FIRST BANCORP PR

GENERAL

First

is

a

publicly

owned

holding

company

that

is

subject

to

regulation,

and

by

the

Federal Reserve Board. The Corporation was incorporated under

the laws of the Commonwealth of Puerto Rico in 1948 to serve as the

bank holding company

for FirstBank. Through

its subsidiaries, including

FirstBank, the Corporation

provides full-service commercial

and

banking

banking

automobile

financing,

agency

and

other

products and

services in

the U.S.,

and the

BVI. As

had total assets

of

$19.3 billion, including loans held for investment

of $12.7 billion, total deposits of $16.9 billion, and total

stockholders’ equity of $1.7

The

has

two

subsidiaries:

and

Agency,

Inc.

(“FirstBank

Agency”).

is

a

Puerto

bank,

and

Agency

is

a

Puerto

insurance agency.

FirstBank is subject to

the supervision, examination

and regulation of both

the Office of the

Commissioner of Financial Institutions

of

Puerto

Rico

(“OCIF”)

and

the

FDIC.

are

insured

through

the

FDIC

Deposit

Fund

(the

“DIF”).

In

within FirstBank,

the Bank’s

USVI operations

are subject to

regulation and examination

by the USVI

Division of Banking

Insurance,

and Financial

Regulation;

its BVI

operations are

regulation by

the BVI

Financial Services

Commission; and

in

the

state

of

Florida

are

subject

to

and

by

the

Florida

Office

of

Regulation.

The

Financial Protection

Bureau (“CFPB”)

regulates FirstBank’s

consumer financial

products and

FirstBank Insurance

Agency

is subject to the supervision, examination

and regulation of the Office of

the Insurance Commissioner of the

Commonwealth of Puerto

Rico (the “Insurance Commissioner of Puerto Rico”) and the Division of

Banking, Insurance and Financial Regulation in the USVI.

FirstBank conducts its

business through its main

office located in

San Juan, Puerto Rico, 57

banking branches in Puerto

Rico, eight

banking

in

the

USVI

and

the

BVI,

and

eight

banking

in

the

state

of

Florida.

has

six

with

in

Puerto

Rico:

First

Federal

Finance

Corp.

(d/b/a

Money

Express

La Financiera),

a

finance

company

specializing

in

the

of

small

loans

with

offices

in

Puerto

Rico;

First

of

Puerto

Rico,

a

Puerto

Rico

which

holds

assets;

an

international

banking

entity

(an

“IBE”)

under

the

Banking

Entity

Act

of

Puerto

Rico;

two

engaged

in

the

operation

of

certain

real

estate

owned

(“OREO”)

and

limited

in

under

the

laws

of

the

of

Puerto

Rico

and

Puerto

Rico

Tax

Incentive

Code

(“Act

of

2019”),

which

commenced

in

and

engages

in

investing

and

lending transactions.

For a

discussion of

certain significant

events that

have occurred

in the

2024, please

refer to

“Significant

Events” included in Part II, Item

7, “Management’s

Discussion and Analysis of Financial Condition

and Results of Operations” of this

BUSINESS SEGMENTS

The Corporation has six reportable segments: Mortgage Banking;

Consumer (Retail) Banking; Commercial and Corporate Banking;

Treasury and Investments; United States

Operations; and Virgin

Islands Operations. These segments are described below,

as well as in

Note 25 – “Segment Information” to the audited financial statements included

in Part II, Item 8 of this Form 10-K.

Mortgage Banking

The Mortgage Banking segment consists of the origination, sale and

servicing of a variety of residential mortgage loan products and

related hedging

activities in

Rico region.

Originations are

sourced through

different channels,

such as

FirstBank branches

and purchases from mortgage bankers,

and in association with new project developers.

This segment focuses on originating

real

estate

loans,

those

that

conform

to

the

U.S.

Federal

Housing

Administration

(the

“FHA”),

the

U.S.

Veterans

Administration (the “VA”)

and the U.S. Department

of Agriculture Rural

Development (the “RD”)

standards. Loans that

meet FHA’s

qualify

for

FHA’s

while

loans

that

meet

VA

or

the

RD

are

by

the

federal

do not

qualify

for

the FHA,

the

VA

or the

RD programs

are referred

to as

loans which

can be

conforming or non-conforming. Conforming

loans are those that meet the

standards for sale under the U.S.

Federal National Mortgage

(“FNMA”)

and

the

U.S.

Federal

Home

Loan

(“FHLMC”)

Loans

that

do

not

meet

FNMA

or

FHLMC

are

to

as

real

estate

loans.

The

Banking

segment

also

and

sells mortgages

in the

market. Conforming

sold to

such

as FNMA

and

FHLMC,

and

the

has

to

issue

National

(“GNMA”)

mortgage-backed securities (“MBS”).

Consumer (Retail) Banking

The

Banking

segment

the

lending

to

small

and

(other

than

those assigned

to

the

and

Banking

segment)

through

branch

network,

ATMs

and

online

banking

in

the

Puerto

Rico

region.

Retail

deposits gathered through each

branch of FirstBank’s

retail network serve as

one of the funding

sources for its lending and

activities. Other activities included in this segment are insurance activities

in the Puerto Rico region.

Commercial and Corporate Banking

The

and

Banking

segment

of

the

lending

and

other

for

large

represented by

specialized and

middle-market

clients and

the government

sector in

Rico region.

This segment

the

lending

(other

than

small business

loans)

and commercial

activities (other

than the government sector). A substantial

portion of the commercial and

corporate banking portfolio is secured

by the underlying real

estate collateral and the personal guarantees from the borrowers.

Treasury and Investments

The

and

segment

is

for

the

and

The

function centrally

manages funding

by providing

funds to

the Mortgage

Banking, Consumer

(Retail) Banking,

and

United

States

and

Virgin

Islands

to

support

their

lending

activities and by

compensating these

units for deposits

gathered. The Treasury

and Investments segment

also obtains funding

through

from

the

FHLB,

and

among

other

funding

sources.

United States Operations

The

United

segment

activities conducted

by FirstBank

on

mainland.

provides a wide

range of banking services

to individual and corporate

customers, primarily in

southern Florida, through

eight banking

branches.

This

segment

offers

a

variety

of

and

banking

and

banking

include checking, savings and money market accounts, retail CDs, internet

banking services, residential mortgages, home equity loans,

and lines of credit. Retail deposits, as well as FHLB advances and

brokered CDs assigned to this segment, serve as funding sources

for

its lending activities.

banking

include

checking,

savings

and

money

market

retail

CDs,

internet

banking

cash

remote

deposit

capture,

and

automated

clearing

house

(“ACH”)

Loan

include

the

traditional commercial and industrial

(“C&I”) and commercial real

estate products, such as lines

of credit, term loans

loans.

Virgin Islands Operations

The Virgin

segment consists

of all

conducted by

FirstBank in

and BVI,

consumer and commercial banking

This segment operates through eight

banking branches serving in the

USVI islands of St.

Thomas, St. Croix, and

St. John, as well the island

of Tortola

in the BVI. This segment

’s primary business

activities include consumer

and

lending

and

Retail

gathered

through

each

branch

serve

as

the

primary

funding

sources for the segment’s lending

CORPORATE SUSTAINABILITY

PROGRAM OVERVIEW

The

is

committed

to

its

clients,

and

communities

it

serves.

Its

which

environmental,

social

and

(“ESG”)

builds

on

its

core

values,

being

a

socially

company.

The

sees

ESG

as

a

step

towards

a

sustainable,

inclusive and successful future.

During

2021,

the

adopted

an

ESG

through

which

it

and

its

and

overarching

policy.

In

2024,

the

evolving

its Corporate

the

publication

of

its

annual

First

Report

for

(the

“2023

Report”).

The

Report

on

a

wide

range

of

ESG

topics,

and

oversight;

ethics

and

compliance; responsible marketing

and sales practices;

sustainable and accessible

finance; responsible banking,

including details as

to

data security and cyber management; people and culture; community

impact; and environmental stewardship.

ESG Governance

The

Board

of

and

team

share

to

of

its

and

In

February

2022,

the

and

of

the

Board

of

amended

its

charter

to

include

of

ESG

and

it

has

primary

of

ESG

practices and

disclosures. Nonetheless, other

committees of the

Board of Directors

also play a

role in ESG

oversight in

matters related to risk and cybersecurity management, human capital management,

and credit risk management.

As

part

of

the

ESG

set

forth

in

FirstBanCorp.’s

Policy,

which

was

by

the

Directors in

2022, the

responsibility of

day-to-day management

of its

ESG framework

and strategy

delegated

to

a

management-level

Committee,

of

leaders

from

areas,

such

as

Human

Resources,

Risk

and

Relations,

Legal

and

Affairs,

Marketing,

Compliance,

Finance,

and

Audit.

The

is

tasked

with

aligning

priorities

and

initiatives

for

the

year,

setting

and

objectives

and

goals,

and

leading

the

annual

process

on

ESG

related

topics.

The

Sustainability Committee reports to the Corporate Governance and Nominating

Committee of the Board of Directors.

HUMAN CAPITAL MANAGEMENT

strives to be

recognized as

a leading

and diversified financial

institution, offering

superior experience

to our clients

and employees. We

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

as we care about our customers. Our goal is to

be an

employer of

choice

within our

primary operating

regions, which

we believe

is achieved

and sustained

by adding

value

to our

lives

and

satisfying

and

evolving

work

experience.

The

core

of

our

value

proposition,

“The

Experience of Being 1,” is our commitment to our employees’ well-being,

success, professional development, and work environment.

Employees

As of

had 3,113

regular employees

representing a

2% decrease

in overall

headcount

had 2,767

employees in

196 employees

in the

Florida

region,

and

in

the

Virgin

Islands

region.

As

of

31,

2024,

67%

of

the

total

population and 58% of management positions were women.

Oversight

Our

Human

reports

to

the

Chief

Risk

Officer

and

manages

all

elements

of

the

human

capital

and

talent

talent

acquisition,

engagement,

and

development, compensation and benefits.

The

Human

Division’s

efforts

are

also

overseen

by

the

Chief

Officer

(“CEO”)

and

the

executive management team

through regular work-related

interactions. Our leaders focus

on strengthening employee

management and

and

maximizing

collaboration

between

departments

and

talents

by

promoting

an

open-door

culture

that

stimulates

frequent communication

between employees and

management. This provides

more opportunities to

identify employees’

needs, obtain

feedback

about

their

work-life

and

act

upon

such

feedback

to

improve

engagement.

In

the

Board

of

and

its

and

monitor

and

are

updated

on

the

Corporation’s human capital management

Talent

is an equal opportunity

employer which considers qualified candidates

for employment to fill its

open positions. We

focus

our

efforts

on attracting

and

the

best

talent for

college

graduates,

and promoting

mobility. The

attraction and selection process includes:

●

Promoting and posting our vacant positions

internally and externally;

●

Building our

employer brand

through social

media and

digital presence,

participating in

professional events

and job

fairs, and

maintaining relationships with universities through internship programs

and career forums;

●

Collaboration

with

hiring

to

ensure

an

accurate

match

between

roles

and

candidates

to

accelerate

the

recruitment

process and attraction of top candidates with the right fit for the role;

●

A robust management

information system

to enhance

of the recruitment

process and

provide candidates

with

a unique experience;

and

●

A robust

on-boarding process

to engage

and support

new employees

’

induction process,

including assignment

of a

“FirstPal”

from day one to help with the organizational culture

transition and learning process.

We

believe

that financial

is critical

for

our employees.

Our goal

is to

levels that

are competitive

market

and comparable

job categories

in similar

organizations.

Our salary

program

is designed

a

that

is

consistent

with

our

level

of

to

attract

the

best

talent

for

each

job

and

commensurately pay for performance.

to base

salaries, some

job positions

are eligible

to participate

in variable

pay programs.

has incentive

for

revenue

and

sales

support

units.

The

incentive

are

reviewed

to

align

them

to

and

ensure

sound

risk

the

Award

Program

and

rewards

outstanding performance

for exempt

employees who

do not

other variable

pay programs.

also

has a

incentive plan

for top-performing

leaders and

employees with

high potential.

These programs

provide awards

based

upon

the

and

individual’s

and

are

key

for

the

attraction

and

of

the

best

talent.

The

investment in its

employees has resulted

in a stable-tenured

workforce, with an

average tenure of

11 years of

service as

of December 31, 2024, and

a voluntary turnover rate of

10.91%, mostly related to hourly employees

in call centers, collections centers

and branches. The Corporation measures turnover among high performers;

such employees’ turnover rate was 3.6% for 2024.

Talent Development

and Engagement

We

believe

that a

culture of

learning and

maximizes the

talent of

human

capital and

is the

foundation for

business success. Our commitment to employee engagement continues

throughout employees’ time with the Corporation.

Our

and

program

strives

to

reflect

both

and

the

organization’s

needs.

The

offers

training opportunities

through online

courses and

in-person or

virtual classes,

as well

as development

activities, special

projects, and

partial tuition reimbursement to complete a bachelor’s

or master's degree to eligible employees. Training

is offered on various subjects

within

five

areas:

fundamentals,

and

governance,

technical

subjects,

soft

skills-professional

development, and leadership skills.

In 2024 we provided

over 100 training topics

through virtual and in-person

modalities allowing our

employees to continue

and complete

development plans.

In 2024, we

delivered more than

109,000 hours of

training and employees

completed an

average of

31.33

hours.

Every year

around

new

and

and

receive

in supervision

and

talent

For

new

supervisors,

we

offer

a

program

to

train

in

basic

leadership,

communication

skills,

and

human

and

In

our

curriculum

to

develop

our

and

in

their

technical

and

people

skills.

The

Leadership

program

encourages

and

managers to review

their leadership skills with

feedback received from instructors

and co-workers. The program

has been delivered to

63% of our current leaders since its launch.

In addition to these training opportunities, we have processes

to promote professional development and career

growth, including the

promotion

of internal

career

growth

opportunities,

processes,

annual

talent review,

and

robust succession

planning. We

also encourage

employees to

our commitment

to our

communities through

our volunteer

and community

reinvestment

In

2024,

our

and

in

initiatives,

contributing over 2,600 hours of volunteer

work. The Bank also encourages its

employees to serve on non-profit organizations’

boards

of

directors.

In

2024,

First

BanCorp

were

members

of

the

board

of

for

non-profit

across

the

Puerto Rico, Florida, and Virgin

Islands regions and offered approximately 3,310 hours of service.

Health & Wellness

Health

and

well-being

are

a

strong

component

of

the

we

provide

to

our

employees.

First

competitive benefits

programs to

address even

the most

pressing needs

of our

their families

to promote

occupational,

physical,

emotional,

and financial

health.

Our

wellness

package

health,

dental

and

vision insurance

offered

through

insurance company

options that

enable employees

to choose

those that

best accommodate

their and

their families’

needs. We

also offer life

insurance and disability

plans, as well

as a defined

contribution retirement plan

option where both

and

contribute,

and

the

make

an

true-up

contribution

for

the

Puerto

Rico

region.

In

the

Corporation offers

a fitness facility

in its main

offices which

allows employees

to participate

in fitness activities

including instructor-

led wellness sessions. Additionally,

in 2024 we included

in-house chiropractic services and

wellness tours to promote

healthy lifestyle

Work-life

balance remains

crucial; therefore,

we offer

various paid

time off

for vacation,

sickness, maternity

and paternity

leave,

bereavement,

marriage,

and

days.

Our

wellness

program

in-house

health

nutrition,

fitness,

health

fairs,

personal finance

education, preventive

healthcare activities,

and nursing

services. The

Corporation subsidizes

a substantial

the

cost

of

these

benefits.

Flexible

work

were

across

the

hybrid

work

arrangements.

MARKET AREA AND COMPETITION

The

in

highly

markets

and

is

subject

to

and

and contingencies.

In particular,

market

competitive in

the main

geographic

service

area of

the Corporation.

also had presence

in the state

of Florida

and in the

the

BVI.

Puerto

Rico

banks

are

subject

to

the

same

federal

laws,

and

that

apply

to

similar

on

the

United States mainland.

Competitors include

other banks,

insurance companies,

mortgage banking

companies, small

loan companies,

automobile financing

leasing companies,

brokerage firms

with retail

credit unions

and certain

retailers that

operate in

the

USVI,

the

BVI,

and

the

state

of

as well

as

(“fintech”)

and

competition

from

digital

The

compete

with

these

other

firms

with

respect

to

the

range

of

and

offered and the types of clients, customers and industries served.

See Part I, Item 1A, “Risk Factors” for further discussion of risks related

to competition.

SUPERVISION AND REGULATION

The

and

its

bank

are

subject

to

federal

and

Puerto

Rican

and

regulation.

These

and

apply

to

all

aspects

of

the

and

the

including commercial

and consumer

lending, deposit

taking, management,

governance and

other activities.

As part

of this

framework, the

to extensive

consumer financial

regulatory legal

and supervisory

U.S.

and

is

dynamic

in

nature,

and

and

are

subject

to

change

as

new

and

actions

are

taken.

See

Part

I,

Item

1,

above

for

and

of

Agency.

Future

may

the

and

of

the

Corporation and the

Bank. Any change in

applicable laws or regulations,

however, may

have a material adverse

effect on the business

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

the Corporation.

is also

the disclosure

and

regulatory requirements

of the

Securities Act

of 1933,

as amended,

and

the

Act

of

1934,

as amended,

both

as administered

by

the

SEC, as

well

as the

rules

to

with

securities listed on the New York

Stock Exchange.

The following discussion summarizes

certain laws, regulations and policies

to which the Company is subject.

It does not address all

applicable laws, regulations

and policies that

affect the Company

currently or might

affect it in

the future. This

discussion is qualified

in its entirety by reference to the full texts of the laws, regulations and policies described.

Bank Holding Company Activities and Other Limitations

The Corporation is registered under

the Bank Holding Company Act

of 1956, as amended (the

“Bank Holding Company Act”),

and

is subject to

ongoing supervision,

examination by the

Board.

is required to

file with

Reserve Board

periodic and

annual reports

information concerning

its own

business operations

and those

of its

The Bank Holding

Company Act also permits

a bank holding company

to elect to become

a financial holding

company and engage

in

a

broader

range

of

The

has

elected

to

be

a

holding

company

under

the

Bank

Holding

Company Act.

Financial holding

companies may

engage, directly or

indirectly,

in any activity

that is determined

to be (i)

financial in

nature, (ii) incidental to

such financial activity,

or (iii) complementary to

a financial activity and does

not pose a substantial risk

to the

safety

and

of

or

the

system

generally.

The

Bank

Holding

Company

Act

provides that

the following

activities have

been determined

to be

“financial in

nature”: (i)

lending, trust

banking activities;

(ii) insurance activities; (iii) financial

or economic advice or services; (iv)

pooled investments; (v) securities

underwriting and dealing;

(vi) domestic activities

permitted for an

existing bank holding

company; (vii) foreign

activities permitted for

an existing bank holding

company; and (viii) merchant banking activities.

A

holding

company

that

ceases

to

meet

certain

is

subject

to

a

variety

of

restrictions,

on

the

precluding

the

undertaking

of

new

or

the

of

shares

or

control

of

other

Until

is

restored,

the

Federal

Reserve

Board

has

broad

discretion

to

impose

on

the

activities. The Corporation

and FirstBank must

be “well-capitalized”

and “well-managed”

for regulatory

purposes,

and

must

earn

“satisfactory”

or

better

ratings

on

its

periodic

Reinvestment

Act

(“CRA”)

examinations for the Corporation to preserve its financial holding company

status.

Under

federal

law

and

Federal

Reserve

Board

policy,

a

bank

holding

company

such

as

the

is

to

act

as

a

source of strength

to its banking

subsidiaries and to

commit required

levels of support

to them. This

support may be

required at times

when,

absent

such

policy,

the

bank

holding

company

might

not

provide

such

support.

In

the

event

of

a

bank

holding

bankruptcy,

any

by the

bank holding

company

to a

federal bank

agency

to maintain

capital of

a

subsidiary bank will

be assumed by

the bankruptcy trustee

and be entitled

to a priority

of payment. In

addition, any capital

loans by a

bank

holding

company

to

any

of

its

banks

must

be

in

right

of

payment

to

and

to

certain

other

indebtedness

of

such

bank.

As

of

31,

2024,

and

the

date

hereof,

was

and

is

the

only

banking

subsidiary of the Corporation.

State-Chartered Non-Member Bank and Banking Laws and Regulations

in General

the OCIF,

the CFPB

and the

FDIC, and

to comprehensive

federal

and state

(including, for

this purpose,

Rico) regulations

that regulate,

scope of

its businesses, its

investments, its

reserves against

deposits, the

timing and

availability of deposited

funds, and

the nature and

amount

of collateral for certain loans.

The

OCIF,

the

CFPB

and

the

FDIC

examine

to

test

the

conformance

to

safe

and

sound

banking

practices and

various statutory

This oversight

establishes a

comprehensive framework

of

permissible

and

the

by

the

FDIC

is

also

for

the

protection

of

the

fund

and

depositors.

These

authorities

have

discretion

in

with

their

and

and

examination policies, including policies

with respect to the classification of

assets and the establishment of adequate

loan loss reserves

for regulatory purposes.

Their enforcement authority

includes, among other

things, the ability to

assess civil monetary

penalties, issue

cease-and-desist

or

removal

orders,

and

initiate

injunctive

actions

against

banking

and

institution-affiliated

In

these

actions

may

be

initiated

for

violations

of

laws

and

and

for

engaging

in

unsafe

or

unsound

certain bank

actions

are required

by statute

and

implementing regulations.

Other actions

or failure

to act

may

provide the basis for enforcement action, including the filing of misleading

or untimely reports with regulatory authorities.

Regulatory Capital Requirements

The federal

have implemented

rules for

U.S. banks

that establish

minimum

capital requirements,

the

components

of

and

the

risk-based

capital

treatment

of

bank

assets

and

sheet

exposures.

These

rules

apply

to

the

and

and

are

to

align

U.S.

capital

with

international regulatory capital standards

adopted by the Basel Committee on Banking

Supervision (“Basel Committee”), in particular,

the international capital accord known as “Basel III.”

The current rules require a minimum common

equity capital requirement and an

additional common equity Tier 1 capital

conservation buffer.

Under the Basel III rules, the Corporation

must maintain certain minimum capital

ratios to be considered adequately capitalized

and

to

avoid

the

above.

These

include:

(i)

a

minimum

common

equity

Tier

Capital

(“CET1”) ratio

of 4.5%,

plus the

2.5% capital

conservation buffer

;

(ii) a

minimum Tier

1 capital

ratio of

6.0%, plus

the 2.5%

capital

conservation buffer; (iii) a minimum Total

capital (Tier 1 plus Tier 2)

ratio of 8.0%, plus the 2.5% capital conservation buffer;

and (iv)

a required minimum leverage ratio (Tier

1 capital to average on-balance sheet non-risk adjusted assets) of 4%.

As part of

regulatory relief measures

in response

to the impact

of COVID-19,

federal banking

agencies issued an

interim final

rule

on

March

31,

2020,

the

option

to

temporarily

delay

the

capital

effects

of

current

credit

losses

(“CECL”).

Under this rule a two-year delay was permitted for the initial impact

of CECL on retained earnings plus 25% of the change

in

the

ACL

credit

deteriorated

(“PCD”)

loans)

from

January

1,

to

31,

Following

the

deferral period, the capital impact is

phased-in over a three-year transition

period, at a rate of 25% per year beginning

January 1, 2022.

This

results

in

a

total

period

of

five

years.

and

the

Bank

elected

to

phase

in

the

full

effect

of

CECL on

regulatory capital under this transition framework.

The

and

the

Bank

compute

risk-weighted

assets

using

the

Standardized

Approach

under

Basel

III.

In

the

Collins Amendment

to the

Dodd-Frank Act,

things, introduced

additional capital

restrictions, including

the phase

out of

certain trust-preferred

securities (“TRuPs”)

from Tier

1 capital.

Preferred securities

issued under

Treasury’s

Asset

Relief Program

(“TARP”)

remain exempt

from this

phase out.

Bank holding

companies, including

were required

to

fully

phase

out

from

Tier

capital

the

junior

that

were

issued

to

support

TRuPs

by

January

1,

these instruments

may continue

to qualify

as Tier

2 capital

until they

are redeemed

or reach

31,

2024,

the

had

$59.9

million

in

junior

that

were

a

full

phase-out

from Tier

capital

under the final Basel III capital rules.

the Corporation's

and FirstBank's

ratios as

Federal

Reserve and FDIC guidelines:

Banking Subsidiary

Well-Capitalized

Minimum

Total capital (Total

capital to risk-weighted assets)

18.02%

17.76%

10.00%

CET1 Capital (CET1 capital to risk-weighted assets)

16.32%

15.76%

6.50%

Tier 1 capital ratio (Tier

1 capital to risk-weighted assets)

16.32%

16.51%

8.00%

(1)

11.07%

11.20%

5.00%

(1) Tier 1 capital to average assets.

Stress-Testing

and Capital Planning Requirements

Federal

do

not

impose

formal

stress-testing

on

banking

with

total

assets

of

less

than $100

billion, such

as the Corporation

and FirstBank.

The federal

have indicated

through interagency

capital planning

and risk

practices of

with total

assets of

$100

billion will

to be

reviewed through the regular

supervisory process. Notwithstanding,

the Corporation monitors its

capital consistent with the

safety and

soundness expectations

of the

federal regulators

to perform

internal stress

testing as

part of

its annual

capital planning

Dividend Restrictions

The

Federal

Reserve Board

has a

policy

that, as

a matter

of prudent

a bank

holding

company should

generally not

pay

cash

unless

its

net

income

to

common

for

the

past

four

quarters,

net

of

paid

during

that

period,

has

been

to

fully

fund

the

and

the

rate

of

retention

appears

to

be

consistent with the organization’s

capital needs, asset quality,

and overall current and prospective financial condition. Furthermore,

the

Federal

Reserve Board’s

rule (Regulation

Q) limits

of capital

a bank

holding

company may

distribute

under certain circumstances. A banking

organization must maintain

a capital conservation buffer

of CET1 capital in an amount

greater

than 2.5% of

total risk weighted

assets to avoid

being subject to

limitations on capital

distributions. The Corporation

is also subject to

certain restrictions

generally imposed

on Puerto

Rico corporations

to the declaration

and payment

of dividends

(i.e., that

dividends may

be paid

out only

capital surplus

or,

in the

absence of

such excess,

net

earnings for such fiscal year and/or the preceding fiscal year).

The principal

source of

funds for

as a

parent holding

company,

is dividends

declared and

paid by

its subsidiary,

FirstBank. The

FirstBank to

declare and

pay dividends

on its

capital stock

is regulated

by the

Banking Law

of

1933,

as

amended

(the

Rico

Banking

the

Federal

Deposit

Act

(the

“FDIA”),

and

FDIC

In

general

terms,

the

Puerto

Rico

Banking

Law

that when

the

of a

bank

are greater

than

receipts,

the

excess

of

expenditures over

receipts shall

be charged

against undistributed

profits of

and the

balance, if

any,

shall be

charged against

the required

reserve fund

of the

bank. If

fund is

not sufficient

to cover

in whole

or in

part, the

amount

must be

charged

capital account.

Rico Banking

Law provides

that, until

said capital

restored to its original

amount and the reserve

fund to 20% of

the original capital, the

bank may not declare

any dividends. In general,

of

the

FDIA

and

the

FDIC

restrict

the

payment

of

when

a

bank

is

undercapitalized

(as

in

Prompt

Corrective

Action

below),

when

a

bank

has

failed

to

pay

or

when

there

are

safety

and

concerns

regarding such bank.

Refer

to

Part

II,

Item

5,

“Market

for

Registrant’s

Common

Equity,

Related

Stockholder

Matters

and

Issuer

Purchases

of

Equity

Securities” of this Form 10-K for further information on the Corporation’s

distribution of dividends and repurchases of common stock.

Consumer Financial Protection Bureau

The CFPB has

primary examination

and enforcement authority

over FirstBank and

other banks with

over $10 billion

in assets with

respect to consumer financial products and services.

The

CFPB’s

primary

include

the

of

persons”

(broadly

defined

to

include

any

person

offering

or

providing a consumer

financial product or

service and any

affiliated service

provider) for compliance

with federal consumer

laws.

It

implements

amendments

to

and

has

primary

to

enforce

the

federal

laws,

the

Equal

Credit Opportunity Act, the Truth

in Lending Act (“TILA”) and the

Real Estate Settlement Procedures Act (“RESPA”),

among others.

The

CFPB

also

has

broad

powers

to

prescribe

rules

to

a

covered

person

or

service

in

with

any

transaction with a consumer for a consumer financial product or service,

or the offering of a consumer financial product or service.

Among other

actions, the

CFPB has

issued regulations

setting forth

mortgage servicing

rules that

apply to

which affect

consumer notices

regarding delinquency,

foreclosure alternatives,

modification applications,

adjustments and

options for

avoiding

“force-placed”

insurance.

the

CFPB has

adopted

rules and

forms

that

combine

certain

that

receive in connection with applying for and closing on a mortgage loan under

the TILA and the RESPA.

The

CFPB

has

been

actively

updating

its

to

address

issues

in

the

marketplace.

This

includes implementing new rules on

personal financial data rights such

as the Open Banking Rule finalized

in October 2024, overdraft

lending practices, and the use of artificial intelligence in credit decisions.

The Trump

administration has

advocated for

reduction of

financial services

regulation. This

may include

structural changes

to, or

the elimination

of, the

CFPB. Consequently,

rulemaking and

regulatory guidance

previously issued

by the

CFPB may

be rolled

back

or modified. The ultimate impact of any changes to certain federal agencies,

like the CFPB, is uncertain at this time.

The Volcker

Rule

Section 13 of the Bank Holding

Company Act (commonly known as

the Volcker

Rule), generally prohibits a banking

entity such as

the Corporation or the

Bank from acquiring or

retaining any ownership in,

or acting as sponsor

to, a hedge fund

or private equity fund

(“covered

fund”).

The

Volcker

Rule

also

prohibits

these

from

engaging,

for

their

own

account,

in

trading of certain securities, derivatives, commodity futures and options

on these instruments.

The Corporation and

the Bank are not engaged

in “proprietary trading” as

defined in the Volcker

Rule. In addition, the

has reviewed its investments and concluded that they are not considered

covered funds under the Volcker

Rule.

Community Reinvestment Act and Home Mortgage Disclosure Act Regulations

The CRA encourages

banks to help meet

the credit needs of

the local communities

in which they offer

services, including low- and

moderate-income individuals, consistent with the safe and sound operation

of the bank.

The

CRA

the

federal

as

part

of

the

general

of

supervised

banks,

to

assess

a

record of meeting

the credit needs of

its community,

assign a performance rating,

and take such record

and rating into account

applications by

such bank,

such as

an application

for approval

of a

merger

or the

establishment of

a branch.

A

rating of

less than “satisfactory”

could result

in the denial

of such applications.

The CRA

also requires

all institutions

to make

public

disclosure of their CRA ratings. FirstBank received a “satisfactory” CRA rating

in its most recent examination by the FDIC.

In

October

2023,

the

U.S.

federal

banking

issued

a

final

rule

to

strengthen

and

modernize

their

implementing the

CRA. The

final rule,

things, revises

the CRA

regulations to

better achieve

the CRA’s

core purpose

of

encouraging banks to

help meet the credit

needs of their local

communities; provides greater

clarity and consistency

in the application

of CRA regulations;

tailors performance standards,

data collection, and reporting

requirements to account

for differences in

bank size,

business model,

and local

conditions; and

promotes a

consistent regulatory

approach that

applies to

banks regulated

by the OCC,

the

Federal

Reserve

Board

and

the

FDIC.

The

final

rule

was

to

take

effect

on

April

1,

2024,

with

most

of

its

becoming

on January

1, 2026.

Reporting of

the collected

data

be

until 2027.

Several

banking

groups filed

a lawsuit seeking

to invalidate

the CRA final

rule, in which

they argued

that the federal

banking agencies exceeded

their

statutory authority in adopting the

CRA final rule. In March 2024,

a federal judge granted an injunction

to extend the CRA final rule’s

date, originally

set for

April 1,

effective date

will be

extended each

day the

injunction remains

in place,

pending

the resolution of the lawsuit.

USA PATRIOT

Act and Other Anti-Money Laundering Requirements

As a regulated

depository institution,

FirstBank is subject

to the

Bank Secrecy

Act, which imposes

a variety of

reporting and

other

the requirement

to file

suspicious

activity and

currency

reports that

to assist

in the

detection and prevention

of money laundering,

terrorist financing and

other criminal activities.

In addition, under

Title III

of the USA

PATRIOT

Act of 2001,

all financial institutions

are required to

identify their customers,

adopt formal and

comprehensive anti-money

laundering programs,

scrutinize or

prohibit certain

transactions of

special concern,

and be

prepared to

respond to

inquiries from

U.S.

law enforcement agencies concerning their customers and their transactions.

In

January

2021,

major

amendments

to

U.S.

became

through

the

enactment

of

F

of

the

National

Defense

Authorization

Act

for

fiscal

year

2021,

known

as

the

Anti-Money

Laundering

Act

of

(the

“AML

Act”).

The

AML

Act

a

variety

of

to

modernize

the

regime

and

remediate

gaps

in

the

U.S.’s

to

and

countering

the

of

terrorism,

creation of

a national

database of

absence corporate

beneficial ownership

along with

significantly enhanced

penalties

for

Bank

Secrecy

Act

violations,

clarification

of

Suspicious

Activity

Report

filing

and

sharing

and

addressing

the

adverse

of

“de-risking,”

namely,

the

practice

of

institutions’ termination or

limitation of business relationships

with clients or classes

of clients in order

to manage the risks associated

with such clients.

Regulations implementing the Bank Secrecy Act and the

USA PATRIOT

Act are published and primarily enforced

by the Financial

Crimes Enforcement Network (“FinCEN”), a bureau

of the U.S. Treasury.

Failure of a financial institution, such as the Corporation or

the

Bank,

to

comply

with

the

of

the

Bank

Secrecy

Act

or

the

USA

PATRIOT

Act

could

have

serious

legal

and

for

the

institution,

the

possibility

of

or

other

legal

actions,

such

as

civil

penalties.

The

is

also

to

comply

with

federal

and

trade

sanctions

requirements enforced by the Office of Foreign Assets Control

(“OFAC”), a bureau

of the U.S. Treasury.

The Corporation believes

it has adopted appropriate

policies, procedures and controls

to address compliance with

the Bank Secrecy

Act, USA

PATRIOT

Act and

economic/trade

sanctions requirements,

and to

implement banking

agency,

FinCEN, OFAC

and

other

U.S. Treasury regulations.

Financial Privacy and Cybersecurity

The Gramm-Leach-Bliley

Act limits the ability

of financial institutions

to disclose non-public information

about consumers to non-

affiliated

third

These

require

of

privacy

to

and,

in

some

allow

consumers to prevent disclosure of certain personal information

to a non-affiliated third party.

The

federal

banking

issue

to

enhance

cyber

risk

standards among financial

institutions. A financial

institution is expected

to establish multiple

lines of defense

and to ensure

their risk

management processes

address the

risk posed

by potential

threats to

the institution.

A financial

management is

to

to

respond

and

recover

the

after

a

cyber-attack.

A

is

also

to

develop

to

enable

of

data

and

if

a

service

of the

falls victim

to this

type

of a

cyber-attack.

Our

Program

(“CISP”) reflects

these

and

our

overall

vision,

direction,

and

efforts

to

protect

the

and

availability of customer information and prevent access by unauthorized

personnel.

In

July

2023,

the

SEC

adopted

rules

requiring

registrants

to

they

experience

and

to

disclose on

an annual

basis material

regarding their

risk management,

strategy,

and governance.

The new

rules

require

registrants

to

on

the

new

Item

1.05

of

Form

8-K

any

incident

they

to

be

within

four

days

of

such

and

to

describe

the

aspects

of

the

incident’s

nature,

scope,

and

timing, as

well as

its material

impact or

reasonably likely

material impact

on the

registrant. The

new rule

also added

Regulation S-K

Item 106,

which requires

disclosure of

the registrant’s

processes, if

any,

for assessing,

identifying, and

managing material

risks from

threats,

as

well

as

the

effects

or

likely

effects

of

risks

from

threats

and

previous cybersecurity

incidents on

the new

Cybersecurity of