FIRST BANCORP /PR/

GENERAL

First

is

a

publicly

owned

holding

company

that

is

subject

to

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

$19.1 billion, including loans held for investment

of $13.1 billion, total deposits of $16.7 billion, and total

stockholders’ equity of $2.0

billion.

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 services.

FirstBank Insurance Agency is

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

tax-exempt

assets;

an

banking

entity

(an

“IBE”)

under

the

International

Banking

Entity

Act

of

Puerto

Rico;

two

engaged

in

the

operation

of

certain

real

estate

owned

properties and

a limited liability

corporation organized

in 2022 under

the laws of

Rico and Puerto

Rico

Tax

Incentive

Code

(“Act

of

2019”),

which

commenced

in

and

engages

in

and

lending

transactions. The limited

liability corporation organized

under the laws

of Act 60 of 2019

has one wholly-owned

subsidiary organized

under such laws.

For a

discussion of

certain significant

have occurred

in the

2025, 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 21 – “Segment Information” to the audited financial statements

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

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

(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

non-conforming

real

estate

loans.

The

Banking

segment

also

and

sells mortgages

in the

market. Conforming

sold to

such

as FNMA

and

FHLMC,

and

the

has

commitment

to

issue

National

(“GNMA”)

mortgage-backed securities (“MBS”).

Consumer (Retail) Banking

The

Banking

segment

the

lending

to

small

banking,

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

sector in

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

funds to

the Mortgage

Consumer (Retail)

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

involving

among

other

funding

sources.

United States Operations

The

United

States Operations

segment

all banking

activities conducted

on the

U.S. mainland.

provides a wide

range of banking services

to individual and corporate

customers, primarily in

southern Florida, through

eight banking

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

banking activities

in the

BVI, including

consumer and commercial

banking services.

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

and

lending

and

Retail

through

each

branch

serve

as

the

primary

funding

sources for the segment’s lending

CORPORATE SUSTAINABILITY

PROGRAM OVERVIEW

The

is

committed

to

supporting

its

clients,

employees,

and

communities

it

serves.

Its

which

environmental,

social

and

(“ESG”)

builds

on

its

core

values,

being

a socially

company.

sees effective

ESG management

as a

critical step

towards

a sustainable

and

successful future.

During 2021, the Corporation adopted an ESG framework

to guide its corporate sustainability strategy and governance.

In 2025, the

its

most

recent

First

Bancorp

Report

for

(the

“2024

Report”),

which

on

a

wide

range

of

ESG

topics,

governance;

ethics

and

compliance;

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 responsibility.

Sustainability Governance

The

Board

of

and

team

share

relating

to

of

its

and

In

2022,

the

and

of

the

Board

of

amended

its

charter

to

include

of

and

it

has

primary

of

ESG

and

disclosures.

Nonetheless,

other

of

the

Board

of

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

set forth

in

FirstBanCorp.’s

Policy,

which

was

by

the

Corporation’s Board of

Directors in 2022 and subsequently amended,

the responsibility of day-to-day management of

its sustainability

and

has

been

delegated

to

a

management-level

comprised

of

leaders

from

areas,

such

as

Human

Resources,

Risk

and

Investor

Relations,

Legal

and

Affairs,

Marketing,

Compliance,

Finance,

and

Audit.

The

is

tasked

with

aligning

and

for

the

year,

setting

and

objectives,

and

leading

the

annual

process

on

sustainability-related

topics.

The

reports

to

the

and

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

The

core

of

our

employer

value

proposition,

“The

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

success, professional development, and work environment.

Employees

2025, the Corporation and

its subsidiaries had 3,218

regular employees representing

a 3.4% increase in overall

headcount

from December

had 2,854

employees in

206 employees

in the

Florida

region,

and

in

the

Virgin

Islands

region.

As

of

31,

2025,

66%

of

the

total

population and 58% of management positions were women.

The Human

Resources Division,

led by

the Human

Resources Director

who reports

directly to

Chief Consumer

Officer

and

Chief

of

Staff,

manages

all

elements

of

the

human

capital

and

talent management, talent acquisition, engagement, learning and

development, compensation and benefits.

The

Human

Resources

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

engagement

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

First BanCorp. is an equal

opportunity employer which considers

qualified candidates for employment

to fill its open positions. We

focus

our

efforts

on attracting

and

retaining

the

best

talent for

college

graduates,

and promoting

mobility. The attraction

and selection process includes:

●

Posting vacancies internally and externally;

●

Building employer brand through digital presence, professional events and

job fairs, and university partnerships;

●

Collaboration with hiring managers to

ensure accurate role alignment to

accelerate the recruitment process and

attraction of top

candidates with the right fit for the role;

●

A robust management information system to enhance

recruitment effectiveness and provide

candidates with 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

with

our

level

of

to

attract

the

best

talent

for

each

job

and

commensurately pay for performance.

In

to

base

salaries,

certain

job

are

eligible

to

participate

in

variable

pay

to

align

with

the

and

The

incentive

for

revenue

generation

and

sales

to

support

units.

These

are

reviewed

to

ensure

alignment

with

strategies, performance objectives,

and sound risk

management practices. The

Corporation’s Management

Award

Program recognizes

and

rewards outstanding

for exempt

employees who

do not

participate in

other

variable pay

programs. In

the

Corporation maintains a long-term incentive

plan for top-performing leaders and

employees, as well as identified high-potential

talent,

to

promote

development,

and

retention.

These

have

fostered

a

stable

and

experienced workforce, reflected in

an average tenure of 11

years as of December 31, 2025.

voluntary turnover rate

declined

to

9.59%

in

2025,

to

10.91%

in

2024,

with

turnover

to

hourly

in

call

centers,

collections

centers

and

Turnover

among

high

performers

improved,

decreasing

to

2.4%

in

from

3.6%

for

2024,

underscoring the effectiveness of the Corporation’s

compensation, engagement, and retention strategies.

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

learning

and

program

strives

to

align

with

both

and

the

needs,

offering

online,

in-

person,

and

virtual

training,

as

well

as

activities,

special

projects,

and

partial

tuition

reimbursement

to

a

bachelor’s

or

master’s

degree

to

eligible

employees.

The

Learning

and

cover

five

areas:

Fundamentals,

Governance and Compliance, Technical

and Specialized Development, Professional Development, and Leadership.

In

2025,

we

delivered

more

than

114,000

training

hours

across

more

than

1,800

courses

through

all

learning

modalities.

New

supervisors

completed

focused

on

foundational

leadership,

communication,

and

HR

while

the

curriculum continued

to strengthen

both technical

and people

-management

skills. The

Leadership

Development program,

which incorporates structured feedback from instructors and peers, has reached

63% of current leaders since its launch.

In

to these

learning opportunities,

we

support professional

and

career

growth,

the internal

career

advancement,

processes,

annual

talent

review,

and

robust

succession

planning.

We

also

encourage

employees to participate in community initiatives, volunteering over

2,800 hours supporting more than 35 organizations in 202

Health & Wellness

First

health

and

wellness

to

support

occupational,

physical,

emotional, and financial well-being.

Benefits include health, dental

and vision insurance offered

through multiple insurance providers,

enabling

to

select

options

that

best

meet

their

and

family

needs.

The

also

offers

an

Employee

Assistance Program

holistic support

and

resources addressing

a broad

range of

needs. In

offers life

insurance and

disability plans,

as well

as a

defined

contribution retirement

plan in

which both

and

the employer

contribute.

For

in

Rico

region,

the

Corporation provides

an additional

true-up

contribution.

further supports employee

wellness through fitness

facilities at its

main offices,

instructor-led wellness sessions,

and

wellness tours that promote healthy lifestyle practices. The Corporation

subsidizes a substantial portion of the cost of these benefits.

Work-life

balance remains

a key

priority; therefore,

offers various

paid time-off

benefits, including

vacation, sick

leave,

maternity

and

paternity

leave,

bereavement

leave,

marriage

leave,

days,

and

flexible

work

arrangements,

hybrid work arrangements.

The wellness program also includes on-site

occupational medical and nursing health

services, nutrition and

fitness initiatives, health

fairs, vaccination clinics preventive

healthcare activities and targeted

education focused on personal

and

health

literacy.

To

enhance

quality

of

life

and

optimize

workplace

the

wellness

program

on-site

musculoskeletal

demonstrations,

tobacco-use prevention

education, discount

programs for

laboratory testing

and consumer

and an emergency donation program to support employees

experiencing catastrophic events.

MARKET AREA AND COMPETITION

The

in

highly

markets

and

is

subject

to

and

uncertainties

and contingencies.

In particular,

the banking

market

is highly

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,

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

emerging

competition

from

digital

platforms.

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 that

govern all aspects

and the Bank’s

activities, including

consumer lending, deposit

taking, management,

governance and

other activities.

As part

of this

regulatory framework,

and the

Bank are

subject

to extensive consumer financial protection laws, regulatory,

legal, and supervisory requirements, which continue to change in

to

new

or

actions.

See

Part

I,

Item

1,

above

for

and

of

Agency.

Future

or

may

the

of

the

Corporation and the Bank and could materially affect its business.

The

is also

subject

to the

and

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

is registered

as a

company under

Act of

1956, as

amended (the

“Bank

Holding

Company

Act”),

and

is

subject

to

ongoing

and

by

the

Federal

Reserve

Board.

In

this

capacity,

the

is

to

file

and

annual

reports

as

well

as

other

its

own

operations and those of its subsidiaries.

The Bank Holding

Company Act also permits

a bank holding company

to elect to become

a financial holding

company and engage

in a

broader range

activities. As

a result,

has elected

to be

a financial

Bank

Holding

Company

Act

and

may

engage,

directly

or

indirectly,

in

any

that

is

to

be

(i)

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

soundness of

depository institutions

or the

financial system

generally.

Act specifically

provides that

the

have

been

to

be

“financial

in

nature”:

(i)

trust

and

other

banking

activities;

(ii)

activities; (iii) financial or economic

advice or services; (iv) pooled investments;

(v) securities underwriting and dealing; (vi)

activities permitted for an existing

bank holding company; (vii) foreign activities

permitted for an existing bank holding

company; and

(viii) merchant banking activities.

must be

“well-capitalized” and

“well-managed”

for regulatory

purposes, and

FirstBank must

earn

“satisfactory” or better ratings

on its periodic Community

Reinvestment Act (“CRA”) examinations

for the Corporation to preserve

its

company status.

If these

standards are

not met,

Reserve Board

may impose

limitations on

holding company’s activities until

compliance is restored.

Under

federal

law

and

Federal

Reserve

Board

policy,

a

bank

holding

such

as the

is

to

act

as

a

source

of strength

to its

banking

capital

support

as necessary.

In the

event

of a

bank

holding company’s

bankruptcy,

any commitment made

by the bank

holding company to

a federal bank

regulatory agency

capital

of

a

bank

will

be

assumed

by

the

bankruptcy

trustee

and

accorded

for

payment.

In

any

capital

loans by

a bank

to any

of its

subsidiary banks

must be

subordinated in

right of

payment to

deposits and

other

indebtedness

of such

subsidiary bank.

As of

31,

2025,

and the

date hereof,

FirstBank was

and

is the

sole banking subsidiary.

State-Chartered Non-Member Bank and Banking Laws and

Regulations

in General

is

subject

to

and

by

the

OCIF,

the

CFPB

and

the

FDIC,

and

is

subject

to

federal

and

state

(including,

for

this

purpose,

the

of

Puerto

Rico)

that

regulate,

among

other things,

the scope

of its

businesses, its

investments, its

reserves against

deposits, the

timing and

availability of

deposited funds,

and the nature and amount of collateral required for certain loans.

The

OCIF,

the

CFPB

and

the

FDIC

conduct

examinations

of

to

assess

its

ensure

the

of

safe

and

sound

banking

practices,

and

with

and

Supervision by

is also

intended for

the protection

of the

Deposit Insurance

Fund (“DIF”)

and depositors.

These regulatory

authorities have discretion in connection with their

supervisory and enforcement activities and examination

policies, including policies

to the

classification of

the establishment

of adequate

loan loss

reserves for

regulatory purposes.

actions

include

civil

cease-and-desist

or

removal

orders,

and

injunctive

actions

which

may

be

imposed

for

violations

of

laws

and

or

for

unsafe

or

unsound

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

and FirstBank are

each subject to

minimum regulatory

capital requirements imposed

by federal banking

These

are

redesigned

to

align

U.S.

capital

with

capital

adopted by the Basel Committee on Banking Supervision

(“Basel Committee”), in particular, the

international capital accord known as

“Basel

III.” Under

the

Basel

III

rules,

the

must

certain

minimum

capital

ratios

to

be

capitalized and to

avoid the regulatory limitations

described above. These

requirements include: (i) a

minimum common equity

Tier 1

Capital

(“CET1”)

ratio

of

4.5%,

plus

a

2.5%

capital

conservation

buffer;

(ii)

a

minimum

Tier

capital

ratio

of

6.0%,

plus

a

2.5%

capital conservation

buffer; (iii)

a minimum

Total

capital (Tier

1 plus

Tier

2. ratio

of 8.0%,

plus a

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

implemented in

response to the

economic impact of

COVID-19, the

federal banking agencies

issued

an

interim

final

rule

on

March

31,

2020,

the

option

to

temporarily

delay

the

capital

effects

of

current

losses (“CECL”). This

transition framework provided

for a total

five-year phase-in period,

which ended on

January 1,

The

and

the

Bank

elected

to

utilize

this

transition

option

and,

as

of

January

1,

2025,

have

fully

the

impact of CECL in their regulatory capital ratios.

The following table presents

and FirstBank’s

regulatory capital ratios as

of December 31, 2025,

based on Federal

Reserve and FDIC guidelines:

Banking Subsidiary

Well-Capitalized

Minimum

Total capital to risk-weighted

assets

18.01%

17.61%

10.00%

CET1 Capital to risk-weighted assets

16.76%

15.60%

6.50%

Tier 1 capital to risk-weighted assets

16.76%

16.35%

8.00%

(1)

11.58%

11.30%

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

and FirstBank.

Instead, the

capital planning

and risk

management practices

of such

banks

are reviewed through

the regular supervisory

process. Notwithstanding,

the Corporation monitors

its capital consistent

with the safety

and

of

the

federal

and

to

perform

stress

testing

as

part

of

its

annual

capital

planning process.

Dividend Restrictions

The Federal

Reserve Board

generally restricts

companies from

paying cash

dividends unless

its net

income available

to

common

for

the

past

four

quarters,

net

of dividends

paid

during

that

period,

has

been

to

fully

fund the

dividends and

the prospective

rate of

earnings retention

appears to

be consistent

capital needs,

asset

and overall current and prospective

financial condition. Under the

Federal Reserve Board’s

regulatory capital rule (Regulation

Q), a bank holding

company must maintain a capital

conservation buffer of

CET1 capital in an amount

greater than 2.5% of total

risk-

weighted

assets to

avoid

limits

on

capital

distributions.

The

is also

subject

to

certain

imposed

on

Puerto Rico corporations

with respect to

the declaration

and payment of

dividends (i.e.,

that dividends may

be paid out

only from

the

capital

surplus

or,

in

the

absence

of

such

excess,

from

the

net

for

such

fiscal

year

and/or

the

preceding fiscal year).

The principal

source of

funds for

as a

parent holding

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

regulations.

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

the bank

and the

balance, if

any,

shall be

charged against

the required

reserve fund

of the

bank. If

the reserve

fund is

not sufficient

to cover

such balance

in whole

or in

part, the

amount

must be

charged

against the

capital account.

The Puerto

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 (“CFPB”)

The

CFPB has

primary

and enforcement

over FirstBank

banks

with assets

exceeding

$10 billion

with respect to consumer financial products and services.

The CFPB supervises “covered

persons” (broadly defined

to include any person

offering or providing

a consumer financial product

or

service

and

any

affiliated

service

provider)

for

with

federal

laws,

the

Equal

Credit

Opportunity Act,

the Truth

in Lending

Act (“TILA”)

and the

Real Estate

Settlement Procedures

Act (“RESPA”).

The CFPB

also has

to prescribe

rules applicable

to covered

persons and

in connection

with consumer

financial products

and

Among

other

the

CFPB

has

issued

to

the

Bank,

addressing

notices

delinquency,

alternatives,

modification

applications,

and

options

for avoiding

“force-

placed”

insurance,

as

well

integrated

under

TILA

and

RESPA

to

loan

and

closing.

During

2025,

the

CFPB

and

advanced

several

large

a

final

rule

restricting

overdraft

fees

for

with

more

than

$10

billion

in

assets

and

supervisory focus

on mortgage servicing,

credit reporting

accuracy,

and fee practices

that may cause

tangible human

harm. However,

in May

2025, Congress

nullified the

CFPB’s

overdraft fee

rule pursuant

to the

Congressional Review

Act, and

the rule

will not

take

effect. As a result,

the CFPB is prohibited

from issuing substantially similar overdraft

fee rule absent new statutory

authorization from

Congress.

In

the

CFPB

its

Personal

Data

Rights

(Open

Banking)

rule

in

October

2024;

implementation of that

rule has been stayed

by a federal court

and the CFPB initiated

a new rulemaking

process in 2025 to

reconsider

and potentially revise the framework, creating continued uncertainty

regarding compliance timelines.

Since

early

2025,

the

CFPB

has

reduced

its

enforcement,

and

rulemaking

activities,

with

broader deregulatory

priorities of the

Trump administration.

These developments have

included the withdrawal

or recission of

certain

dismissal

of

reduced

activity,

and

proposals

to

downsize

the

agency

and

limit its funding. While statutory

authority remains unchanged, the scope,

pace, and intensity of CFPB supervision

and regulation may

continue to evolve, and the ultimate impact on covered institutions remains

uncertain.

The Volcker

Rule

Section

of

the

Bank

Holding

Company

Act,

commonly

known

as

the

Volcker

Rule,

prohibits

a

banking

entity,

Corporation and the

Bank, from engaging

in short-term proprietary

trading of certain

securities, derivatives,

commodity

futures,

and

options

on

these

for

its

own

account.

The

Volcker

Rule

also

restricts

banking

from

acquiring

or

retaining any ownership in, or acting as sponsor to, a hedge fund

or private equity fund (“covered fund”).

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

The

CRA

encourages

banks

to

help

meet

the

credit

needs

of

communities

they

serve,

low-

and

moderate-income

individuals,

the safe

and sound

operation of

the bank.

The CRA

requires the

federal supervisory

agencies, as

part of

the

general

of

supervised

banks,

to

assess

a

record

of

meeting

the

credit

needs

of

its

community,

assign

a

rating,

and

the

rating

when

certain

applications

such

as

mergers,

branch

establishment,

and

other

activities. A

rating of

less than

“satisfactory” could

the denial

of such

applications. The

CRA also requires

all institutions

to

make

public

of

their

CRA

ratings.

a

“satisfactory”

CRA

rating

in

its most

recent

by

the

FDIC.

In

October

2023,

the

U.S.

federal

banking

issued

a

final

rule

to

and

modernize

their

implementing the CRA,

originally scheduled

to take effect

on April 1,

2024, with most

of its provisions

applicable beginning

January

1,

and

data

in

several

banking

groups

filed

a

lawsuit

challenging

the

rule,

and

in

March

a

federal

judge

granted

an

injunction

delaying

its

date.

In

July

2025,

the

FDIC,

Federal

Reserve

Board,

and

OCC announced

their intent

to rescind

the 2023

CRA final

rule and

revert to

the 1995

CRA regulations.

As a

result, banks

remain

subject

to

the

CRA

and

the

enhanced

contemplated

by

the

CRA

final

rule

are

not

in

effect.

USA PATRIOT

Act and Other Anti-Money Laundering Requirements

As

a

regulated

institution,

is

subject

to

the

Bank

Secrecy

Act,

which

to

file

suspicious

activity and

currency transaction

reports that

are designed

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

to

identify

their

adopt

formal

and

programs,

scrutinize

or

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

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

modernized

the

U.S.

AML

and

counter-terrorist

framework, including the creation of a national database of

corporate beneficial ownership along with significantly

enhanced reporting

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

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

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

to

disclose

non-public

to

non-

affiliated

third parties,

requires disclosure

of privacy

policies to

consumers and,

in some

allow consumers

to prevent

disclosure of certain personal information to a non-affiliated

third party.

The

federal

banking

issue

to

risk

institutions are expected to maintain multiple lines of

defense and robust risk management processes to

address potential cyber threats.

must

ensure

to

respond

to

and

recover

after

a

cyber-attack

and

to

restore

data and

business functions

if a

critical service

provider is

impacted. Our

Corporate Information

Program

(“CISP”)

reflects these

and

outlines

our

overall vision,

direction,

and governance

efforts to

protect

the confidentiality,

and availability of customer information and prevent access by unauthorized

personnel.

In July

2023, the

SEC adopted

rules requiring

registrants to

disclose material

cybersecurity incidents

and provide

annual reporting

regarding cybersecurity

risk management,

strategy,

and governance.

Registrants must

report cybersecurity

material incidents

on Item

1.05 of Form

8-K within four

business days of

determining materiality,

describing the

incident’s

nature, scope,

and timing, as

well as

its material impact or reasonably likely material impact on the registrant.

The rule also added Regulation S-K Item 106, which requires

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

incidents on Item

1C. Cybersecurity to

this Form 10-K.