UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

Check the appropriate box:

FIRST BANCORP.

(Name of Registrant as Specified In Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

2018

NOTICE OF ANNUAL MEETING

AND PROXY STATEMENT

1519 PONCE DE LEON AVENUE

SAN JUAN, PUERTO RICO 00908

(787) 729-8200

NOTICE OF

2018 ANNUAL MEETING

OF STOCKHOLDERS

To the Stockholders of First BanCorp.:

NOTICE IS HEREBY GIVEN that, pursuant to a resolution of the Board of Directors and Article I, Section 2 of First BanCorp.’s By-laws, the 2018 Annual Meeting of Stockholders (“Annual Meeting”) of First BanCorp. will be held at 10:00 a.m., local time, on Thursday, May 24, 2018, at the Corporation’s principal offices located at 1519 Ponce de Leon Avenue, Santurce, Puerto Rico, for the purpose of considering and taking action on the following matters, all of which are more completely described in the accompanying Proxy Statement:

In addition, we will consider and take action on such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. The Board of Directors has no knowledge of any other business to be transacted at the Annual Meeting.

Only stockholders of record as of the close of business on April 5, 2018 are entitled to receive notice of and to vote at the Annual Meeting. A list of such stockholders will be available at our principal offices, at the address set forth above, for the examination by any stockholder for any purpose germane to the meeting during ordinary business hours, for a period of ten days prior to the Annual Meeting.

We continue to use the Internet as our primary means of furnishing proxy materials to most of our stockholders, in accordance with U.S. Securities and Exchange Commission rules. Rather than sending stockholders a paper copy of our proxy materials, we are sending them a Notice of Internet Availability of Proxy Materials that contains instructions for accessing the materials and voting via the Internet. We believe this method of distribution makes the proxy distribution process more efficient, less costly and reduces our impact on the environment. This Proxy Statement and our 2017 Annual Report are available at www.1firstbank.com and https://materials.proxyvote.com/318672. Stockholders may request a copy of the proxy materials in printed form by following the procedures set forth in the Notice of Internet Availability of Proxy Materials.

You are cordially invited to attend the Annual Meeting. It is important that your shares be represented regardless of the number you own. Even if you plan to be present at the Annual Meeting, you are urged to vote as soon as possible so that the Corporation may be assured of the presence of a quorum at the meeting. You may vote via the Internet, by telephone or, if you received a paper proxy card in the mail, by mailing the completed proxy card. The instructions on the Notice of Internet Availability of Proxy Materials or your proxy card describe how to use these convenient services. You may revoke any proxy that you give at any time prior to its exercise

By Order of the Board of Directors,

/s/ Lawrence Odell

Lawrence Odell

Secretary

San Juan, Puerto Rico

April 13, 2018

TABLE OF CONTENTS

1519 PONCE DE LEON AVENUE

SAN JUAN, PUERTO RICO 00908

2018 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 24, 2018

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of First BanCorp. (the “Corporation”) for use at the 2018 Annual Meeting of Stockholders to be held at 10:00 a.m., local time, on Thursday, May 24, 2018, at the Corporation’s principal offices located at 1519 Ponce de Leon Avenue, Santurce, Puerto Rico, and at any adjournment or postponement thereof (the “Annual Meeting”). This Proxy Statement, the Notice of 2018 Annual Meeting of Stockholders and the enclosed form of proxy are first being sent or given on or about April 13, 2018 to stockholders of record as of April 5, 2018 (the “Record Date”). We have made available with this Proxy Statement the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “Annual Report”), although the Annual Report should not be deemed to be part of this Proxy Statement. The Board has designated the individuals identified on the proxy card (the “proxy holders”) to serve as proxies to vote the shares represented at the Annual Meeting. Shares represented by properly executed proxies that we receive will be voted at the Annual Meeting in accordance with the instructions specified in the proxies. If you properly submit a proxy but do not give instructions on how you want your shares to be voted, your shares will be voted by the proxy holders in accordance with the Board’s recommendations described below.

QUESTIONS AND ANSWERS ABOUT THE MEETING

What information is contained in this Proxy Statement?

The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the Board, the Board committees, the compensation of directors and executive officers, and other required information.

What is the purpose of the Annual Meeting?

At the Annual Meeting, stockholders will act upon the following matters, which are identified in the accompanying Notice of Annual Meeting of Stockholders:

What should I receive?

You should receive this Proxy Statement, the Notice of Annual Meeting of Stockholders, the proxy card and the Annual Report with the audited financial statements for the year ended December 31, 2017, audited by KPMG LLP.

How many votes do I have?

You will have one vote for every share of the Corporation’s common stock, par value $0.10 per share (“Common Stock”), you owned as of the close of business on April 5, 2018, the Record Date.

If I am a holder of shares of Common Stock, but I did not hold my shares of Common Stock as of the Record Date, am I entitled to vote?

No. If you were not a record or beneficial holder of shares of Common Stock as of the Record Date, you will not be entitled to vote on the proposals.

How many shares of stock are outstanding?

On the Record Date, 216,389,958 shares of Common Stock were issued and outstanding.

How many votes must be present to hold the Meeting?

Holders of a majority of the outstanding shares of Common Stock must be present either in person or by proxy to enable us to conduct business at the Annual Meeting. Proxies received but marked as abstentions will be included in the calculation of the

2018 Annual Meeting of Stockholders to be Held on May 24, 2018 | Questions and Answers about the Meeting

number of shares considered to be present at the Annual Meeting for purposes of determining whether holders of a majority of the outstanding shares of Common Stock are present. Broker non-votes will not be counted. A broker non-vote occurs when a broker, bank, trustee or other nominee has not received voting instructions from the beneficial owner and the broker, bank, trustee or other nominee does not have discretionary authority to vote on a particular matter. We urge you to vote by proxy even if you plan to attend the Annual Meeting so that we will know as soon as possible that enough votes will be present for us to conduct business at the Annual Meeting.

Votes cast by proxy or in person at the Annual Meeting will be counted by Broadridge Financial Solutions, an independent third party.

What vote is required and how are abstentions and broker non-votes treated?

To be elected, directors must receive the affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the election of directors. Abstentions will have the same effect as votes cast AGAINST and broker non-votes will not be counted as either a vote cast for or a vote cast against the nominee and, therefore, will have no effect on the results for the election of directors.

As to approval of the advisory vote related to executive compensation and the advisory vote related to the frequency of future advisory votes on the Corporation’s executive compensation, the affirmative vote of a majority of the shares represented in person or by proxy and entitled to vote will be required for approval. Abstentions will have the same effect as votes cast AGAINST the proposals and broker non-votes will not be counted in determining the number of shares necessary for approval.

On which proposals can my broker vote my shares?

Brokers do not have discretionary authority to vote shares on the election of directors, on the non-binding approval of compensation of the Corporation’s NEOs and on the non-binding vote on the frequency of future advisory votes on the Corporation’s executive compensation. You must instruct your broker how to vote your shares so that your vote can be counted.

How does the Board recommend that I vote?

The following are the Board’s recommendations with respect to each of the items to be considered and voted upon at the Annual Meeting:

How do I vote?

If you are a “stockholder of record” on the Record Date, you may vote by proxy without attending the Annual Meeting by:

Internet and telephone voting is available until 11:59 p.m. Eastern Time on May 23, 2018. Please refer to the specific instructions set forth on the Notice of Internet Availability of Proxy Materials or the proxy card for additional information on how to vote. For security reasons, our electronic voting system has been designed to authenticate your identity as a stockholder.

If you hold your shares in “street name” (i.e., your shares are held of record by a broker, bank, trustee or other nominee), your broker, bank, trustee or other nominee will provide you with materials and instructions for voting your shares, including a voting instruction form.

2018 Annual Meeting of Stockholders to be Held on May 24, 2018 | Questions and Answers about the Meeting

Can I vote my shares in person at the Annual Meeting?

If you are a “stockholder of record” on the Record Date, you may vote your shares in person at the Annual Meeting. If you hold your shares in “street name,” you must obtain a valid, legal proxy from your broker, banker, trustee or other nominee, giving you the right to vote your shares at the Annual Meeting.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Stockholder of Record. If your shares are registered in your name with our transfer agent, Computershare, you are considered the stockholder of record with respect to those shares, and these proxy materials are being provided directly to you. As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to vote via the Internet, by telephone, or by completing, signing, dating and returning the enclosed proxy card.

Beneficial Owner. If your shares are held by a broker, bank, trustee or other nominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your broker, bank, trustee or other nominee, who is considered the stockholder of record with respect to those shares. As a beneficial owner, you have the right to instruct your broker, bank, trustee or other nominee on how to vote the shares held in your account, and the broker, bank, trustee or other nominee who holds your shares will inform you how to instruct it to vote your shares. The organization that holds your shares, however, is considered the stockholder of record for purposes of voting at the Annual Meeting. As noted above, if you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid, legal proxy from your broker, bank, trustee or other nominee giving you the right to vote your shares at the Annual Meeting. The organization that holds your shares cannot vote your shares without your instructions on Proposals No. 1, No. 2 and No. 3 so it is important that you instruct your nominee how to vote your shares.

Who will bear the costs of soliciting proxies for the Annual Meeting?

We will bear the cost of soliciting proxies for the Annual Meeting. In addition to solicitation by mail, proxies may be solicited personally, by telephone or otherwise. Our directors, officers and employees may also solicit proxies but will not receive any additional compensation for their services. Proxies and proxy materials will also be distributed at our expense by brokers, nominees, custodians and other similar parties.

Can I change my vote?

Yes. If you are a stockholder of record, you may revoke your proxy at any time before it is exercised by sending in a new proxy card with a later date, or casting a new vote over the Internet or by telephone, or sending a written notice of revocation to the President or Corporate Secretary at First BanCorp., at P.O. Box 9146, San Juan, Puerto Rico 00908-0146, that is delivered before the proxy is exercised. Internet and telephone voting is available until 11:59 p.m. Eastern Time on May 23, 2018. If you attend the Annual Meeting and vote in person, your previously submitted proxy will not be used.

If your shares are held in the name of a broker, bank, trustee or other nominee, that institution will instruct you as to how your vote may be changed.

What should I do if I receive more than one set of voting materials?

You may receive more than one set of voting materials, including multiple Notices of Internet Availability of Proxy Materials or multiple copies of this Proxy Statement and multiple proxy cards. For example, if you hold your shares in more than one brokerage account, you may receive a voting instruction form for each brokerage account in which you hold shares. You should exercise your vote in connection with each set of voting materials you receive as they represent different shares.

Could other matters be decided at the Annual Meeting?

The Board does not intend to present any business at the Annual Meeting other than that described in the Notice of Annual Meeting of Stockholders. The Board at this time knows of no other matters that may come before the Annual Meeting and the Chairman of the Annual Meeting will declare out of order and disregard any matter not properly presented. However, if any new matter or stockholder proposal requiring the vote of the stockholders is properly presented before the Annual Meeting, proxies may be voted with respect thereto in accordance with the best judgment of the proxy holders, under the discretionary authority granted by stockholders in their proxies in connection with general matters, subject to compliance with Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2018 Annual Meeting of Stockholders to be Held on May 24, 2018 | Questions and Answers about the Meeting

What happens to my vote if the Annual Meeting is postponed or adjourned?

Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is exercised.

Who can help answer my questions?

You should contact Lawrence Odell, Secretary of the Board, by e-mail at lawrence.odell@firstbankpr.com or by telephone at 787-729-8041, if you have any questions about how to vote or need copies of our public filings submitted to the U.S. Securities and Exchange Commission (“SEC”).

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 24, 2018

You will help the Corporation protect the environment and save postage and printing expenses in future years by consenting to receive the annual report and proxy materials via the Internet. This Proxy Statement and the Annual Report are available at

https://materials.proxyvote.com/318672. You may obtain directions regarding how to attend the Annual Meeting and vote in person by contacting Lawrence Odell, Secretary of the Board, by e-mail at lawrence.odell@firstbankpr.com or by telephone at 787-729-8041.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth certain information as of April 5, 2018, unless otherwise specified, with respect to shares of our Common Stock beneficially owned by: (1) each person known to us to be the beneficial owner of more than 5% of our Common Stock; (2) each director, each director nominee and each executive officer named in the Summary Compensation Table in this Proxy Statement (the “NEOs”); and (3) all current directors and executive officers as a group. This information has been provided by each of the directors and executive officers at our request or derived from statements filed with the SEC pursuant to Section 13(d), 13(g), or 16(a) of the Exchange Act. Beneficial ownership of securities means the possession, directly or indirectly, through any formal or informal arrangement, either individually or in a group, of voting power (which includes the power to vote, or to direct the voting of, such security) and/or investment power (which includes the power to dispose of, or to direct the disposition of, such security). As of April 5, 2018, no officer or director, and, to the Corporation’s knowledge, no beneficial owner of more than 5% of the shares of Common Stock owns any of the Corporation’s outstanding preferred stock. Unless otherwise indicated, to the Corporation’s knowledge, the beneficial owner has sole voting and dispositive power over the shares.

(1) Beneficial Owners of More Than 5% of our Common Stock:

Security Ownership of Certain Beneficial Owners and Management | Beneficial Owners of More Than 5% of our Common Stock

(2) Beneficial Ownership of Directors, Director Nominees and Executive Officers:

Security Ownership of Certain Beneficial Owners and Management | Beneficial Ownership of Directors, Director Nominees and Executive Officers

INFORMATION WITH RESPECT TO NOMINEES STANDING FOR ELECTION AS DIRECTORS AND WITH RESPECT TO

EXECUTIVE OFFICERS OF THE CORPORATION

PROPOSAL NO. 1—ELECTION OF DIRECTORS

During fiscal year 2017, the composition of our Board changed in the following respects:

At the Annual Meeting, stockholders are being asked to vote on the election of eight people as members of the Board to serve until the 2019 Annual Meeting or until their respective successors are duly elected and qualified. The Board, upon the recommendation of the Corporate Governance and Nominating Committee, has nominated the eight people listed below for election at the Annual Meeting.

Each of the nominees for director has agreed to be named in the proxy statement and to serve as a director if elected. Each nominee is currently serving as a director of the Corporation.

Our By-laws provide that the Board will consist of a number of members fixed from time to time by resolution of a majority of the Board, provided that the number of directors is always an odd number and not less than five nor more than fifteen. In accordance with our Restated Articles of Incorporation and By-laws, director nominees stand for election annually. A director is elected by the stockholders for a one-year term and serves until his or her successor is duly elected and qualified. If stockholders do not elect a nominee who is serving as a director, Puerto Rico corporation law provides that the director would continue to serve on the Board as a “holdover director.” Under our By-laws, an incumbent director who is not elected by a majority of the votes present in person or by proxy and entitled to vote must tender his or her resignation to the Board promptly following certification of the stockholder vote. The Board must act on the tendered resignation within 90 days following certification of the stockholder vote and must elect a new director by the affirmative vote of a majority of the Board to fill the vacancy until the next election of directors by stockholders. Given the resignations of Mr. Harmon and Mr. Bresler in August of 2017, the Board underwent a director search process. Pursuant to such process, the Board appointed Mr. Heffern to the Board in November 2017. The Board is actively seeking another candidate to the Board in order to bring the number of Board members back to nine and be in compliance with the aforementioned odd number requirement of the Corporation’s Restated Articles of Incorporation and By-laws.

Our retirement policy for the Board states that directors who reach the age of 70 may continue to serve until the end of the term to which they were elected, but will not be eligible to stand for re-election absent a waiver of this requirement. Pursuant to our Corporate Governance Guidelines and Principles, the Board of Directors waived this requirement with respect to its determination to include Robert T. Gormley, David I. Matson and José Menéndez-Cortada as director nominees in this Proxy Statement.

On March 21, 2018, the Board nominated current Directors Juan Acosta Reboyras, Aurelio Alemán, Luz A. Crespo, Robert T. Gormley, John A. Heffern, Roberto R. Herencia, David I. Matson, and José Menéndez-Cortada to serve terms ending at the 2019 Annual Meeting of Stockholders, and when their respective successors have been duly elected and qualified. Unless otherwise directed, each proxy executed and returned by a stockholder will be voted FOR the election of these nominees. If any nominee should be unable to serve or for good cause will not serve, the designated proxies will vote each executed and returned proxy for the substitute nominee or nominees as the Board may propose. At this time, the Board knows of no reason why any of the persons identified above may not be able to serve as a director if elected and has not identified any substitute nominees.

Except for Mr. Gormley and Mr. Matson, all of the members of the Board are also the members of the Board of Directors of FirstBank Puerto Rico (“FirstBank” or the “Bank”). The information presented below regarding the time of service on the Board includes terms concurrently served on the Board of Directors of the Bank as applicable.

DIRECTOR QUALIFICATIONS

Each director nominee has the qualifications and experience to focus on the complex issues confronting us and the financial industry. The nominees are leaders in business, finance, accounting or academia because of their intellectual acumen and analytic skills, strategic vision, ability to lead and inspire others to work with them, and records of outstanding accomplishments. Each has been chosen to stand for election in part because he or she has the ability and willingness to ask difficult questions, understand our unique challenges and evaluate the strategies proposed by management and, when applicable, oversee their implementation.

Our nominees collectively have a long record of professional integrity and dedication to their professions and community, a strong work ethic that includes coming fully prepared to meetings and fulfilling professional obligations, the ability to maintain a collegial environment, and the experience of having served as directors of the Corporation and other companies.

Proposal No. 1—Election of Directors | Director Qualifications

In evaluating the composition of the Board, the Corporate Governance and Nominating Committee seeks to find and retain individuals who, in addition to having the qualifications set forth in our Corporate Governance Guidelines and Principles, have the skills, experience and abilities necessary to oversee our operations in the corporate and consumer businesses within Puerto Rico, the United States and the United States and British Virgin Islands. This Committee has determined that it is critically important to our proper operation and success that, through its members, our Board has expertise and experience in the following areas:

Proposal No. 1—Election of Directors | Nominees Standing for Election as Directors for Terms Expiring at the 2018 Annual Meeting

NOMINEES STANDING FOR ELECTION AS DIRECTORS FOR TERMS EXPIRING AT

THE 2018 ANNUAL MEETING

Proposal No. 1—Election of Directors | Nominees Standing for Election as Directors for Terms Expiring at the 2018 Annual Meeting

Proposal No. 1—Election of Directors | Nominees Standing for Election as Directors for Terms Expiring at the 2018 Annual Meeting

Proposal No. 1—Election of Directors | Nominees Standing for Election as Directors for Terms Expiring at the 2018 Annual Meeting

Proposal No. 1—Election of Directors | Nominees Standing for Election as Directors for Terms Expiring at the 2018 Annual Meeting

Proposal No. 1—Election of Directors | Required Vote

Required Vote

To be elected, each director must receive the affirmative vote of a majority of the outstanding shares represented in person or by proxy at the meeting and entitled to vote on the election of directors.

Recommendation of the Board of Directors

The Board Unanimously Recommends that You Vote for the Election of Each Director Nominee.

Information About Executive Officers Who Are Not Directors

INFORMATION ABOUT EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The executive officers of the Corporation and FirstBank, other than our President and Chief Executive Officer, are listed below. The Corporation’s By-laws provide that each officer shall be elected annually at the first meeting of the Board after the annual meeting of stockholders and that each officer shall hold office until his or her successor has been duly elected and qualified or until his or her death, resignation or removal from office.

Orlando Berges, 60

Executive Vice President and Chief Financial Officer

Calixto García-Vélez, 50

Executive Vice President and Florida Region Executive

Donald Kafka, 58

Executive Vice President and Chief Operating Officer

  Information About Executive Officers Who Are Not Directors

Ginoris López-Lay, 49

Executive Vice President and Strategic Management Director

Emilio Martinó, 67

Executive Vice President and Chief Lending Officer

T. Michael McDonald, 56

Executive Vice President and Business Group Director

Lawrence Odell, 69

Executive Vice President, General Counsel and Secretary

  Information About Executive Officers Who Are Not Directors

Cassan Pancham, 57

Executive Vice President and Business Group Executive

Carlos Power, 56

Executive Vice President and Consumer Lending Business Executive

Nayda Rivera, 44

Executive Vice President and Chief Risk Officer

CORPORATE GOVERNANCE AND RELATED MATTERS

Our Board believes that high standards of corporate governance are an essential component of strengthening our corporate culture and embedding our institutional values in our day-to-day business operations. The Board’s Corporate Governance and Nominating Committee recommends to the Board the adoption of our Corporate Governance Guidelines and Principles to protect and enhance stockholder value and to set forth the principles as to how the Board, its various committees, individual directors and management should perform their functions. The Corporate Governance and Nominating Committee considers developments in corporate governance and, to the extent necessary, recommends to the Board changes to our Corporate Governance Guidelines and Principles.

Key Corporate Governance Practices

Corporate Governance and Related Matters | General

General

The following discussion summarizes various corporate governance matters including director independence, board and committee structure, function and composition, and governance charters, policies and procedures. The following policies, procedures and charters are available through our web site at www.1firstbankpr.com, under “Investor Relations — Corporate Governance”: our Corporate Governance Guidelines and Principles; the charters of the Audit Committee, the Compensation and Benefits Committee (or the “Compensation Committee”), the Corporate Governance and Nominating Committee, the Credit Committee, the Asset/Liability Committee, the Compliance Committee and the Risk Committee; the Corporation’s Code of Ethical Conduct and the Corporation’s Code of Ethics for CEO and Senior Financial Officers; and the Independence Principles for Directors. Our stockholders may obtain printed copies of these documents by writing to Lawrence Odell, Secretary of the Board, at First BanCorp., 1519 Ponce de León Avenue, Santurce, Puerto Rico 00908.

Code of Ethics

Our Code of Ethics for CEO and Senior Financial Officers (the “Code”) states the principles to which senior financial officers must adhere in order to act in a manner consistent with the highest moral and ethical standards. The Code imposes a duty to avoid conflicts of interest and comply with the laws and regulations that apply to the Corporation and its subsidiaries, among other matters. The Code applies to each officer of the Corporation or its affiliates having any or all of the responsibilities and/or authority generally held by persons with the following titles, regardless of the officer’s formal title: the president, the chief executive officer, the chief financial officer, the chief accounting officer, the controller, the treasurer, the tax manager, the general counsel, the general auditor, any assistant general counsel responsible for finance matters, any assistant controller and any regional or business unit financial officer. Only the Board or the Audit Committee may grant waivers from compliance with the Code. Any waiver of any part of the Code will be promptly disclosed to stockholders on our website at www.1firstbankpr.com. Neither the Board nor the Audit Committee received any requests for waivers under the Code in 2017 or through April 13, 2018.

Our Code of Ethical Conduct, which applies to all employees and Directors of the Corporation and all of its subsidiaries, is designed to maintain a high ethical culture in the Corporation. The Code of Ethical Conduct addresses, among other matters, conflicts of interest, operational norms and confidentiality of our and our customers’ information.

Independence of the Board of Directors and Director Nominees

The Board annually evaluates the independence of its members based on the criteria for determining independence identified by the New York Stock Exchange (“NYSE”), the SEC and our Independence Principles for Directors. Our Corporate Governance Guidelines and Principles require that a majority of the Board be composed of directors who meet the requirements for independence established in our Independence Principles for Directors, which incorporate the independence requirements established by the NYSE and the SEC. The Board has concluded that the Corporation has a majority of independent directors. The Board has determined that Messrs. Juan Acosta Reboyras, Luz A. Crespo, Robert T. Gormley, John A. Heffern, Roberto R. Herencia, David I. Matson and José Menéndez-Cortada are independent under the Independence Principles for Directors, taking into account the matters discussed under “Certain Transactions and Related Person Transactions.” Mr. Aurelio Alemán, our President and Chief Executive Officer, is not considered to be independent as he is an employee of the Corporation. Our Corporate Governance Guidelines and Principles require that the independent directors conduct regularly scheduled executive sessions at least twice a year. The independent directors generally meet in executive sessions without management present following regularly scheduled Board meetings.

Board Leadership Structure

We currently have an independent chairman separate from the chief executive officer. The Board believes it is important to maintain flexibility in its board leadership structure and, historically, has had in place different leadership structures, depending on our needs at the time. Nevertheless, the Board firmly supports having an independent director in a board leadership position at all times. Accordingly, our Board adopted corporate policies that provide that, if we do not have an independent chairman, the Board must elect a lead independent director, having similar duties to an independent chairman, including leading the executive sessions of the non-management directors at Board meetings. At this time, our chairman provides independent leadership of the Board. Having an independent chairman or lead director enables non-management directors to raise issues and concerns for Board consideration without immediately involving management. The independent chairman or lead director also serves as a liaison between the Board and senior management. Our Board has determined that the current structure, an independent chair separate from the chief executive officer, is the most appropriate structure at this time.

Corporate Governance and Related Matters | Board Self-Assessment

Board Self-Assessment

The Board conducts an annual self-assessment aimed at improving its performance. As part of such assessment, each director completes a written questionnaire that is designed to gather recommendations for improving Board effectiveness and solicit feedback on a wide range of issues, including:

Each of the seven standing Board committees also conducts its own written annual self-assessment, which generally includes issues such as:

Responses to the Board and committee self-assessments, including written comments, are tabulated. Responses are not attributed to individual directors in order to promote openness and transparency. The Board and committee self-assessment reports are discussed by the Corporate Governance and Nominating Committee and then the Chair of the Corporate Governance and Nominating Committee leads the discussion with the full Board.

Board’s Role in Risk Oversight

The Board oversees our enterprise risk management framework through the Risk Committee, Audit Committee, Credit Committee, Asset/Liability Committee, Compliance Committee, and Compensation and Benefits Committee. Each one of the Board designated committees has a distinct charter and role within the governance and risk management hierarchy of the Corporation. The charters, which are posted on our website, define the roles and responsibilities of each committee’s members, including the responsibility for risk oversight, and specify relationships among the committees, the Board and management.

The Risk Committee of the Corporation assists the Board in its oversight of the Corporation’s management of the Corporation’s company-wide risk management framework. The Committee’s role is one of oversight, recognizing that management is responsible for designing, implementing and maintaining an effective risk management framework. The Risk Committee’s duties and responsibilities are further detailed below under the Risk Committee section.

The Board’s role is to oversee this effort, recognizing that management is responsible for executing our risk management policies. The Board has the ultimate responsibility for defining the Corporation’s risk tolerances. Senior management is responsible for implementing the Corporation’s risk management strategies in such a way as to appropriately limit the risks the Corporation takes and ensure that the Corporation’s employees comply with policies and procedures and all applicable laws and regulations. In performing this function, the Board receives periodic reports from the Board designated committees and different members of senior management.

Director Stock Ownership

The Board believes that appropriate stock ownership by directors further aligns their interests with those of our stockholders. Under our Director Stock Ownership Requirement Guidelines (the “Guidelines”), as amended effective February 7, 2013, non-management directors are expected to hold an investment position in our Common Stock having a market value equivalent to at least $150,000. Directors are expected to achieve the ownership goal within three years after the director’s initial appointment to the Board. The Guidelines are administered by the Corporate Governance and Nominating Committee of the Board. The Corporate Governance and Nominating Committee may recommend changes to the Guidelines to the Board, and the Board may at any time approve amendments or modifications to the Guidelines. In the event of extenuating circumstances that preclude a director from complying with the Guidelines, such as when the Stock Ownership Guidelines place a severe hardship on the director or the director is precluded from purchasing Common Stock due to trading restrictions imposed by the Corporation, the Corporate Governance and Nominating Committee may waive compliance with the Guidelines for a period of time. As of the date of the filing of this Proxy Statement, all directors are in compliance with the Guidelines.

Corporate Governance and Related Matters | Communications with the Board

Communications with the Board

Stockholders or other interested parties who wish to communicate with the Board may do so by writing to the Chairman of the Board in care of the Office of the Corporate Secretary at the Corporation’s headquarters, 1519 Ponce de León Avenue, Santurce, Puerto Rico 00908. Communications may also be made by contacting Lawrence Odell, Secretary of the Board, by e-mail to lawrence.odell@firstbankpr.com or by telephone at 787-729-8041. Concerns may also be communicated to the Board by calling the Hotline, also known as “Protejo lo de Uno,” at the toll-free telephone number 1-800-780-9526 or by email to thenetwork@firstbankpr.com. Communications relating to accounting, internal accounting controls or auditing matters will be referred to the Chair of the Audit Committee. Depending upon the nature of other concerns, they may be referred to our Internal Audit Department, the Legal or Finance Department, or any other appropriate department or the Board. As they deem necessary or appropriate, the Chairman of the Board or the Chair of the Audit Committee may direct that certain concerns communicated to them be presented to the entire Audit Committee or the Board, or that such concerns receive special treatment, including through the retention of outside counsel or other outside advisors.

Board Meetings

The Board is responsible for directing and overseeing the business and affairs of the Corporation. The Board represents the Corporation’s stockholders and its primary purpose is to build long-term stockholder value. The Board meets on a regularly scheduled basis during the year to review significant developments affecting the Corporation and to act on matters that require Board approval. It also holds special meetings when an important matter requires Board action between regularly scheduled meetings. The Board met nine (9) times during fiscal year 2017. Each of the current members of the Board participated in at least 75% of the Board meetings held during fiscal year 2017 while such person was a director.

Board Attendance at Annual Meetings

While we have not adopted a formal policy with respect to directors’ attendance at annual meetings of stockholders, we encourage our directors to attend such meetings. Seven of the then current nine members of the Board, Directors Juan Acosta Reboyras, Aurelio Alemán, Luz A. Crespo, Robert Gormley, Roberto R. Herencia, David I. Matson and José Menéndez-Cortada, who are all of the present directors and nominees who were directors at that time, attended the 2017 Annual Meeting of Stockholders.

Board Committees

The Board has seven standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, the Asset/Liability Committee, the Credit Committee, the Compliance Committee and the Risk Committee. In addition, from time to time and as it deems appropriate, the Board may also establish ad-hoc committees, which are created for a specific purpose to focus on examining a particular subject or matter. These ad-hoc committees have a deadline by which they must complete their work, or expire. The members of the committees are appointed and removed by the Board, which also appoints a chair for each committee. The functions of the standing committees, their current members and the number of meetings held during 2017 are set forth below. Each of the current members of the Board participated in at least 75% of the total number of meetings held by the committees of the Board on which he/she served during fiscal year 2017 while such person was a member of such committees.

The following table identifies the current members of the standing committees of the Board:

Name of Director

Compensation & Benefits

Corporate Governance & Nominating Committee

Asset/Liability Committee

Credit Committee

Compliance Committee

Risk Committee

Audit Committee

Juan Acosta Reboyras

Aurelio Alemán

Luz A. Crespo

Robert T. Gormley

John A. Heffern

Roberto R. Herencia

David I. Matson

José Menéndez-Cortada

= Member     = Chair

Corporate Governance and Related Matters | Compensation and Benefits Committee

Compensation and Benefits Committee

The Compensation Committee’s charter provides that the Committee is to be composed of a minimum of three directors who meet the independence criteria established by the NYSE and our Independence Principles for Directors. Each member of the Committee meets the applicable independence requirements, including the enhanced independence requirements adopted by the NYSE as a result of the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Committee is responsible for the oversight of our compensation policies and practices, including the evaluation and recommendation to the Board of the salaries and incentive compensation programs for the executive officers and key employees of the Corporation. The Committee’s charter describes the following responsibilities and duties of the Committee, among others:

The Compensation Committee met a total of five (5) times during fiscal year 2017.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee’s charter provides that the Committee is to be composed of a minimum of three directors who meet the independence criteria established by the NYSE and our Independence Principles for Directors. Each member of the Committee meets the applicable independence requirements.

Corporate Governance and Related Matters  | Corporate Governance and Nominating Committee

The responsibilities and duties of the Committee include, among others, the following:

The Corporate Governance and Nominating Committee met four (4) times during fiscal year 2017.

Identifying and Evaluating Nominees for Directors

The Board, acting through the Corporate Governance and Nominating Committee, is responsible for assembling for stockholder consideration a group of nominees that, taken together, have the experience, qualifications, attributes, and skills appropriate for functioning effectively as a board. The Corporate Governance and Nominating Committee regularly reviews the composition of the Board, the Board’s performance, and the input of stockholders and other key constituencies. The Corporate Governance and Nominating Committee looks for certain characteristics common to all Board members, including integrity, strong professional reputation and record of achievement, constructive and collegial personal attributes, and the ability and commitment to devote sufficient time and energy to Board service. In addition, the Corporate Governance and Nominating Committee seeks to include on the Board a complementary mix of individuals with diverse backgrounds and skills reflecting the broad set of challenges that the Board confronts. These individual qualities can include matters like experience in our industry, technical experience, leadership experience, and relevant geographical experience. In fulfilling these responsibilities regarding Board membership, the Board adopted the Policy Regarding Selection of Directors, which sets forth the Corporate Governance and Nominating Committee’s responsibility with respect to the identification and recommendation to the Board of qualified candidates for Board membership, which is to be based primarily on the criteria listed below as well as the extent to which the interplay of the candidate’s attributes with those of other Board members will yield a Board that is effective, collegial and responsive to the needs of the Corporation:

The Corporate Governance and Nominating Committee does not have a specific diversity policy with respect to the director nomination process. Rather, the Committee considers diversity in the context of viewpoints, experience, skills, background and

Corporate Governance and Related Matters | Corporate Governance and Nominating Committee

other demographics that could assist the Board in light of the Board’s composition at the time. The Board believes in the benefits of having a diverse Board, and sees diversity at the Board level as an essential element in maintaining a competitive advantage. The Board believes that a truly diverse Board will include and make good use of differences in the skills, regional and industry experience, background, race, gender and other distinctions between Directors. All Board appointments are made on merit, in the context of the skills, experience, independence and knowledge that the Board as a whole requires to be effective.

The Committee gives appropriate consideration to candidates for Board membership recommended by stockholders and evaluates such candidates in the same manner as candidates identified by the Committee. Candidate recommendations, along with the type of biographical information required for board nominees, should be submitted to the Corporate Secretary at First BanCorp., at P.O. Box 9146, San Juan, Puerto Rico 00908-0146. The Committee may use outside consultants to assist it in identifying candidates.

The Committee is also responsible for initially assessing whether a candidate would be an “independent” director under the requirements for independence established by the NYSE and in our Independence Principles for Directors and applicable rules and regulations. The Board, taking into consideration the recommendations of the Committee, is responsible for selecting the nominees for election to the Board by the stockholders and for appointing directors to the Board to fill vacancies, with primary emphasis on the criteria set forth above. The Board, taking into consideration the assessment of the Committee, also makes a determination as to whether a nominee or appointee would be an independent director.

Succession Planning

The Board recognizes that one of its most important duties is to ensure senior leadership continuity by overseeing the development of executive talent and planning for the efficient succession of the CEO and other executive officers. The Board has delegated primary responsibility for succession planning to the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee annually reviews the Corporation’s talent management and succession plan, which includes the planning, execution and ongoing management of critical future talent needs to match the organization’s available talent to its future needs and anticipated organizational gaps and the succession plans for certain identified key positions. The principal components of this plan are: (1) a proposed plan for emergency CEO succession; (2) a proposed plan for CEO succession in the ordinary course of business; and (3) the CEO’s plan for management succession for certain identified key positions. The succession plan includes an assessment of the experience, performance, skills and planned career paths for possible candidates within the senior management team.

Asset/Liability Committee

The Asset/Liability Committee’s charter provides that the Committee is to be composed of a minimum of three directors who meet the independence criteria established by the NYSE and our Independence Principles for Directors, and also includes our Chief Executive Officer, Chief Financial Officer, Treasurer and Chief Risk Officer. Each non-employee member of this Committee meets the applicable independence requirements.

Under the terms of its charter, the Asset/Liability Committee assists the Board in its oversight of the Corporation’s asset and liability management policies (the “ALM”) relating to (i) funds management, (ii) investment management, (iii) liquidity, (iv) interest rate risk management, and (v) the use of derivatives. In doing so, the Committee’s primary functions involve:

The Asset/Liability Committee met a total of four (4) times during fiscal year 2017.

Credit Committee

The Credit Committee’s charter provides that this Committee is to be composed of a minimum of three directors who meet the independence criteria established by the NYSE and our Independence Principles for Directors, and also includes our Chief Executive Officer, Chief Lending Officer and a designated business group executive. Each non-employee member of this Committee meets the applicable independence requirements.

Under the terms of its charter, the Credit Committee assists the Board in its oversight of the Corporation’s policies related to all aspects of the Corporation’s lending function and credit risk management, hereafter “Credit Management.” The purpose of the Committee is to review the quality of the Corporation’s credit portfolio and the trends affecting that portfolio; to oversee the effectiveness and administration of credit-related policies; to approve loans, as required by the lending authorities; and to report to the Board regarding Credit Management.

Corporate Governance and Related Matters | Credit Committee

The Credit Committee met a total of sixteen (16) times during fiscal year 2017.

Compliance Committee

The Compliance Committee, which was established by the Board in June 2010, assists the Board of the Corporation and the Bank in fulfilling its responsibility to ensure the Corporation and the Bank comply with any actions required by the Fed, the FDIC and/or OCIF to improve the financial condition of the Corporation and/or the Bank (“Regulatory Actions”).

The Compliance Committee’s charter provides that the committee is to be composed of at least three directors who meet the independence criteria established by the NYSE and our Independence Principles for Directors. Each member of this Committee meets the applicable independence requirements.

The responsibilities and duties of the Compliance Committee include, among others, the following:

The Compliance Committee met a total of eight (8) times during fiscal year 2017.

Risk Committee

The Risk Committee assists the Board in its oversight of the Corporation’s management of its company-wide risk management framework. The Risk Committee’s charter provides that this Committee shall be composed of at least three directors of the Board who meet the independence criteria established by the NYSE and our Independence Principles for Directors. In addition, it states that at least one member will qualify as a “risk expert” as such term is defined under applicable rules promulgated under Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Committee will consider the experience of the designated member with risk management expertise, including, for example, background in risk management or oversight applicable to the size and complexity of the organization’s activities, attitude toward risk, and leadership capabilities. Each member will have an understanding of risk management and expertise commensurate with the Corporation’s size, complexity and capital structure.

The responsibilities and duties of the Risk Committee include, among others, the following:

Corporate Governance and Related Matters | Risk Committee

The Risk Committee met a total of eleven (11) times during fiscal year 2017.

Audit Committee

The Audit Committee charter provides that this Committee is to be composed of at least three outside directors who meet the independence criteria established by the NYSE, the SEC and our Independence Principles for Directors.

As set forth in the Audit Committee’s charter, the Audit Committee represents and assists the Board in fulfilling its responsibility to oversee management regarding: (i) the conduct and integrity of our financial reporting to any governmental or regulatory body, stockholders, other users of our financial reports and the public; (ii) the performance of our internal audit function; (iii) our systems of internal control over financial reporting and disclosure controls and procedures; (iv) the qualifications, engagement, compensation, independence and performance of our independent auditors, their conduct of the annual audit of our financial statements, and their engagement to provide any other services; (v) our legal and regulatory compliance; (vi) the application of our related person transaction policy as established by the Board; (vii) the application of our codes of business conduct and ethics as established by management and the Board; and (viii) the preparation of the audit committee report required to be included in our annual meeting proxy statement by the rules of the SEC.

Each member of the Audit Committee meets the applicable independence requirements and is financially literate, knowledgeable and qualified to review financial statements. The Board has determined that Mr. David I. Matson, chairman of the Audit Committee from June 2014 to March 16, 2016, and Mr. Juan Acosta Reboyras, chairman of the Audit Committee since March 16, 2016, are audit committee financial experts, as defined by Item 407(d)(5) of Regulation S-K. For a brief description of Mr. David Matson’s and Mr. Juan Acosta Reboyras’ relevant experience, please refer to the “Information With Respect To Nominees Standing For Election As Directors And With Respect To Executive Officers Of The Corporation” section above. The Audit Committee met a total of sixteen (16) times during fiscal year 2017.

AUDIT COMMITTEE REPORT

In the performance of its oversight function, the Audit Committee reviewed and discussed the audited financial statements of the Corporation for the fiscal year ended December 31, 2017 with management and KPMG LLP, the Corporation’s independent registered public accounting firm. The Audit Committee also discussed with KPMG LLP the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 (now known as PCAOB Auditing Standard 1301). Finally, the Audit Committee has received the written disclosures and the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Corporation is compatible with maintaining the auditors’ independence, and has discussed with the independent registered public accounting firm its independence from the Corporation and its management. These discussions and considerations, however, do not assure that the audit of the Corporation’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board, that the financial statements are presented in accordance with generally accepted accounting principles in the United States or that the Corporation’s independent registered public accounting firm is in fact “independent.”

The members of the Audit Committee are not engaged professionally in rendering auditing or accounting services on behalf of the Corporation nor are they employees of the Corporation. The Audit Committee relies, without independent verification, on the information provided and the representations made by management regarding whether the Corporation’s internal control over financial reporting is effective, that the financial statements have been prepared with integrity and objectivity and that such financial statements have been prepared in conformity with generally accepted accounting principles in the United States. The Audit Committee also relies on the opinions of the independent registered public accounting firm on the consolidated financial statements and on the effectiveness of internal control over financial reporting.

Based on the Audit Committee’s consideration of the audited financial statements and the discussions referred to above with management and the independent registered public accounting firm, and subject to the limitations on the role and responsibilities of the Audit Committee set forth in its charter and those discussed above, the Committee recommended to the Board that the Corporation’s audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the SEC.

This report is provided by the members of the Audit Committee:

Juan Acosta Reboyras (Chairman)

Luz A. Crespo

John A. Heffern

David I. Matson

José Menéndez-Cortada

Information about the Independent Registered Public Accounting Firm

The Audit Committee has established controls and procedures that require the pre-approval of all audit, audit-related and permissible non-audit services provided by the independent registered public accounting firm in order to ensure that the rendering of such services does not impair the auditor’s independence. The Audit Committee may delegate to one or more of its members the authority to pre-approve any audit, audit-related or permissible non-audit services, and the member to whom such delegation was made must report any pre-approval decisions at the next scheduled meeting of the Audit Committee. Under the pre-approval policy, audit services for the Corporation are negotiated annually. In the event that any additional audit services not included in the annual negotiation of services or any increases in the fees agreed to in such negotiation are required by the Corporation, an amendment to the existing engagement letter or an additional proposed engagement letter is obtained from the independent registered public accounting firm and evaluated by the Audit Committee or the member(s) of the Audit Committee with authority to pre-approve such services.

The total fees paid or accrued by the Corporation for professional services rendered by KPMG LLP for the years ended December 31, 2017 and December 31, 2016 were $3,196,641 and $2,873,420, respectively, distributed as follows:

Audit Committee Report

KPMG will have representatives at the Annual Meeting. As such, KPMG will be able to make a statement if they desire and will be available to respond to appropriate questions. As a result of the Audit Committee’s decision to conduct a request for proposal process for audit services, the Corporation’s stockholders are not being asked to ratify the appointment of any auditor as the Corporation’s independent registered public accounting firm for Fiscal 2018.

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

The Board or the Audit Committee reviews all transactions and relationships in which the Corporation and any of its directors, director nominees, executive officers, security holders who are known to the Corporation to own of record or beneficially more than 5% of the Corporation’s Common Stock (“principal stockholder”) and any immediate family member of any of the foregoing persons (each, a “related person”) has an interest. Our Corporate Governance Guidelines and Principles and Code of Ethics for the CEO and Senior Financial Officers require our directors, executive officers and principal financial officers to report to the Board or the Audit Committee any situation that could be perceived as a conflict of interest. In addition, applicable law and regulations require that all loans or extensions of credit to executive officers and directors be made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons (unless the loan or extension of credit is made under a benefit program generally available to all employees and does not give preference to any insider over any other employee) and must not involve more than the normal risk of repayment or present other unfavorable features. Pursuant to Regulation O adopted by the Fed, any extension of credit to an executive officer, director, or principal stockholder, including any related interest of such persons (collectively an “Insider”), must be approved in advance by a majority of the Board, excluding the interested party, if such extension, when aggregated with all other loans or lines of credit to that Insider exceeds (in any case) $500,000.

The Corporation’s written Related Person Transaction Policy (the “Policy”) addresses the reporting, review and approval or ratification of transactions with related persons. The Policy is not designed to prohibit all related person transactions; rather, it is to provide for timely internal reporting and appropriate review, approval or rejection, oversight and public disclosure, when required, of such transactions.

For purposes of the Policy, a “related person transaction” is a transaction or arrangement or series of transactions or arrangements in which the Corporation participates (whether or not the Corporation is a party), the amount involved exceeds $120,000, and a related person has a direct or indirect material interest in such transaction or arrangement. A related person’s interest in a transaction or arrangement is presumed material to such person unless it is clearly incidental in nature or has been determined in accordance with the Policy to be immaterial in nature. A transaction in which any subsidiary of the Corporation or any other company controlled by the Corporation participates shall be considered a transaction in which the Corporation participates.

Examples of related person transactions generally include sales, purchases or other transfers of real or personal property, use of property and equipment by lease or otherwise, services received or furnished, the borrowing and lending of funds, guarantees of loans or other undertakings and the employment by the Corporation of an immediate family member of a director, executive officer or principal stockholder or a change in the terms or conditions of employment of such an individual that is material to such individual. However, the Policy contains a list of categories of transactions that will not be considered related person transactions for purposes of the Policy given their nature, size and/or degree of significance to the Corporation and, therefore, need not be taken to the Audit Committee for their review and approval, ratification or rejection.

Any related person who intends to enter into a related person transaction is required to disclose that intention and all material facts with respect to such transaction to the general counsel, and any officer or employee of the Corporation who intends to cause the Corporation to enter into any related person transaction must disclose that intention and all material facts with respect to the transaction to his or her superior, who is responsible for reporting such information to the general counsel. The general counsel is responsible for determining whether a transaction may meet the requirements of a related person transaction requiring review under the Policy, and, upon such determination, must report the material facts respecting the transaction and the related person’s interest in such transaction to the Audit Committee for its review and approval, ratification or rejection. Any related party transaction in which the general counsel has a direct or indirect interest is evaluated directly by the Audit Committee.

If a member of the Audit Committee has an interest in a related person transaction and the number of Audit Committee members available to review and approve the transaction is less than two members after such committee member recuses himself or herself from consideration of the transaction, the transaction must instead be reviewed by an ad hoc committee of at least two independent directors designated by the Board. The Audit Committee may delegate to the Corporation’s chief executive officer, chief risk officer, and general counsel, acting collectively, its authority to review, approve or ratify specified related person transactions or categories of related person transactions when the Audit Committee determines that such action is warranted.

Annually, the Audit Committee must review any previously approved or ratified related person transaction that is continuing (unless the amount involved in the uncompleted portion of the transaction is less than $120,000) and determine, based on the then existing facts and circumstances, including the Corporation’s existing contractual or other obligations, if it is in the best interests of the Corporation to continue, modify or terminate the transaction.

The Audit Committee has the authority to (i) determine categories of related person transactions that are immaterial and not required to be individually reported to, reviewed by, and/or approved, ratified or rejected by the Audit Committee and (ii) approve in advance categories of related person transactions that need not be individually reported to, reviewed by, and/or approved, ratified or rejected by the Audit Committee but may instead be reported to and reviewed by the Audit Committee collectively on a periodic basis, which must be at least annually. The Audit Committee must notify the Board on a quarterly basis of all related person transactions considered by the Audit Committee.

Certain Relationships and Related Person Transactions

In connection with considering a related person transaction, the Audit Committee (or its delegate), in its judgment, must consider, in light of the relevant facts and circumstances, whether or not the transaction is in, or not inconsistent with, the best interests of the Corporation.

During fiscal year 2017, certain related persons were customers of and had transactions with the Corporation and/or its subsidiaries. All such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time they were made for comparable transactions with persons not related to the Corporation, and did not involve more than the normal risk of collectability or present other unfavorable features.

During fiscal year 2017, the Corporation engaged, in the ordinary course of business, the legal services of Martínez Odell & Calabria and Cancio, Nadal, Rivera & Díaz, P.S.C. as one of the Corporation’s corporate and regulatory counsel. Mr. Lawrence Odell, General Counsel of the Corporation since February 2006, was a partner at Martínez Odell & Calabria (the “Law Firm”) until his resignation on March 31, 2012 at which time Mr. Odell entered into an Amended and Restated Employment Agreement with the Corporation. Effective February 2018, Cancio, Nadal, Rivera & Díaz, P.S.C acquired the Law Firm’s practice, including its client list. Mr. Odell’s interest in the Law Firm as a partner was being liquidated by the Law Firm until its dissolution at which point it was assumed by Cancio, Nadal, Rivera & Díaz, P.S.C. as successor in interest. Cancio, Nadal, Rivera & Díaz, P.S.C. will continue to liquidate Mr. Odell’s partnership interest over an extended period of time. During fiscal year 2017, the Corporation paid $1,847 to the Law Firm and $729,510 to Cancio, Nadal, Rivera & Díaz, P.S.C. for its legal services.

Our investment agreements with funds affiliated with Thomas H. Lee Partners, L.P. (“THL”) and funds managed by Oaktree Capital Management, L.P. (“Oaktree”), as amended, provided each of THL and Oaktree with various rights, including the right to designate a person to serve on our Board for as long as each of them owns at least 25% of the number of shares of Common Stock acquired by them in the Corporation’s private offering of shares in 2011 (the “Capital Raise”). A secondary offering of the Common Stock by THL and Oaktree was completed on February 7, 2017. THL and Oaktree sold 20 million shares (10 million shares each) of the Corporation’s Common Stock. Subsequently, the underwriters exercised their option to purchase an additional 3 million shares of the Corporation’s Common Stock from the selling stockholders. In addition, on August 3, 2017, THL and Oaktree participated in another secondary offering of the Corporation’s Common Stock in which they sold an aggregate of 20 million shares (10 million shares each) of Common Stock. The Corporation did not receive any proceeds from these offerings, and costs incurred in connection with these transactions amounted to $0.4 million in 2017. As of August 3, 2017, each of THL and Oaktree owned less than 5% of the Corporation’s Common Stock and less than 20% of the shares they acquired in the Capital Raise. As a result, the directors on the Corporation’s Board of Directors who represented THL and Oaktree resigned as directors in August 2017.

THL is a private equity firm that has had an investment in the entity that provides the products and services with respect to the Corporation’s mortgage servicing systems (the “Provider”) since 2006, prior to THL’s investment in the Corporation. The servicing system activities are conducted in the ordinary course of business, and our relationship with the Provider was negotiated on an arms’-length basis. From January 1, 2017 through August 30, 2017 (the date in which the THL Board representative resigned from the Board), we paid the Provider approximately $818,096.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2017, the following directors were members of the Compensation Committee: Robert T. Gormley, Michael P. Harmon, Roberto R. Herencia, and José Menéndez-Cortada. During fiscal year 2017, no executive officer of the Corporation served on any board of directors or compensation committee of any entity whose board or management included any person who served on the Corporation’s Board or on the Corporation’s Compensation Committee.

COMPENSATION OF DIRECTORS

Non-management directors of the Corporation receive an annual retainer and compensation for attending meetings of the Board but not for attending meetings of the Board of Directors of the Bank. Directors who are also officers of the Corporation, FirstBank or any other subsidiary of the Corporation do not receive fees or other compensation for service on the Board, the Board of Directors of FirstBank, or the Board of Directors of any other subsidiary or any of their committees. Accordingly, Mr. Aurelio Alemán, who was a director during fiscal year 2017, is not included in the table set forth below because he was an employee at the same time and, therefore, received no compensation for his services as a director.

The Compensation Committee periodically reviews market data in order to determine the appropriate level of compensation for maintaining a competitive director compensation structure necessary to attract and retain qualified candidates for board service. The most recent review was conducted by the Compensation Committee with the help of Frederick W. Cook & CO., Inc. (the “Review”) in August 2017. On August 30, 2017, upon the recommendation of the Compensation Committee, the Board approved a change to the compensation structure for non-employee directors, effective as of September 1, 2017. In this regard, the Board of Directors approved an increase in the value of the annual grant of restricted stock to $40,000 from $25,000. Following is a description of the revised compensation structure for non-employee directors:

Each director is paid fees for services as a Director in a total amount equal to $115,000 per year (such amount, the “Annual Fee”). The Annual Fee is payable $75,000 in cash (the “Annual Retainer”) and $40,000 in the form of an annual grant of restricted stock (the “Annual Restricted Stock”) under the Corporation’s Omnibus Incentive Plan. The Annual Retainer is payable on a monthly basis over a twelve-month period. The Annual Restricted Stock is subject to a twelve-month vesting period. In addition, the Directors may receive additional compensation in the form of retainers depending upon the Board committees on which they serve, as follows:

Non-management directors are expected to hold an investment position in our Common Stock having a market value equivalent to at least $150,000. New directors are required to achieve the ownership goal within three years after the director’s initial appointment to the Board.

The Corporation reimburses Board members for travel, lodging and other reasonable out-of-pocket expenses in connection with attendance at Board and committee meetings and performance of other services for the Corporation in their capacities as directors.

The non-management Chairman of the Board was entitled to receive during 2017 total compensation of $1.6 million per year comprised of the following three components:

In connection with the performance of his duties as non-management chairman, Mr. Herencia is entitled to reimbursement for certain expenses, including costs related to office space and health insurance.

Compensation of Directors | Director Summary Compensation Table

Mr. Herencia has been a critical member of the Board for almost seven years, dating back to the recapitalization of the Corporation in late 2011 when our private equity ownership required that the Board hire an independent chairman that had specialized expertise. Mr. Herencia’ s significant time investment, expertise in turnaround situations and coordination with regulators have added significant value to our Board and the Corporation. His vast experience in the financial industry has been critical to the identification and attraction of both the managerial talent and Board members who currently serve the Corporation. His intimate knowledge of both Puerto Rico and U.S. banking markets, as both are executive and director, singles him out as a uniquely qualified director in the Puerto Rico Market. He has extensive knowledge about our customers and competitors, as well as the complexities of regulatory compliance and the risk management environment. The Corporation relies heavily on Mr. Herencia’s knowledge, skills, relationships, and Board leadership and, as such, has agreed in years past to a compensation level that was above market and in line with his substaintial duties and value to the Board.

Upon the reduction in ownership positions of THL and Oaktree and taking into account proxy advisory analysis on director pay level, the Board decided to ask Mr. Herencia to stand for reelection and enter into a new compensation arrangement for the following three years at a reduced compensation level. While the level of pay is still above market, the Board feels this is more than justified given the benefits of the skill set and expertise provided by Mr. Herencia at a still critical time for the Corporation. On September 29, 2017, the Board approved substantial reductions to Mr. Herencia’s annual compensation as the non-management Chairman of the Board and Chairman of the Board of Directors of FirstBank, starting with the twelve-month periods effective from May to April of 2018, 2019 and 2020 (subject to his re-election by the stockholders at the annual meeting of stockholders for each of the covered twelve-month periods). As a result, Mr. Herencia will receive reduced total annual compensation for the 2018, 2019, and 2020 fiscal years as illustrated in the graph below:

Mr. Herencia’s compensation reflects his duties and responsibilities as non-management Chairman of the Board, he does not receive any additional compensation for his duties and responsibilities as chairman or member of any of the Corporation’s Board committees. Consistent with past practice, the cash retainer is payable monthly for services as the non-management Chairman of the Board and Chairman of the Board of Directors of the Bank. Semi-annual cash payments are payable in September and March, in two equal installments. Restricted stock is granted each September and vests one year from the date of the grant, with the exception of the final 2020 restricted stock award, which will vest immediately. Mr. Herencia will continue to be entitled to reimbursement for his health insurance, but such reimbursement will be subject to a limitation to be determined based on expected total expenses.

Compensation of Directors | Director Summary Compensation Table

The following table sets forth all the compensation that the Corporation paid to non-management directors who served during fiscal year 2017:

DIRECTOR SUMMARY COMPENSATION TABLE

PROPOSAL NO. 2—NON-BINDING APPROVAL OF COMPENSATION OF NAMED EXECUTIVE OFFICERS

Background of the Proposal

As participants in United States Department of the Treasury’s Capital Purchase Program Troubled Asset Relief Program (“TARP”), we provided our stockholders with the opportunity to cast a “say-on-pay” vote every year from 2009 through 2017. Now that the Corporation is no longer subject to the requirements applicable to TARP participants given the United States Department of the Treasury’s sale of its remaining shares of the Corporation’s Common Stock, the Corporation is subject to the requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC regulations that it solicit a separate, nonbinding “say on pay” stockholder vote to approve the compensation of executives.

This proposal, commonly known as a “Say on Pay” proposal, gives the Corporation’s stockholders the opportunity to vote on the Corporation’s executive compensation policies and procedures through the following resolution:

RESOLVED, that the stockholders approve, on an advisory basis, the NEOs’ compensation disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related tables and narrative included in this Proxy Statement for the 2018 Annual Meeting of Stockholders.

Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee will consider the outcome of the vote when evaluating the effectiveness of our compensation policies and procedures and in connection with its future executive compensation determinations. As part of the process of the Corporation’s emergence from the restrictions imposed by TARP, including the prohibitions on the payment of incentive compensation and the granting of equity-based awards other than limited amounts of long-term restricted stock, the Corporation considered information from a variety of sources, including proxy advisors, governance advocacies and peer company proxies, in determining a new compensation structure, pay levels and proportion of pay-at-risk effective as of July 1, 2017. This was especially important to the Compensation Committee in light of the Corporation’s stockholder say-on-pay support of 70.6%. As a result of these activities, the Compensation Committee, working with its independent compensation consultant, developed, adopted and implemented a new executive compensation program that more closely aligns with market best practices, rewards pay-for-performance and further aligns the interests of the Corporation’s NEOs with stockholders.

Accordingly, the compensation paid to our NEOs for 2017 reflects the TARP restrictions for the first six months of 2017 and the initial implementation of the new executive compensation program for the last six months of 2017. Cash-based salaries paid in 2017 remained at the same levels for the NEOs as the 2016 levels. The levels of stock issued to NEOs as a part of their salary (the “Salary Stock”) remained the same for 2017 as for 2016 except for the Salary Stock paid to the CEO and Ms. Nayda Rivera, who were granted higher amounts of Salary Stock in light of the Compensation Committee’s analysis of total compensation paid to executive officers in comparable positions at the Corporation’s peer companies. The restricted stock awards were also consistent in 2017 with those awards in 2016. In light of the Corporation’s emergence from the TARP restrictions, the related forfeiture of restricted stock granted to executives, including the NEOs, and the termination of the Written Agreement with the Fed that resulted from the Corporation’s improved asset quality and performance and achievement of other requirements of that agreement, the Compensation Committee made various compensation decisions that affected total 2017 compensation. In July 2017, it awarded the NEOs the opportunity to earn a short-term cash incentive amount for the last six months of 2017 based on the achievement of quantitative performance criteria as well as individual goals and made a cash transition award to each NEO contingent on the executive’s continued employment on the quarterly payment dates of the award through June 30, 2018. As more fully discussed in the Compensation Discussion and Analysis section, the Compensation Committee determined to award short-term incentive amounts based on achievement of the 2017 profitability targets and individual goals. The Corporation’s net income, adjusted to take into account the provisions that the Corporation recognized as a result of the extraordinary hurricanes in September 2017 that had a significant adverse effect on Puerto Rico, several of the Caribbean islands in which the Corporation operates as well as the Corporation’s business, exceeded the adjusted target. Its pre-tax pre-provision net income of $217.8 million exceeded the target by $11.8 million or 6%. Its classified asset ratio improved to 43.1%, exceeding the target of 34.8%. Although the Corporation’s non-performing asset ratio did not achieve the target, the Corporation’s non-performing assets decreased by $83.9 million. In addition, the Compensation Committee took into account significant corporate achievements in 2017, including the increase in core deposits and the reduction of the exposure to Puerto Rico government loans, and its analysis of the individual performance of the NEOs, which included their leadership in mitigating the effects of the hurricanes on the Corporation’s business. For details as to the TARP-related restrictions on compensation and the new compensation structure adopted upon emergence from TARP, please see the Compensation Discussion and Analysis section beginning on page 38. For additional information about the compensation paid to our NEOs and the Corporation’s overall executive compensation policies and procedures, please see the “Compensation Discussion and Analysis” section and the tabular disclosure (together with the accompanying narrative disclosure) in this Proxy Statement.

Proposal No. 2—Non-binding Approval of Compensation of Named Executive Officers | Background of the Proposal

Required Vote

Approval of this Proposal No. 2 regarding executive compensation requires the affirmative vote of a majority of the shares represented in person or by proxy at the meeting and entitled to vote on this proposal.

Recommendation of the Board of Directors

		The Board of Directors Unanimously Recommends a Vote “FOR” the Approval of the Named Executive Officers’ Compensation Disclosed in this Proxy Statement.

PROPOSAL NO. 3—ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE CORPORATION’S EXECUTIVE COMPENSATION

Background of the Proposal

As participants in TARP, we provided our stockholders with the opportunity to cast a “say-on-pay” vote every year from 2009 through 2017. Now that the Corporation is no longer subject to the requirements applicable to TARP participants, it is subject to both the requirement for an advisory vote on compensation paid to our NEO’s, as described in Proposal No. 2 above, as well as the requirement that the Corporation’s stockholders have an opportunity, at least once every six years, to vote on the frequency of an advisory vote on executive compensation. Accordingly, the Corporation is asking its stockholders to provide input on the frequency of future stockholder advisory votes on executive compensation, in accordance with Section 14A of the Securities Exchange Act of 1934, as amended. In particular, we are asking whether the advisory vote should occur every year, every two years or every three years. You may also abstain from voting.

We believe that an annual advisory vote on executive compensation will continue to allow our stockholders to provide us with their direct and timely input on our compensation philosophy, policies and practices. Accordingly, the Board of Directors recommends that stockholders vote in favor of an annual advisory vote on executive compensation.

Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board and it will not create any duty for the Board to take any action in response to the outcome of the vote.

Required Vote

The affirmative vote of a majority of the shares represented in person or by proxy at the meeting and entitled to vote on this proposal is required to approve, on an advisory non-binding basis, the frequency of future advisory votes on the compensation paid to our NEOs on an annual basis, every two years or every three years.

Recommendation of the Board of Directors

		The Board Recommends a Vote For An Annual Advisory Vote On Executive Compensation.

EXECUTIVE COMPENSATION DISCLOSURE

COMPENSATION DISCUSSION & ANALYSIS (CD&A)

FOREWORD

The year 2017 was transformative for the Bank. We emerged from TARP and the Fed Written Agreement was terminated. Achieving these critical regulatory milestones enabled us to reset our focus on the future and to develop and implement a new, market-aligned executive compensation program, designed with a significant emphasis on performance-based pay.

Shortly thereafter, and beyond the Corporation’s control, our stock price and financial performance were affected by the direct passage of major hurricanes Irma and Maria through the Puerto Rico and Eastern Caribbean Region during Q3 2017.

These significant events, and their timing, are particularly relevant when assessing our executive compensation program and financial outcomes for the year:

The Compensation Committee considered the impact of these events, including the loss of population and talent related to Puerto Rico’s long economic decline, which has accelerated due to hurricanes Irma and Maria, the absence of cash incentive payment awards made to NEOs during the eight years and five months during which the Corporation was subject to TARP, and the large forfeitures of long-term incentive awards resulting at the time of the repayment of TARP, as described in the section entitled “Restricted Stock Forfeitures,” as it made the executive compensation decisions for the named executive officers (“NEOs”) listed below. As such, this CD&A begins by summarizing the Corporation’s new executive compensation program, which became effective on July 1, 2017 and is fully in place for fiscal 2018. The following narrative also provides information about the compensation decisions made for the first half of 2017, at which time the executive compensation program was still subject to compensation-related restrictions under TARP.

The Compensation Committee believes it is the experience, cohesiveness and credibility of its senior leadership team that has poised the Corporation to increase profitability and drive long-term stockholder value by executing our strategic priorities, while also supporting the critical rebuilding activities in our communities.

Compensation Discussion & Analysis (CD&A) | New Executive Compensation Program

NEW EXECUTIVE COMPENSATION PROGRAM: EFFECTIVE JULY 1, 2017

As part of the process of the Corporation’s emergence from TARP, the Corporation considered information from a variety of sources, including proxy advisors, governance advocates and peer company proxies in determining the new compensation structure, pay levels and proportion of pay-at-risk. This was especially important to the Compensation Committee in light of the Corporation’s stockholder say-on-pay support of only 70.6% at the 2017 Annual Meeting of Stockholders.

As a result of these activities, the Compensation Committee, working with its independent compensation consultant, developed, adopted and implemented a new executive compensation program effective on July 1, 2017. This new program more closely aligns with market best practices, rewards pay-for-performance and further aligns the interests of the Corporation’s NEOs with stockholders.

Compensation Philosophy & Guiding Principles

The Corporation’s executive compensation program continues to have a performance-oriented focus — it is designed to support corporate strategic goals, including improved profitability and stockholder value appreciation.

Summary of New Program Elements

The new executive compensation program is supported by the following principal elements of compensation:

Compensation Discussion & Analysis (CD&A) | New Executive Compensation Program

Target Total Direct Compensation Mix

Our new compensation program returns us to our guiding compensation principles ensuring that there is an appropriate pay-performance relationship, driving our business strategy, creating long-term stockholder value and supporting leadership stability objectives. The program also addresses compensation risk by using a combination of financial results including credit quality, strategic accomplishments and a demonstration of leadership and other core competencies.

Short-Term Incentive				100%				Cash Based on balanced scorecard of key financial, strategic and operational results and, individual goals and competencies
Long-Term Incentive				60%				Performance Shares Based on achievement of a targeted level of tangible book value at the end of a three-year performance period
				40%				Time-Vested Restricted Stock Vesting of shares in 50% increments on the second and third anniversaries of the grant date

The charts presented below illustrate the shift in pay mix as a result of the Corporation’s emergence from the TARP restrictions to a more performance-based program by reviewing the target total direct compensation of our CEO and other NEOs by each compensation component. Compensation was fixed or vested based on service during the period in which the Corporation was subject to the compensation-related restrictions under TARP. Once the Corporation was no longer subject to these restrictions, the Corporation approved a new compensation program effective on July 1, 2017. During our transition period (July 1, 2017 to June 30, 2018):

After the elimination of Salary Stock and the full vesting of the transition award, the percentage of total direct compensation of our CEO and other NEOs that is dependent upon achievement of performance goals (“at risk”) will be 66% and 49%, respectively.

Chief Executive Officer

Compensation Discussion & Analysis (CD&A) | New Executive Compensation Program

Best Compensation Governance Practices and Policies

The following practices and policies, which we believe are in the best interests of our stockholders and NEOs, are also embedded in our program to promote sound compensation governance:

For details about the Compensation Committee’s decisions based on the new program and 2017 performance, please refer to “Compensation Decisions for July 1 — December 31, 2017 (New Program)),” starting on page 47 of this CD&A.

Other NEOs

Compensation Discussion & Analysis (CD&A) | 2017 Business Overview / Impact on Executive Compensation

2017 BUSINESS OVERVIEW / IMPACT ON EXECUTIVE COMPENSATION

Performance At-A-Glance

Despite the 2017’s challenges, the Corporation’s leadership team remained focused on successfully executing the Corporation’s business plan and completing key strategic initiatives to continue improving the Corporation’s operational performance towards sustainable profitability and improved stockholders’ returns. The following table summarizes our key achievements for 2017, as well as the shortcomings and non-forecasted events that affected the Corporation’s performance during 2017.

* See Appendix A for a reconciliation of this non-GAAP financial measure as well as other non-GAAP financial measures discussed in this Proxy Statement.

Compensation Discussion & Analysis (CD&A) | 2017 Business Overview / Impact on Executive Compensation

During 2017, the Corporation achieved the following operational results, including results adjusted for the effects of the hurricanes as well as other adjustments that are detailed in the reconciliation attached as Appendix A:

Effects of Hurricanes

Two strong hurricanes affected the Corporation’s service areas during 2017. Early in September, Hurricane Irma, a Category 5 hurricane, affected the eastern Caribbean islands, including the U.S. Virgin Islands of St. Thomas and St. John and Tortola in the British Virgin Islands, and, to a lesser extent, the U.S. Virgin Island of St. Croix and Puerto Rico. After hitting the eastern Caribbean, Hurricane Irma made landfall along Florida’s southwest shoreline. Two weeks after Hurricane Irma sideswiped Puerto Rico, Hurricane Maria made landfall in Puerto Rico as a Category 4 hurricane, also battering other islands in the Caribbean, including St. Croix. These hurricanes caused widespread property damage, flooding, power outages, and water and communication service interruptions, and have severely disrupted normal economic activity in all of these regions. Fiscal year results were affected by the hurricanes, including the $66.5 million storm-related provision in the third quarter and $4.8 million in the fourth quarter as well as overall business volume declines.

Business Performance Considering Effects of Hurricanes

To better assess the Corporation’s year-over-year operational results, certain corporate financial measures were adjusted to account for the non-recurring hurricane-related provisions described above, as follows:

Compensation Discussion & Analysis (CD&A) | 2017 Business Overview / Impact on Executive Compensation

Total Shareholder Return

The hurricanes negatively affected the Corporation’s total stockholder return and that of other financial institutions in Puerto Rico. The chart below depicts the hypothetical gain or loss on a $100 investment from 1/1/2017 to 1/1/2018 for the Corporation (“FBP”), POPULAR, Inc. (“BPOP”) and OFG Bancorp (“OFG”). The table also provides a comparison to the SNL U.S. Bank & Thrift Index (“SNL”), which is primarily comprised of financial institutions in the contiguous United States.

Other factors specific to the Corporation diminished opportunities to provide additional returns to shareholders during 2017. The Corporation is prohibited from deploying capital in the form of common dividends or a share repurchase without regulatory approval. Further, three of our largest shareholders sold in 2017 over 50 million shares of Common Stock. Despite these challenges, the Corporation had solid adjusted operating results in 2017 that represented improvement over the prior year, and ended the year with the highest capital ratios among Puerto Rico publicly-traded banks and in the top decile of U.S. peers. We believe that our 18.7% stock price increase through the first quarter of 2018 represents confidence in the Corporation’s ability to perform and grow value for our shareholders.

WHAT GUIDES OUR PROGRAM

Our Decision-Making Process

The Compensation Committee oversees the executive compensation program for our NEOs. The Compensation Committee is comprised of independent, non-employee members of the Board of Directors (the “Board”). The Compensation Committee works closely with its independent consultant and management to examine the effectiveness of the Corporation’s executive compensation program throughout the year. (During 2017, this also included ensuring compliance with the compensation restrictions under TARP, which are explained in detail on page 56 of this CD&A.)

Details of the Compensation Committee’s authority and responsibilities are specified in the Committee’s charter, which was most recently amended on January 31, 2018. The charter is available on the Corporation’s website at https://www.1firstbank.com/pr/en/help-center/investor-relations.

Compensation Discussion & Analysis (CD&A) | What Guides Our Program

The Role of the Compensation Committee

The Compensation Committee typically reviews and makes compensation recommendations to the independent Board members for the CEO, the other NEOs, and other selected senior executives in the first quarter of each year based on an evaluation of compensation paid by peers and the Corporation’s performance results for the preceding year. The Corporation’s President and CEO, following the compensation structure approved by the Board, makes recommendations concerning the amount of compensation to be awarded to executive officers, excluding himself. The CEO does not participate in the Compensation Committee’s deliberations or decisions. The Compensation Committee reviews and considers the CEO’s recommendations and makes a final determination. In making its determinations, the Compensation Committee reviews the Corporation’s performance as a whole and the performance of each executive as it relates to the accomplishment of the goals and performance objectives set forth for the executive for the year, together with any such goals that have been established for the relevant lines of business of the Corporation.

The Role of CEO

The CEO does not provide recommendations concerning his own compensation, nor is he present when his compensation is discussed by the Compensation Committee. The Compensation Committee, with input from its independent compensation consultant, discusses the elements of the CEO’s compensation in executive session and makes a recommendation to all of the non-management members of the Board for discussion and final approval. The CEO, with input from the Compensation Committee’s independent compensation consultant, assists in setting compensation for the other NEOs.

The Role of the Independent Consultant

The role of the outside compensation consultant is to assist the Compensation Committee in analyzing executive pay packages and contracts, perform executive and director compensation reviews, including market competition assessments, and develop executive and director compensation recommendations for the Compensation Committee’s consideration. The compensation consultant communicates directly and is available to participate in executive sessions with the Compensation Committee. In that regard, a representative of the executive compensation consultant attends selected meetings of the Compensation Committee during which the representative assists the Compensation Committee in making specific executive compensation decisions. Pearl Meyer has been the Compensation Committee’s executive compensation consultant since February 2013. Pearl Meyer reports directly to the Compensation Committee and does not provide any other services to the Corporation. The Compensation Committee has analyzed whether the work of Pearl Meyer as a compensation consultant has raised any conflict of interest, taking into consideration the following factors: (i) the provision of any other services to the Corporation by Pearl Meyer; (ii) the amount of fees paid by the Corporation to Pearl Meyer as a percentage of Pearl Meyer’s total revenue; (iii) Pearl Meyer’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Pearl Meyer or the individual compensation advisors employed by Pearl Meyer with an executive officer of the Corporation; (v) any business or personal relationship of the individual compensation advisors with any member of the Compensation Committee; and (vi) any stock of the Corporation owned by Pearl Meyer or the individual compensation advisors employed by Pearl Meyer. The Compensation Committee has determined, based on its analysis of the above factors, that the work of Pearl Meyer and the individual compensation advisors employed by Pearl Meyer as compensation consultants to the Compensation Committee has not created any conflict of interest.

The Role of Peer Companies

The Compensation Committee strives to set a competitive level of total compensation for each NEO as compared with executives in similar positions at peer companies. For purposes of setting 2017 compensation levels, consistent with the recommendation of Pearl Meyer, the Compensation Committee took into account publicly-available data from industry compensation surveys and proxy statements from the group of peer companies listed below. (Industry survey data was collected from banking surveys with an asset size of approximately $12.0 billion. Proxy data was compiled for publicly-traded commercial banks with assets generally between approximately $9 billion and $19.3 billion; however, three banks outside this asset range (smaller or larger) were included because they are known competitors for executive talent (Popular, Inc., OFG Bancorp and BankUnited, Inc.)