First Bancorp: Form 10-K for the period ended Dec 31, 2025

Business

GENERAL

First BanCorp. is a publicly owned financial holding company that is subject to regulation, supervision and examination 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 consumer banking services, mortgage banking services, automobile financing, insurance agency services, and other financial

products and services in Puerto Rico, the U.S., the USVI and the BVI. As of December 31, 2025, the Corporation 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 Corporation has two wholly-owned subsidiaries: FirstBank and FirstBank Insurance Agency, Inc. (“FirstBank Insurance

Agency”). FirstBank is a Puerto Rico-chartered commercial bank, and FirstBank Insurance Agency is a Puerto Rico-chartered

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. Deposits are insured through the FDIC Deposit Insurance Fund (the “DIF”). In addition,

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 subject to regulation by the BVI Financial Services Commission; and its operations

in the state of Florida are subject to regulation and examination by the Florida Office of Financial Regulation. The Consumer

Financial Protection Bureau (“CFPB”) regulates FirstBank’s consumer financial products and services. 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 branches in the USVI and the BVI, and eight banking branches in the state of Florida. FirstBank has six wholly-owned

subsidiaries with operations in Puerto Rico: First Federal Finance Corp. (d/b/a Money Express La Financiera), a finance company

specializing in the origination of small loans with 25 offices in Puerto Rico; First Management of Puerto Rico, a Puerto Rico

corporation, which holds tax-exempt assets; FirstBank Overseas Corporation, an international banking entity (an “IBE”) organized

under the International Banking Entity Act of Puerto Rico; two companies engaged in the operation of certain real estate owned

properties and a limited liability corporation organized in 2022 under the laws of the Commonwealth of Puerto Rico and Puerto Rico

Tax Incentive Code (“Act 60 of 2019”), which commenced operations in 2023 and engages in qualified investing 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 events that have occurred in the year ended December 31, 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

Form 10-K.

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 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 the Puerto 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 residential

real estate loans, including 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

standards qualify for FHA’s insurance while loans that meet

VA

or the RD standards are guaranteed by the respective federal

agencies.

Mortgage loans that do not qualify for the FHA, the

VA

or the RD programs are referred to as conventional 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

Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet

FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also

acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA

and FHLMC, and the Corporation has commitment authority to issue Government National Mortgage Association (“GNMA”)

mortgage-backed securities (“MBS”).

Consumer (Retail) Banking

The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,

commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking

segment) primarily conducted through FirstBank’s 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 investment

activities. Other activities included in this segment are insurance activities in the Puerto Rico region.

Commercial and Corporate Banking

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers

represented by specialized and middle-market clients and the government sector in the Puerto Rico region. This segment consists of

the Corporation’s commercial lending (other than small business commercial loans) and commercial deposit-taking 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 Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The

treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial

and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending

activities and by compensating these units for deposits gathered. The Treasury and Investments segment also obtains funding through

brokered deposits, advances from the FHLB, and repurchase agreements involving investment securities, among other funding

sources.

United States Operations

The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank

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 consumer and commercial banking products and services. Consumer banking products

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.

Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash

management services, remote deposit capture, and automated clearing house (“ACH”) transactions. Loan products include the

traditional commercial and industrial (“C&I”) and commercial real estate products, such as lines of credit, term loans and construction

loans.

Virgin Islands Operations

The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and 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 consumer

and commercial lending and deposit-taking activities. Retail deposits gathered through each branch serve as the primary funding

sources for the segment’s lending activities.

CORPORATE SUSTAINABILITY PROGRAM OVERVIEW

The Corporation is committed to supporting its clients, employees, shareholders and communities it serves. Its Corporate

Sustainability program, which includes environmental, social and governance (“ESG”) matters, builds on its core values, including

being a socially responsible company. The Corporation 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

Corporation published its most recent First Bancorp Corporate Sustainability Report for 2024 (the “2024 Report”), which provides disclosure on a wide range of ESG topics, including governance; business 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 responsibility.

Sustainability Governance

The Corporation’s Board of Directors and executive leadership team share responsibilities relating to oversight of its corporate

sustainability policies and practices. In February 2022, the Corporate Governance and Nominating Committee of the Board of

Directors amended its charter to include oversight responsibility of sustainability matters, and it has primary oversight of ESG

policies, practices and disclosures. Nonetheless, other committees of the Corporation’s 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 sustainability governance structure set forth in FirstBanCorp.’s Sustainability Policy, which was approved by the

Corporation’s Board of Directors in 2022 and subsequently amended, the responsibility of day-to-day management of its sustainability

framework and strategy has been delegated to a management-level Sustainability Committee, comprised of leaders from different

areas, such as Human Resources, Enterprise Risk Management, Strategic Planning and Investor Relations, Legal and Corporate

Affairs, Marketing, Compliance, Finance, and Corporate Internal Audit. The Sustainability Committee is tasked with aligning

priorities and initiatives for the year, setting and monitoring long-term objectives, and leading the annual reporting process on

sustainability-related topics. The Sustainability Committee reports to the Corporate Governance and Nominating Committee of the

Board of Directors.

HUMAN CAPITAL MANAGEMENT

First BanCorp. 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

employees’ lives and providing satisfying and evolving work experience. 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

As of December 31, 2025, the Corporation and its subsidiaries had 3,218 regular employees representing a 3.4% increase in overall

headcount from December 31, 2024. The Corporation had 2,854 employees in the Puerto Rico region, 206 employees in the Florida

region, and 158 employees in the Virgin Islands region. As of December 31, 2025, approximately 66% of the total employee

population and 58% of management positions were women.

Oversight

The Human Resources Division, led by the Human Resources Director who reports directly to the Corporation’s Chief Consumer

Officer and Corporate Chief of Staff, manages all elements of the Corporation’s human capital programs and strategies, including

talent management, talent acquisition, engagement, learning and development, compensation and benefits.

The Human Resources Division’s efforts are also overseen by the Corporation’s Chief Executive 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 experience, and act upon such feedback to improve employee engagement. In addition, the

Corporation’s Board of Directors and its Compensation and Benefits Committee monitor and are regularly updated on the

Corporation’s human capital management strategies.

Talent Management

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 the Corporation, including college graduates, and promoting internal

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 security is critical for our employees. Our goal is to maintain compensation levels that are competitive

with the market and comparable job categories in similar organizations. Our salary administration program is designed to provide a

compensation structure that is consistent with our employees’ level of responsibilities to attract the best talent for each job and

commensurately pay for performance.

In addition to base salaries, certain job positions are eligible to participate in variable pay programs designed to align employee

performance with the Corporation’s strategic and financial objectives. The Corporation maintains incentive programs for revenue

generation and sales functions to support business units. These programs are reviewed annually to ensure alignment with business

strategies, performance objectives, and sound risk management practices. The Corporation’s Management Award Program recognizes

and rewards outstanding performance for exempt employees who do not participate in other variable pay programs. In addition, the

Corporation maintains a long-term incentive plan for top-performing leaders and employees, as well as identified high-potential talent,

to promote sustained performance, leadership development, and long-term retention. These programs have fostered a stable and

experienced workforce, reflected in an average tenure of 11 years as of December 31, 2025. The Corporation’s voluntary turnover rate

declined to 9.59% in 2025, compared to 10.91% in 2024, with turnover primarily attributable to hourly employees in call centers,

collections centers and branches. Turnover among high performers improved, decreasing to 2.4% in 2025 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 development maximizes the talent of human capital and is the foundation for sustained

business success. Our commitment to employee engagement continues throughout employees’ time with the Corporation.

Our learning and development program strives to align with both employees’ and the organization’s needs, offering online, in-

person, and virtual training, as well as development activities, special projects, and partial tuition reimbursement to complete a

bachelor’s or master’s degree to eligible employees. The Learning and Development priorities 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 programs focused on foundational supervision, leadership, communication, and HR policies, while the

leadership 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 addition to these learning opportunities, we support professional development and career growth, including the internal career

advancement, performance management 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 5.

Health & Wellness

First BanCorp. provides comprehensive health and wellness benefits designed to support employees’ occupational, physical,

emotional, and financial well-being. Benefits include health, dental and vision insurance offered through multiple insurance providers,

enabling employees to select coverage options that best meet their individual and family needs. The Corporation also offers an

Employee Assistance Program to provide holistic support and resources addressing a broad range of employees’ needs. In addition,

the Corporation offers life insurance and disability plans, as well as a defined contribution retirement plan in which both employees

and the employer contribute. For employees in the Puerto Rico region, the Corporation provides an additional true-up contribution.

The Corporation 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, the Corporation offers various paid time-off benefits, including vacation, sick

leave, maternity and paternity leave, bereavement leave, marriage leave, personal days, and flexible work arrangements, including

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 financial

and health literacy. To enhance quality of life and optimize workplace conditions, the wellness program provides on-site

musculoskeletal demonstrations, tobacco-use prevention education, discount programs for laboratory testing and consumer products,

and an emergency donation program to support employees experiencing catastrophic events.

MARKET AREA AND COMPETITION

The Corporation operates in highly competitive markets and is subject to significant business, economic and competitive

uncertainties and contingencies. In particular, the banking market is highly competitive in Puerto Rico, the main geographic service

area of the Corporation. As of December 31, 2025, the Corporation also had presence in the state of Florida and in the USVI and the

BVI. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions on the

United States mainland.

Competitors include other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing

companies, leasing companies, brokerage firms with retail operations, credit unions and certain retailers that operate in Puerto Rico,

the USVI, the BVI, and the state of Florida, as well as financial technology (“fintech”) companies and emerging competition from

digital platforms. The Corporation’s businesses compete with these other firms with respect to the range of products and services

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 Corporation and FirstBank, its bank subsidiary, are subject to comprehensive federal and Puerto Rican supervision and

regulation that govern all aspects of the Corporation’s and the Bank’s activities, including commercial and consumer lending, deposit

taking, management, governance and other activities. As part of this regulatory framework, the Corporation and the Bank are subject

to extensive consumer financial protection laws, regulatory, legal, and supervisory requirements, which continue to change in response

to new legislative or regulatory actions. See Part I, Item 1, “Business–General” above for additional regulatory oversight and

supervision of FirstBank Insurance Agency. Future legislative or regulatory developments may increase the oversight of the

Corporation and the Bank and could materially affect its business.

The Corporation is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the

Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules applicable to companies 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 as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “Bank

Holding Company Act”), and is subject to ongoing supervision, regulation, and examination by the Federal Reserve Board. In this

capacity, the Corporation is required to file periodic and annual reports as well as other information regarding its own business

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 of financial activities. As a result, the Corporation has elected to be a financial holding company under the Bank

Holding Company Act and 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

soundness of depository institutions or the financial system generally. The Bank Holding Company Act specifically provides that the

following activities have been determined to be “financial in nature”: (i) lending, trust and other 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.

The Corporation and FirstBank 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

financial holding company status. If these standards are not met, the Federal Reserve Board may impose limitations on the financial

holding company’s activities until compliance is restored.

Under federal law and Federal Reserve Board policy, a bank holding company, such as the Corporation, is expected to act as a

source of strength to its banking subsidiaries, including by providing capital and other 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 to maintain

capital of a subsidiary bank will be assumed by the bankruptcy trustee and accorded priority for payment. In addition, any capital

loans by a bank holding company to any of its subsidiary banks must be subordinated in right of payment to deposits and to certain

other indebtedness of such subsidiary bank. As of December 31, 2025, and the date hereof, FirstBank was and is the Corporation’s

sole banking subsidiary.

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

in General

FirstBank is subject to supervision, regulation, and examination by the OCIF, the CFPB and the FDIC, and is subject to

comprehensive federal and state (including, for this purpose, the Commonwealth of Puerto Rico) regulations 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 periodic examinations of FirstBank to assess its financial condition, ensure the

maintenance of safe and sound banking practices, and evaluate compliance with applicable statutory and regulatory requirements.

Supervision by the FDIC 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

with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Enforcement

actions include civil monetary penalties, cease-and-desist or removal orders, and injunctive actions which may be imposed for

violations of laws and regulations, or for unsafe or unsound practices. 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 Corporation and FirstBank are each subject to minimum regulatory capital requirements imposed by federal banking agencies.

These requirements are redesigned to align U.S. regulatory capital requirements 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.” Under the Basel III rules, the Corporation must maintain certain minimum capital ratios to be considered adequately

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 1 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, providing the option to temporarily delay the regulatory capital effects of current

expected credit losses (“CECL”). This transition framework provided for a total five-year phase-in period, which ended on January 1,

2025. The Corporation and the Bank elected to utilize this transition option and, as of January 1, 2025, have fully recognized the

impact of CECL in their regulatory capital ratios.

The following table presents the Corporation’s and FirstBank’s regulatory capital ratios as of December 31, 2025, based on Federal

Reserve and FDIC guidelines:

Banking Subsidiary

First BanCorp.

FirstBank

Well-Capitalized

Minimum

As of December 31, 2025

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%

Leverage ratio

(1)

11.58%

11.30%

5.00%

(1) Tier 1 capital to average assets.

Stress-Testing and Capital Planning Requirements

Federal regulations currently do not impose formal stress-testing requirements on banking organizations with total assets of less

than $100 billion, such as the Corporation 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 soundness expectations of the federal regulators and continues to perform internal stress testing as part of its annual capital

planning process.

Dividend Restrictions

The Federal Reserve Board generally restricts bank holding companies from paying cash dividends unless its net income available

to common shareholders for the past four quarters, net of dividends previously paid during that period, has been sufficient to fully

fund the dividends and the prospective rate of earnings retention appears to be consistent with the organization’s capital needs, asset

quality, 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 Corporation is also subject to certain restrictions generally 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

Corporation’s capital surplus or, in the absence of such excess, from the Corporation’s net earnings for such fiscal year and/or the

preceding fiscal year).

The principal source of funds for the Corporation, as a parent holding company, is dividends declared and paid by its subsidiary,

FirstBank. The ability of FirstBank to declare and pay dividends on its capital stock is regulated by the Puerto Rico Banking Law of

1933, as amended (the “Puerto Rico Banking Law”), the Federal Deposit Insurance Act (the “FDIA”), and FDIC regulations. In

general terms, the Puerto Rico Banking Law provides that when the expenditures 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 outstanding

amount must be charged against the bank’s capital account. The Puerto Rico Banking Law provides that, until said capital has been

restored to its original amount and the reserve fund to 20% of the original capital, the bank may not declare any dividends. In general,

regulations of the FDIA and the FDIC restrict the payment of dividends when a bank is undercapitalized (as discussed in Prompt

Corrective Action below), when a bank has failed to pay insurance assessments, or when there are safety and soundness 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 examination and enforcement authority over FirstBank and other 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 compliance with federal consumer financial laws, including the Equal Credit

Opportunity Act, the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”). The CFPB also has

authority to prescribe rules applicable to covered persons and service providers in connection with consumer financial products and

services.

Among other actions, the CFPB has issued mortgage servicing regulations applicable to the Bank, addressing consumer notices

regarding delinquency, foreclosure alternatives, modification applications, interest rate adjustments and options for avoiding “force-

placed” insurance, as well integrated disclosure requirements under TILA and RESPA applicable to mortgage loan origination and

closing.

During 2025, the CFPB finalized and advanced several significant regulatory initiatives affecting large depository institutions,

including a final rule substantially restricting overdraft fees for institutions with more than $10 billion in assets and increased

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 addition, the CFPB finalized its Personal Financial Data Rights (Open Banking) rule in October 2024; however,

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 significantly reduced its enforcement, supervision, and rulemaking activities, consistent with

broader deregulatory priorities of the Trump administration. These developments have included the withdrawal or recission of certain

guidance, dismissal of enforcement actions, reduced examination activity, and proposals to substantially 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 13 of the Bank Holding Company Act, commonly known as the Volcker Rule, generally prohibits a banking entity,

including the Corporation and the Bank, from engaging in short-term proprietary trading of certain securities, derivatives, commodity

futures, and options on these instruments for its own account. The Volcker Rule also restricts banking entities 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 Corporation

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, including low- and moderate-income

individuals, consistent with the safe and sound operation of the bank. The CRA requires the federal supervisory agencies, as part of

the general examination of supervised banks, to assess a bank’s record of meeting the credit needs of its community, assign a

performance rating, and consider the rating when reviewing certain applications such as mergers, branch establishment, and other

activities. 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 regulatory agencies issued a final rule to strengthen and modernize their regulations

implementing the CRA, originally scheduled to take effect on April 1, 2024, with most of its provisions applicable beginning January

1, 2026 and data reporting required in 2027. However, several banking industry groups filed a lawsuit challenging the rule, and in

March 2024 a federal judge granted an injunction delaying its effective 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 currently

remain subject to the 1995 CRA framework, and the enhanced requirements contemplated by the 2023 CRA final rule are not in

effect.

USA PATRIOT Act and Other Anti-Money Laundering Requirements

As a regulated depository institution, FirstBank is subject to the Bank Secrecy Act, which requires financial institutions 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 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 legislative amendments to U.S. anti-money laundering requirements became effective through the

enactment of Division F of the National Defense Authorization Act for fiscal year 2021, otherwise known as the Anti-Money

Laundering Act of 2020 (the “AML Act”). The AML Act significantly modernized the U.S. AML and counter-terrorist financing

framework, including the creation of a national database of corporate beneficial ownership along with significantly enhanced reporting requirements, increased penalties for Bank Secrecy Act violations, clarification of Suspicious Activity Report filing and sharing requirements, and provisions addressing the adverse consequences of “de-risking,” namely, the practice of financial 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 requirements of the Bank Secrecy Act or the USA PATRIOT Act could have serious legal and

reputational consequences for the institution, including the possibility of regulatory enforcement or other legal actions, such as

significant civil monetary penalties. The Corporation is also required to comply with federal economic 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 consumer information to non-

affiliated third parties, requires disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent

disclosure of certain personal information to a non-affiliated third party.

The federal banking regulators regularly issue guidance to strengthen cybersecurity risk management standards. Financial

institutions are expected to maintain multiple lines of defense and robust risk management processes to address potential cyber threats.

Management must ensure effective procedures to respond to and recover operations after a cyber-attack and establish processes to

restore data and business functions if a critical service provider is impacted. Our Corporate Information Security Program (“CISP”)

reflects these requirements and outlines our overall vision, direction, and governance efforts to protect the confidentiality, integrity,

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

disclosure of the registrant’s processes, if any, for assessing, identifying, and managing material risks from cybersecurity threats, as

well as the material effects or reasonably likely material effects of risks from cybersecurity threats and previous cybersecurity

incidents on Item 1C. Cybersecurity to this Form 10-K. Item 106 also requires registrants to describe the board of directors’ oversight

of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from such threats.

These disclosures are included in Part I, Item 1C. “Cybersecurity” to this Form 10-K.

Limitations on Transactions with Affiliates and Insiders

Certain transactions between FDIC-insured depository financial institutions, such as FirstBank, and its affiliates are governed by

Sections 23A and 23B of the Federal Reserve Act and Regulation W of the Federal Reserve. An affiliate of a bank is, in general, any

corporation or entity that controls, is controlled by, or is under common control with the bank, including the bank’s parent holding

company and any companies that are controlled by such holding company.

Generally, Sections 23A and 23B of the Federal Reserve Act (i) limit the extent to which the bank or its subsidiaries may engage in

“covered transactions” with any one affiliate to an amount equal to 10% of such bank’s capital stock and surplus, and contain an

aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such bank’s capital stock and surplus and (ii)

require that all “covered transactions” be on terms that are substantially the same, or at least as favorable to the bank or affiliate, as

those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a

guarantee, credit derivatives, securities lending and other similar transactions entailing the provision of financial support by the bank

to an affiliate. In addition, loans or other extensions of credit by the bank to the affiliate are required to be collateralized in accordance

with the requirements set forth in Section 23A of the Federal Reserve Act.

In addition, Sections 22(h) and (g) of the Federal Reserve Act, implemented through Regulation O, place restrictions on

commercial bank loans to executive officers, directors, and principal stockholders of the bank and its affiliates. Under Section 22(h) of

the Federal Reserve Act, bank loans to a director, an executive officer, a greater than 10% stockholder of the bank, and certain related

interests of these persons, may not exceed, together with all other outstanding loans to such persons and affiliated interests, the bank’s

limit on loans to one borrower, which is generally equal to 15% of the bank’s unimpaired capital and surplus in the case of loans that

are not fully secured, and an additional 10% of the bank's unimpaired capital and unimpaired surplus in the case of loans that are fully secured by readily marketable collateral having a market value at least equal to the amount of the loan. Section 22(h) of the Federal

Reserve Act also requires that loans to directors, executive officers, and principal stockholders be made on terms that are substantially

the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans. In addition,

the aggregate amount of extensions of credit by a bank to insiders cannot exceed the bank’s unimpaired capital and surplus.

Furthermore, Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.

Executive Compensation

The federal banking agencies have adopted interagency guidance on incentive-based compensation arrangements applicable to all

banking organizations regardless of asset size. This guidance establishes a principles-based framework designed to ensure that

incentive-based compensation arrangements appropriately tie rewards to longer-term performance and do not undermine the safety

and soundness of banking organizations or create undue risks to the financial system. The framework emphasizes balanced risk-taking

incentives, compatibility with effective controls and risk management, and strong corporate governance, and provides for supervisory

or enforcement action where material deficiencies threaten an institution’s safety and soundness.

In May 2016, the federal financial regulators re-proposed regulations under Section 956 of the Dodd-Frank Act (first proposed in

2011) governing incentive-based compensation practices at covered banking institutions, which would include, among others, all

banking organizations with assets of $1 billion or greater. Portions of these proposed rules would apply to the Corporation and

FirstBank. Those applicable provisions would generally (i) prohibit types and features of incentive-based compensation arrangements

that encourage inappropriate risk because they are “excessive” or “could lead to material financial loss” at the banking institution; (ii)

require incentive-based compensation arrangements to adhere to three basic principles: (1) a balance between risk and reward; (2)

effective risk management and controls; and (3) effective governance; and (iii) require appropriate board of directors (or committee)

oversight and recordkeeping and disclosures to the banking institution’s primary regulatory agency. As of December 31, 2025, the rule

has not been finalized. Although several federal banking agencies re-proposed the rule in 2024, the absence of joint action by all

required regulators continues to delay adoption, and the timing and substance of any final rule remain uncertain.

In August 2022, the SEC introduced new pay-versus-performance disclosure rules, which took effect in October 2022, requiring to

clearly disclose the relationship between executive compensation and the company’s financial performance. Additionally, in October

2022, the SEC finalized a rule that directs stock exchanges to require listed companies to implement clawback policies to recover

incentive-based compensation from current or former executive officers in the event of certain financial restatements, and requires

companies to, among other things, file their clawback policies as Exhibit 97 of Form 10-K. Our Compensation Clawback Policy is

compliant with NYSE’s listing standards pursuant to this rule.

Prompt Corrective Action

The “prompt corrective action” provisions of the FDIA require the federal bank regulatory agencies to take prompt corrective

action against any insured depository institution that is undercapitalized. The FDIA establishes five capital categories: well-

capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Well-capitalized

insured depository institutions significantly exceed the required minimum level for each relevant capital measure.

A bank’s capital category may not constitute an accurate representation of the overall financial condition or prospects of a bank,

such as the Bank, and should be considered in conjunction with other available information regarding the financial condition and

results of operations of such bank.

Deposit Insurance

FirstBank is subject to FDIC deposit insurance assessments, which increased for all banks, including FirstBank, following the

increase in deposit insurance coverage to up to $250,000 per customer and the FDIC’s expanded authority to increase insurance

premiums implemented by the Dodd-Frank Act. The FDIA further requires that the designated reserve ratio for the DIF for any year

not be less than 1.35% of estimated insured deposits or the comparable percentage of the new deposit assessment base. In addition, the

FDIC was required to take the necessary actions for the reserve ratio to reach 1.35% of estimated insured deposits by September 30,

2020. The FDIC managed to reach the goal early, achieving a reserve ratio of 1.36% in September 2018. However, in the third quarter

of 2020, the FDIC announced that the reserve ratio of the DIF fell nine basis points between the first and second quarters of 2020,

from 1.39% to 1.30%. The decline was attributed to an unprecedented surge in deposits. The FDIC approved a plan that is expected to

restore the DIF to at least 1.35% within eight years, as required by the FDIA. Under the plan, the FDIC will maintain the current

schedules of assessment rates for all banks; monitor deposit balance trends, potential losses and other factors that affect the reserve

ratio; and provide updates to its loss and income projections at least twice a year. The FDIC has also adopted a final rule raising its

industry target ratio of reserves to insured deposits to 2%, 65 basis points above the statutory minimum, but the FDIC has indicated

that it does not project that goal to be met for several years.

In October 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit

insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The FDIC

designated a long-term reserve ratio for the DIF of 2% and has continued to maintain that designation through 2026. The increase in

assessment rate schedules was intended to increase the likelihood that the reserve ratio of the DIF would reach the statutory minimum

of 1.35% by the statutory deadline of September 30, 2028. As of 2025, the FDIC has reported that the DIF reserve ratio has exceeded

the statutory minimum and remains below the 2% designated reserve ratio. Accordingly, the increased assessment rate schedules

remain in effect. Progressively lower assessment rate schedules will take effect if the reserve ratio reaches 2% and again at 2.5%.

In November 2023, the FDIC issued a final rule imposing a special assessment to recover estimated losses incurred by the Deposit

Insurance Fund (“DIF”) resulting from the closures of Silicon Valley Bank and Signature Bank. The assessment is being collected

quarterly from certain insured depository institutions, including the Bank, beginning with the quarter ending June 30, 2024. During

2024, the Corporation recorded an additional loss related to the FDIC special assessment to reflect updated estimates of its obligation

based on information available at that time, including the impact of the then-established extended assessment period provisions. On

December 16, 2025, the FDIC issued an interim final rule amending the collection terms of the special assessment, which included

reducing the collection rate in the eighth collection quarter from 3.36 basis points to 2.97 basis points, removing the previously

established extended assessment period provisions and providing offsets to regular quarterly deposit insurance assessments if

aggregate collections exceed actual losses. As of December 31, 2025, the Corporation’s total estimated FDIC special assessment

amounted to $6.3 million, of which $5.5 million has been paid. The Corporation continues to monitor the FDIC’s estimated loss to the

DIF, which could affect the amount of its accrued liability.

FDIC Insolvency Authority

Under Puerto Rico banking laws, the OCIF may appoint the FDIC as conservator or receiver of a failed or failing FDIC-insured

Puerto Rican bank, and the FDIA authorizes the FDIC to accept such an appointment or to appoint itself as conservator or receiver. In

an insolvency scenario or the occurrence of other events, the FDIC has broad authority to transfer or liquidate the bank’s assets and

liabilities, pay out insured depositors, as well as uninsured depositors and other creditors to the extent of the closed bank’s available

assets, administer the receivership estate, pay out estate claims, and repudiate or disaffirm certain types of contracts. In the event of

any liquidation or resolution of an insured depository institution, including the Bank, depositors’ claims (including those of the FDIC

as subrogee of insured depositors) and certain administrative expenses have priority over other general unsecured creditors.

Accordingly, if the Bank were to fail, insured and uninsured depositors, along with the FDIC, would have priority in payment ahead of

unsecured, non-deposit creditors, including the Corporation, with respect to any extensions of credit they have made to such insured

depository institution.

Activities and Investments

The principal activities of FDIC-insured, state-chartered banks, such as FirstBank, are generally limited to those that are

permissible for national banks. Similarly, under regulations dealing with equity investments, an insured state-chartered bank generally

may not directly or indirectly acquire or retain any equity investments of a type, or in an amount, that is not permissible for a national

bank.

Federal Home Loan Bank System

FirstBank is a member of the FHLB system, a network of eleven regional FHLBs governed and regulated by the Federal Housing

Finance Agency that serve as reserve or credit facilities for member institutions within their assigned regions.

As a member of FHLB of New York, FirstBank is required to hold shares of capital stock in the FHLB of New York in an amount

calculated in accordance with the requirements set forth in applicable laws and regulations. FirstBank is in compliance with the stock

ownership requirements of the FHLB of New York. All loans, advances and other extensions of credit made by the FHLB to

FirstBank are secured by a portion of FirstBank’s mortgage loan or securities portfolios, certain other investments and the capital

stock of the FHLB held by FirstBank.

The board of directors of each FHLB may increase minimum investment requirements to meet regulatory capital needs, subject to

the Federal Housing Finance Agency approval in certain cases. Because the extent of any obligation to increase our investment in any

of the FHLBs depends entirely upon the occurrence of a future event, the amount of any future investment in the capital stock of the

FHLBs is not determinable.

Ownership and Control

Because of FirstBank’s status as an FDIC-insured bank, as defined in the Bank Holding Company Act, the Corporation, as the

owner of FirstBank’s common stock, is subject to certain restrictions and disclosure obligations under various federal laws, including

the Bank Holding Company Act and the Change in Bank Control Act (the “CBCA”). Regulations adopted pursuant to the Bank

Holding Company Act and the CBCA generally require prior Federal Reserve Board or other federal banking agency approval or non-

objection for an acquisition of control of an “insured institution” (as defined in the Act) or holding company thereof by any person (or

persons acting in concert). Control is deemed to exist if, among other things, a person (or group of persons acting in concert) acquires

25% or more of any class of voting stock of an insured institution or holding company thereof. Under the CBCA, control is presumed

to exist subject to rebuttal if a person (or group of persons acting in concert) acquires 10% or more of any class of voting stock and

either (i) the corporation has registered securities under Section 12 of the Exchange Act, or (ii) no person (or group of persons acting

in concert) will own, control or hold the power to vote a greater percentage of that class of voting securities immediately after the

transaction. The concept of acting in concert is broad and subject to certain rebuttable presumptions, including, among others, that

relatives, business partners, management officials, affiliates and others are presumed to be acting in concert with each other and their

businesses. The regulations of the FDIC implementing the CBCA are generally similar to those described above.

The Puerto Rico Banking Law requires the approval of the OCIF for changes in control of a Puerto Rico bank. See “Puerto Rico

Banking Law” below for further detail.

Standards for Safety and Soundness

The FDIA requires the FDIC and other federal bank regulatory agencies to prescribe standards of safety and soundness. Bank

regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings

prospects, management, liquidity, or other aspects of a banking organization’s operations are unsatisfactory. The regulators may also

take action if they determine that the banking organization or its management is violating or has violated any law or regulation. The

regulators have the power to, among other things, prohibit unsafe or unsound practices, require affirmative actions to correct any

violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of

subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil monetary penalties, remove officers and

directors, and terminate deposit insurance.

Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations, and supervisory agreements could

subject the Corporation, its subsidiaries, and their respective officers, directors, and institution-affiliated parties to the remedies

described above, and other sanctions. In addition, the FDIC may terminate a bank’s deposit insurance upon finding that the bank’s

financial condition is unsafe or unsound or that the bank has engaged in unsafe or unsound practices or has violated an applicable rule,

regulation, order, or condition enacted or imposed by the bank’s regulatory agency.

Regulatory Framework for Leveraged Lending Activities

In December 2025, the OCC and the FDIC rescinded the Interagency Guidance on Leveraged Lending (“2013 Guidance”) and its

2014 FAQs, citing that the framework was overly restrictive, extended beyond its intended scope, and contributed to a shift of

leveraged lending to nonbank lenders. In addition, the 2013 Guidance had not been submitted to Congress as required under the

Congressional Review Act. Following the rescission, banks are expected to manage leveraged lending activities under general

principles for safe and sound lending, consistent with broader commercial credit risk management standards. Institutions are expected

to maintain a defined risk appetite, apply a consistent internal definition of leveraged loans, adhere to sound underwriting standards,

monitor borrower performance and refinancing risk, and conduct independent credit assessments for participations. Examiners will

continue to assess underwriting, risk ratings, and reserves based on the size and risk profile of each bank’s leveraged lending

activities. The rescission does not result in immediate changes to Call Report requirements.

Brokered Deposits

FDIC regulations adopted under the FDIA govern the receipt of brokered deposits by banks. Well -capitalized institutions are not

subject to limitations on brokered deposits, while adequately capitalized institutions are able to accept, renew or rollover brokered

deposits only with a waiver from the FDIC and subject to certain restrictions on the interest paid on such deposits. Undercapitalized

institutions are not permitted to accept brokered deposits. In October 2020, the FDIC adopted revisions to its brokered deposit

regulations that became effective on April 1, 2021, with full compliance extended to January 1, 2022. For brokered deposits, the final

rule established a new framework for analyzing certain parts of the “deposit broker” definition, including a new interpretation for the

“primary purpose” exception and the business relationships that meet the exception. Pursuant to this revision, during the fourth quarter

of 2021, certain non-maturity deposits previously reported as brokered deposits were recharacterized as non-brokered deposits.

Puerto Rico Banking Law

As a commercial bank organized under the laws of the Commonwealth of Puerto Rico, FirstBank is subject to supervision,

examination and regulation by the commissioner of OCIF (the “Commissioner”) pursuant to the Puerto Rico Banking Law of 1933, as

amended (the “Banking Law”), which governs its corporate structure, powers, capital and investment requirements, lending limits, and

the authority of the Commissioner.

The Banking Law requires every bank to maintain a legal reserve, which shall not be less than 20% of its demand liabilities, except

government deposits (federal, state and municipal) that are secured by actual collateral. The reserve is required to be composed of any

of the permitted securities, or a combination thereof, including cash, immediately collectible items, and other assets authorized by the

Commissioner.

Section 17 of the Banking Law, as amended by Section 8.2 of Regulation No. 9680, permits Puerto Rico commercial banks to make

loans to any one person, firm, partnership or corporation in an aggregate amount of up to 15% of the sum of: (i) the bank’s paid-in

capital; (ii) the bank’s reserve fund; (iii) 100% of the bank’s retained earnings, subject to certain limitations; and (iv) any other

components that the Commissioner may determine from time to time. If such loans are secured by collateral worth at least 25% in

excess of the loan amount, the aggregate maximum amount may reach 33.33% of the sum of the bank’s paid-in capital, reserve fund,

100% of retained earnings, subject to certain limitations, and such other components that the Commissioner may determine from time

to time. There are no restrictions under the Banking Law on the amount of loans that may be wholly secured by bonds, securities and

other evidences of indebtedness of the government of the United States, or of the Commonwealth of Puerto Rico, or by bonds, not in

default, of municipalities or instrumentalities of the Commonwealth of Puerto Rico.

The Banking Law requires that Puerto Rico commercial banks prepare each year a balance summary of their operations and submit

such balance summary for approval at a regular meeting of stockholders, together with an explanatory report thereon. The Banking

Law also requires that at least 10% of the yearly net income of a Puerto Rico commercial bank be credited annually to a reserve fund

until such reserve fund is in an amount equal to the total paid-in-capital of the bank.

The Banking Law also provides that when a Puerto Rico commercial bank’s expenditures exceed its receipts, the excess must be

charged first to undistributed profits of the bank, then to the reserve fund, and, if needed, to the capital account, and it prohibits

declaration of dividends until capital has been restored to its original amount and the reserve fund equals 20% of the original capital.

The Finance Board, composed of representatives from various Puerto Rico Government agencies, instrumentalities and public

corporations, including the Commissioner, has the authority to regulate the maximum interest rates and finance charges that may be

charged on loans to individuals and unincorporated businesses in Puerto Rico, but current regulations allow most such rates to be

determined by free competition. Accordingly, the regulations do not set a maximum rate for charges on retail installment sales

contracts, small loans, and credit card purchases. Furthermore, there is no maximum rate set for installment sales contracts involving

motor vehicles, commercial, agricultural and industrial equipment, commercial electric appliances and insurance premiums.

International Banking Center Regulatory Act of Puerto Rico (“IBE Act 52”)

The business and operations of FirstBank International Branch (“FirstBank IBE” or the “IBE division of FirstBank”) and FirstBank

Overseas Corporation (the IBE subsidiary of FirstBank) are subject to supervision and regulation by the Commissioner. FirstBank IBE

and FirstBank Overseas Corporation were established pursuant to Puerto Rico Act 52-1989, as amended, known as the “International

Banking Center Regulatory Act” (the IBE Act 52). The IBE Act 52 provides for total Puerto Rico tax exemption on net income

derived by an IBE operating in Puerto Rico on the specific activities identified in the IBE Act 52. An IBE that operates as a unit of a

bank pays income taxes at the corporate standard rates to the extent that the IBE’s net income exceeds 20% of the bank’s total net

taxable income. Under the IBE Act 52, certain sales, encumbrances, assignments, mergers, exchanges or transfers of shares, interests

or participation(s) in the capital of an IBE may not be initiated without the prior approval of the Commissioner. The IBE Act 52 and

the regulations issued thereunder by the Commissioner (the “IBE Regulations”) limit the business activities that may be carried out by

an IBE. Such activities are limited in part to persons and assets located outside of Puerto Rico.

Pursuant to the IBE Act 52 and the IBE Regulations, each of FirstBank IBE and FirstBank Overseas Corporation must maintain, in

Puerto Rico, books and records of its transactions conducted in the ordinary course of business. FirstBank IBE and FirstBank

Overseas Corporation are also required to submit to the Commissioner quarterly reports of their financial condition and results of

operations, and are required to comply with the annual audited financial statements requirement.

The IBE Act 52 empowers the Commissioner to revoke or suspend, after notice and hearing, a license issued thereunder if, among

other things, the IBE fails to comply with the IBE Act 52, the IBE Regulations or the terms of its license, or if the Commissioner finds

that the business or affairs of the IBE are conducted in a manner that is not consistent with the public interest.

On February 16, 2024, the Governor of Puerto Rico approved Act 45 of 2024 which amended the IBE Act 52. These amendments

became effective on May 15, 2024, and, among other things, increased the annual license fee paid by the IBEs to OCIF from $5

thousand to $25 thousand and amended certain other compliance matters, including a minimum employment requirement of eight full-

time employees. The amendments also established updated prudential standards, such as higher minimum paid-in capital, enhanced

custody and asset-quality rules, and a phased increase in required unencumbered assets for existing IBEs, from $0.5 million for the

2024-2025 compliance period to $1.5 million by 2027–2028, while newly organized entities must maintain at least $1 million in

unencumbered assets.

Puerto Rico Income Taxes

Under the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Tax Code”), the Corporation and its subsidiaries are

treated as separate taxable entities and are not entitled to file consolidated tax returns. However, certain subsidiaries that are organized

as limited liability companies with a partnership election are treated as pass-through entities for Puerto Rico tax purposes. A

subsidiary may realize a tax benefit from a net operating loss (“NOL”) only if it can generate sufficient taxable income within the

applicable NOL carryforward period. The PR Tax Code provides a dividend received deduction of 100% on dividends received from

“controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

On July 17, 2025, the Government of Puerto Rico enacted Act 65-2025 which, among other things, allows domestic limited liability

companies owned by legal entities to elect to be treated as disregarded entities for tax purposes. As a result of this change, during the

third quarter of 2025, the Corporation reversed approximately $16.6 million in valuation allowance related to deferred tax assets

primarily associated with NOL carryforwards at the holding company level. This reversal reflects the Corporation’s expectation of

realizing these tax benefits under the new election established by the Act.

The Corporation has maintained an effective tax rate lower than the maximum statutory rate in Puerto Rico, which has resulted

mainly from conducting business through certain entities that have special tax treatments, including doing business through an IBE

unit of the Bank and through FirstBank Overseas Corporation, each of which are generally exempt from Puerto Rico income taxation

under IBE Act 52, and through a wholly-owned subsidiary that engages in certain Puerto Rico qualified investing activities that have

certain tax advantages under Act 60 of 2019.

United States Income Taxes

As a Puerto Rico corporation, First BanCorp. is treated as a foreign corporation for U.S. and USVI income tax purposes and,

accordingly, is generally subject to U.S. and USVI income tax only on its income from sources within the U.S. and USVI or income

effectively connected with the conduct of a trade or business in those jurisdictions. Any such tax paid in the U.S. and USVI is also

creditable against the Corporation’s Puerto Rico tax liability, subject to certain conditions and limitations.

Insurance Operations Regulation

As a financial holding company under the Bank Holding Company Act, we are permitted to engage in a broader range of activities,

including insurance activities, that are permitted to bank holding companies.

FirstBank Insurance Agency is registered as an insurance agency with the Insurance Commissioner of Puerto Rico and is subject to

regulations issued by the Insurance Commissioner of Puerto Rico and the Division of Banking, Insurance and Financial Regulation in

the USVI relating to, among other things, the licensing of employees and sales and solicitation and advertising practices, and by the

Federal Reserve Board as to certain consumer protection provisions mandated by the Gramm-Leach-Bliley Act and its implementing

regulations.

Mortgage Banking Operations

In addition to FDIC and CFPB regulations, FirstBank is subject to the rules and regulations of the FHA, VA, FNMA, FHLMC,

GNMA, and the U.S. Department of Housing and Urban Development (“HUD”) with respect to originating, processing, selling and

servicing mortgage loans and the issuance and sale of MBS. Those rules and regulations, among other things, prohibit discrimination

and establish underwriting guidelines that include provisions for inspections and appraisals, require credit reports on prospective

borrowers and fix maximum loan amounts, and, with respect to

VA

loans, fix maximum interest rates. Moreover, lenders such as

FirstBank are required annually to submit audited financial statements to the FHA, VA, FNMA, FHLMC, GNMA and HUD and each

regulatory entity has its own financial requirements. FirstBank’s affairs are also subject to supervision and examination by the FHA,

VA, FNMA, FHLMC, GNMA and HUD at all times to assure compliance with applicable regulations, policies and procedures.

Mortgage origination activities are subject to, among other requirements, the Equal Credit Opportunity Act, TILA and the RESPA and

the regulations promulgated thereunder that, among other things, prohibit discrimination and require the disclosure of certain basic

information to mortgagors concerning credit terms and settlement costs. FirstBank is licensed by the Commissioner under the Puerto

Rico Mortgage Banking Law, and, as such, is subject to regulation by the Commissioner, with respect to, among other things,

licensing requirements and the establishment of maximum origination fees on certain types of mortgage loan products.

WEBSITE ACCESS TO REPORT

The Corporation makes available annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K,

and amendments to those reports, and proxy statements on Schedule 14A, filed or furnished pursuant to Sections 13(a), 14(a) or 15(d)

of the Exchange Act, free of charge on or through its internet website at www.1firstbank.com (http://www.1firstbank.com) (under “Investor Relations”) or directly

through the Corporation’s investor relations website, fbpinvestor.com, as soon as reasonably practicable after the Corporation

electronically files such material with, or furnishes it to, the SEC. The SEC maintains a website that contains reports, proxy and

information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov (http://www.sec.gov).

The Corporation also makes available its Corporate Governance Guidelines and Principles, the charters of the Audit,

Asset/Liability, Compensation and Benefits, Credit, Risk, Trust, and Corporate Governance and Nominating Committees and the

documents listed below, free of charge on or through its internet website at www.fbpinvestor.com (http://www.fbpinvestor.com) (under Corporate Governance):

• Code of Ethics for CEO and Senior Financial Officers (the “Code of Ethics”)
• Code of Ethical Conduct applicable to all employees
• Independence Principles for Directors
• Corporate Sustainability Reports
• Sustainability Policy

The Corporate Governance Guidelines and Principles and the aforementioned charters and documents may also be obtained free of

charge by sending a written request to Mrs. Sara Alvarez Cabrero , Executive Vice President, General Counsel and Secretary of the

Board, PO Box 9146, San Juan, Puerto Rico 00908.

Website addresses referenced in this Form 10-K are provided as textual references and for convenience only, and the content on the

referenced websites does not constitute a part of this Form 10-K or any other report or document that the Corporation files with or

furnishes to the SEC.

Risk Factors

Below is a discussion about material risks and uncertainties that could impact the Corporation’s businesses, results of operations,

financial condition, liquidity, and capital position, and could cause actual results to differ materially from those projected in any

forward-looking statements. Additional risks and uncertainties not currently known to the Corporation or deemed immaterial may also

materially adversely affect the Corporation. Thus, the following should not be considered a complete discussion of all of the risks and

uncertainties the Corporation may face. See the discussion under “Forward-Looking Statements,” in this Form 10-K.

RISKS RELATING TO THE BUSINESS ENVIRONMENT AND OUR INDUSTRY

The effect of changes in the interest rate environment and inflation levels on the level, composition and performance of the

Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin, loan

originations, deposit attrition, overall results of operations, and liquidity position.

Net interest income represents the difference between the interest earned on interest-earning assets and interest paid on interest-

bearing liabilities. Because assets and liabilities may reprice at different times and by different amounts, changes in interest rates can

materially affect net interest income and net interest margin. Prolonged periods of lower interest rates generally compress net interest

margin and reduce profitability. Higher interest rates can increase borrowing costs for consumers and businesses, reduce loan demand,

and shift customer behavior among deposit products, which can negatively affect loan growth, deposit retention, funding costs, and

liquidity. Competitive pressures to attract deposits may increase reliance on higher-cost funding, including wholesale funding, which

could further compress net interest margin. Interest rates are influenced by factors beyond our control, including general economic

conditions, inflationary trends, changes in government spending and debt issuances and monetary policy actions of governmental and

regulatory agencies, including the Federal Reserve Board.

Additionally, basis risk may adversely affect net interest income. Basis risk arises when interest rates for different financial

instruments with similar maturities, or the indices used to price them, change at different times or by different magnitudes. For

example, the interest expense for liability instruments might not change by the same amount as interest income received from loans or

investments. To the extent that the interest rates on loans and borrowings change at different rates and by different amounts, the

margin between our variable rate-based assets and the cost of the interest-bearing liabilities might be compressed and adversely affect

net interest income.

Also, changes in interest rates may impact the ability to attract and retain clients, as well as gain acceptance from current and

prospective customers for new and existing products and services. This, in turn, affects demand for new loan originations, the

composition of the Corporation’s interest-earning assets, and the extent of any re-shifting between non-interest-bearing and interest-

bearing liabilities. Further, changes in interest rates impact the value of our fixed-rate securities. Any unrealized gains or losses from

these portfolios impact other comprehensive income, stockholders’ equity, and the tangible common equity ratio. Any realized gains

or losses from these portfolios impact regulatory capital ratios.

Changes in prepayments may adversely affect net interest income.

Net interest income may be affected by prepayments on MBS. Generally, when rates rise, prepayments of principal and interest will

decrease, and the duration of MBS securities will increase and vice versa. Conversely, when rates fall, prepayments of principal and

interest will increase, and the duration of MBS will decrease. Such acceleration in the prepayments of MBS would lower yields on

these securities, as the amortization of premiums paid upon the acquisition of these securities would accelerate. Conversely,

acceleration in the prepayments of MBS would increase yields on securities purchased at a discount, as the accretion of the discount

would accelerate. Also, net interest income in future periods might be affected by our investment in callable securities because

decreases in interest rates might prompt the early redemption of such securities.

The volatility in the financial services industry, which could result in, among other things, bank deposit runoffs, liquidity

constraints, and increased regulatory requirements and costs.

The closure and placement into receivership with the FDIC of certain large U.S. regional banks with assets over $100 billion in

March and May 2023, and adverse developments affecting other banks, resulted in heightened levels of market volatility and

consequently negatively impacted customer confidence in the safety and soundness of financial institutions. These developments

resulted in certain regional banks experiencing higher than normal deposit outflows and an elevated level of competition for available

deposits in the market. The impact of market volatility from adverse developments in the banking industry such as this one are highly

uncertain and difficult to predict. In the aftermath of these bank failures, the banking agencies have increased regulatory requirements

and costs that may impact capital ratios or the FDIC deposit insurance premium. For example, in 2023, the FDIC issued a final rule to

impose a special assessment to recover certain estimated losses to the Deposit Insurance Fund (“DIF”) arising from the closures of

Silicon Valley Bank and Signature Bank. The estimated losses will be recovered through quarterly special assessments collected from

certain insured depository institutions, including the Bank, and collection began during the quarter ended June 30, 2024. As of

December 31, 2025, the Corporation’s total estimated FDIC special assessment amounted to $6.3 million, of which $5.5 million has

been paid. The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued

liability.

Difficult market and general economic conditions have affected the financial industry in the past and could adversely affect us

in the future.

Given that most of our business is in Puerto Rico and the U.S. and given the degree of interrelation between Puerto Rico’s economy

and that of the U.S., we are exposed to downturns in the U.S. economy, including factors such as employment levels in the U.S. and

real estate valuations. The deterioration of these conditions has adversely affected us in the past and in the future could adversely

affect the credit performance of mortgage loans, and result in significant write-downs of asset values by financial institutions,

including U.S. government-sponsored entities (“GSEs”) as well as major commercial banks and investment banks.

In particular, we may face the following risks:

Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select,

manage, and underwrite the loans become less predictive of future behaviors.

The models used to estimate losses inherent in the credit exposure, particularly those under CECL, require difficult,

subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might

impair the ability of the borrowers to repay their loans, which may no longer be accurately estimated and which may, in

turn, impact the reliability of the models.

Our ability to borrow from other financial institutions or to engage in sales of mortgage loans to third parties (including

mortgage loan securitization transactions with GSEs and repurchase agreements) on favorable terms, or at all, could be

adversely affected by further disruptions in the capital or credit markets or other events, including deteriorating investor

expectations.

Competitive dynamics in the industry could change as a result of strategic growth opportunities in connection with current

market conditions.

Expected future regulation of our industry may increase our compliance costs and limit our ability to pursue business

opportunities.

There may be downward pressure on our stock price.

Any deterioration of economic conditions in the U.S. and disruptions in the financial markets could adversely affect our ability to

access capital, our business, financial condition, and results of operations. Unfavorable or uncertain economic and market conditions

have been and could cause declines in economic growth, business activity or investor or business confidence; limitations on the

availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters;

epidemics and pandemics; or a combination of these or other factors.

Additionally, the residential mortgage loan origination business is impacted by home values and has historically been cyclical,

enjoying periods of strong growth and profitability followed by periods of shrinking volumes and industry-wide losses. During periods

of rising interest rates, the refinancing of many mortgage products tends to decrease as the economic incentives for borrowers to

refinance their existing mortgage loans are reduced.

Any sustained period of increased delinquencies, foreclosures, or losses could adversely affect our ability to sell loans, the prices

we receive for loans, the values of mortgage loans held for sale, or residual interests in securitizations, which could adversely affect

our financial condition and results of operations. In addition, any additional material decline in real estate values would further

weaken the loan-to-value ratios and increase the possibility of loss if a borrower defaults. In such event, we will be subject to the risk

of loss on such real estate arising from borrower defaults to the extent not covered by third-party credit enhancements.

We operate in a highly competitive industry and market area.

We face substantial competition in all areas of our operations from a variety of different competitors, including other banks,

insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies,

brokerage firms with retail operations, credit unions, certain retailers, fintech companies and digital platforms. The Corporation’s

ability to compete effectively depends on the relative performance of its products, the degree to which the features of its products appeal to customers, and the extent to which the Corporation meets clients’ needs and expectations. The Corporation’s ability to compete also depends on its ability to attract and retain professional and other personnel, and on its reputation.

The Corporation encounters intense competition in attracting and retaining deposits and in its consumer and commercial lending

activities. The Corporation competes for loans with other financial institutions. The Corporation’s ability to originate loans depends

primarily on the rates and fees charged and the service it provides to its borrowers in making prompt credit decisions. There can be no

assurance that in the future the Corporation will be able to increase its deposit base, originate loans in the manner or on the terms on

which it has done so in the past, or otherwise compete effectively.

The Corporation’s credit quality and the value of the portfolio of Puerto Rico government securities have been, and in the future

may be, adversely affected by Puerto Rico’s economic condition, and may be affected by actions taken by the Puerto Rico

government or the PROMESA oversight board to address the ongoing fiscal and economic challenges in Puerto Rico.

A significant portion of our business activities and credit exposure is concentrated in Puerto Rico, which has faced prolonged

economic and fiscal challenges. Although the Puerto Rico Planning Board (“PRPB”) reported in its preliminary estimates that real

gross national product (“GNP”) grew 0.4% in fiscal year 2025, marking the fifth consecutive year of positive economic growth, future

economic prospects remain uncertain. However, according to the PROMESA oversight board, the fiscal year 2026 budget prepares the

Puerto Rico government for potential further declines in federal funding over the fiscal year that began on July 1, 2025.

As of December 31, 2025, the Corporation had $297.8 million of direct exposure to the Puerto Rico government, its municipalities

and public corporations. As of December 31, 2025, approximately $211.3 million of the exposure consisted of loans and obligations of

municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit

and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $42.2 million consisted of loans

and obligations which are supported by one or more specific sources of municipal revenues. The municipalities are required by law to

levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and

notes. In addition to municipalities, the total direct exposure also included $8.7 million in a loan extended to an affiliate of PREPA,

$32.9 million in loans to a public corporation of the Puerto Rico government, and an obligation of the Puerto Rico government,

specifically a residential pass-through MBS issued by the PR Housing Finance Authority (“PRHFA”), at an amortized cost of $2.7

million as part of its available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2025).

Also, as of December 31, 2025, the outstanding balance of construction loans funded through conduit financing structures to

support the federal programs of Low-Income Housing Tax Credit (“LIHTC”) combined with Community Development Block Grant-

Disaster Recovery (“CDBG-DR”) funding amounted to $92.4 million. The main objective of these programs is to spur development in

new or rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations

which are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan

agreement for the specific project loan to which the Corporation will serve as ultimate lender, but where the PRHFA will be the lender

of record. In addition, as of December 31, 2025, the Corporation had $67.1 million in exposure to residential mortgage loans

guaranteed by the PRHFA.

The Corporation operates in various jurisdictions highly dependent on federal funding programs. On January 27, 2025, the Office of

Management and Budget (“OMB”) issued Memorandum M-25-13 entitled “Temporary Pause of Agency Grant, Loan, and Other

Financial Assistance Programs.” The Memo directed every federal agency to “temporarily pause all activities related to obligation or

disbursement of all federal financial assistance, and other relevant agency activities that may be implicated by executive orders,

including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the

green new deal.” Lawsuits challenging the pause were immediately filed and on January 28, 2025, the U.S. District Court for the

District of Columbia enjoined the Trump administration from implementing OMB Memorandum M-25-13 for disbursements under

open awards. On January 29, 2025, OMB rescinded the Memo, however, the administration has continued to pursue agency-by-

agency reviews of federal financial assistance programs and to implement targeted funding pauses, terminations, or additional

compliance requirements consistent with its policy priorities, subject to applicable legal constraints. It remains uncertain whether the

administration will issue new directives, executive orders, or guidance affecting federal grants, loans, or other financial assistance in

the future, or how courts may rule on ongoing or future challenges; however, any such action by the administration or ruling by the

courts that limit such grants or financial assistance could have a negative effect on our business.

Instability in economic conditions, delays in the receipt of disaster relief funds allocated to Puerto Rico or any temporary or

permanent pause on any federal funds, and the potential impact on asset values resulting from past or future natural disaster events,

when added to Puerto Rico’s ongoing fiscal challenges, could materially adversely affect our business, financial condition, liquidity,

results of operations and capital position.

A deterioration in economic conditions in the U.S. Virgin Islands and British Virgin Islands could harm our results of

operations.

The Corporation has exposure to the USVI and BVI economies, which remain susceptible to fiscal challenges, natural disasters, and

reliance on federal disaster relief and recovery funding. As of December 31, 2025 and 2024, the Corporation had $138.7 million and

$100.4 million, respectively, in loans to USVI public corporations, all of which were performing as of that date. However, ongoing

fiscal and economic challenges in the USVI may deteriorate the overall financial and economic conditions in the area, which could

negatively affect the Corporation’s asset quality, credit performance and overall financial condition.

We are subject to ESG risks that could adversely affect our reputation and the market price of our securities.

Although the current U.S. presidential administration and federal regulatory agencies have, in recent years, reduced or paused

certain ESG-related regulatory initiatives, including the SEC’s decision in 2025 to withdraw its defense of federal climate-related

disclosures, stakeholder expectations regarding ESG matters are not uniform. Both opponents and proponents of ESG-related practices

have increasingly engaged in legislative, regulatory, litigation, and public advocacy efforts to advance their respective pos itions. As a

result, the ESG regulatory and political landscape has become more complex and less predictable. Failure to adapt to or comply with

regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do

business with certain partners, and our stock price.

For example, we may be exposed to negative publicity based on the identity and activities of those to whom we lend or with whom

we otherwise do business, and on the public’s view of the ESG-related approach and performance of our customers and business

partners. Such negative publicity may arise from adverse coverage in traditional media or may spread rapidly through social media

and other digital platforms. If we were to become the subject of such negative publicity, our relationships and reputation with existing

and prospective customers and third parties with which we do business could be damaged, which could have an adverse effect on our

ability to attract and retain customers and employees and could have a negative impact on our business, financial condition and results

of operations. In addition, we may face criticism from ESG detractors regarding the scope, nature, or perceived impact of our ESG

initiatives or policies, or in response to any revisions or enhancements to these initiatives. We could also be subject to adverse actions

or responses by governmental actors (such as anti-ESG legislation or retaliatory legislative treatment) or consumers (through boycotts

or negative publicity campaigns) that could adversely affect our reputation, results of operations and financial condition.

Our results of operations could be adversely affected by natural disasters, public health crises, political crises, negative global

climate patterns or other catastrophic events.

Natural disasters, whose nature and severity may be impacted by climate change, such as hurricanes, floods, extreme cold events

and other adverse weather conditions; public health crises; political crises, such as terrorist attacks, war, labor unrest, other political

instability, trade policies, tariffs and sanctions, including the ongoing conflict in Ukraine, the conflict in the Middle East, recent

conflicts in South America, and the possible expansion of such conflicts in surrounding areas and potential geopolitical consequences;

negative global climate patterns, especially in water stressed regions; or other catastrophic events, such as fires or other disasters

occurring at our locations, whether occurring in Puerto Rico, the U.S., or internationally, could cause a significant adverse effect on

the economy and disrupt our operations. Certain areas in which our business is concentrated, including Puerto Rico and the USVI, are

particularly susceptible to earthquakes, hurricanes, and major storms. Further, climate change may increase both the frequency and

severity of extreme weather conditions and natural disasters, which may affect our business operations, either in a particular region or

globally, as well as the activities of our customers. The Corporation is also not able to predict the positive or negative effects that

future events or changes to the U.S. or global economy, financial markets, or regulatory and business environment could have on our

operations.

Climate change, and efforts to mitigate its long-term effects, may materially adversely affect the Corporation’s business and

results of operations.

Concerns regarding the long-term effects of climate change have led, and are expected to continue to lead, to increased

governmental efforts worldwide aimed at mitigating climate-related risks. In addition, consumers and businesses may voluntarily

modify their behavior, business practices, and investment decisions in response to these concerns. As a result, the Corporation and its

customers may be required to adapt to new laws and regulations, and shifts in consumer and business preferences associated with

climate change. These developments may result in increased costs, asset value reductions, and changes to operating processes. The

impact on our customers will likely vary depending on their specific attributes, including reliance on our role in fossil fuel activities.

The Corporation may face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. The

Corporation’s efforts to take these risks into account in making lending and other decisions, including increasing our business with

climate-responsible companies, may not be effective in protecting the Corporation from the negative impact of new laws and

regulations or changes in consumer or business behavior.

Deterioration in collateral values may result in additional losses.

Our business is affected by the value of the assets securing our loans or underlying our investments.

We had a commercial and construction loan portfolio held for investment in the amount of $6.5 billion as of December 31, 2025.

Due to their nature, these loans entail a higher credit risk than consumer and residential mortgage loans, since they are larger in size,

concentrate more risk in a single borrower and are generally more sensitive to economic downturns. Furthermore, in the case of a

slowdown in the real estate market, it may be difficult to dispose of the properties securing these loans upon any foreclosure of the

properties. We may incur losses over the near term, either because of continued deterioration in the quality of loans or because of sales

of problem loans, which would likely accelerate the recognition of losses. Any such losses could adversely impact our overall

financial performance and results of operations.

Deterioration of the value of real estate collateral securing our construction and commercial loan portfolios, whether located in

Puerto Rico or elsewhere, would result in increased credit losses. Whether the collateral that underlies our loans is located in Puerto

Rico, the USVI, the BVI, or the U.S. mainland, the performance of our loan portfolio and the collateral value backing the transactions

are dependent upon the performance of, and conditions within, each specific real estate market. As of December 31, 2025, $2.8 billion

of our commercial and construction loan portfolio held for investment, or 21% of the total loan portfolio held for investment, consisted

of commercial mortgage and construction loans, of which $1.9 billion was in the Puerto Rico region.

We measure credit losses for collateral dependent loans based on the fair value of the collateral, which is generally obtained from

appraisals, adjusted for undiscounted selling costs as appropriate. Updated appraisals are obtained when we determine that loans are

collateral dependent and are updated annually thereafter. In addition, appraisals are also obtained for certain residential mortgage

loans on a spot basis based on specific characteristics, such as delinquency levels, and age of the appraisal. The appraised value of the

collateral may decrease, or we may not be able to recover collateral at its appraised value. A significant decline in collateral valuations

for collateral dependent loans has required and, in the future, may require, increases in our credit loss expense on loans. Any such

increase would have an adverse effect on our future financial condition and results of operations.

Labor shortages, challenges in attracting and retaining qualified personnel, and constraints in the supply chain could adversely

affect our clients’ operations as well as our business and operations.

Widespread labor shortages across Puerto Rico, the United States, the Virgin Islands, and other markets have affected many of our

commercial clients, contributing to operational disruptions, supply chain constraints, reduced cash flow, and potential difficulties in

meeting loan obligations. These labor market pressures also affect the Corporation’s own operations. Competition for skilled and

experienced personnel remains intense, and rising wages, driven in part by inflation and heightened employee expectations, may

increase our cost structure and contribute to higher turnover. As a result, the Corporation may face prolonged vacancies, challenges in

attracting and retaining qualified employees, and potential impacts on service levels. If these conditions persist, they could materially

and adversely affect the Corporation’s operations, competitive position, and overall financial results.

The failure of other financial institutions could adversely affect us.

Our ability to engage in routine financing transactions could be adversely affected by future failures of financial institutions and the

actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing,

counterparty and other relationships. We have exposure to different industries and counterparties and routinely execute transactions

with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment

companies and other institutional clients. In certain of these transactions, we are required to post collateral to secure the obligations to

the counterparties. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience

delays in recovering the assets posted as collateral, or we may incur a loss to the extent that the counterparty was holding collateral in

excess of the obligation to such counterparty or under other circumstances.

In addition, many of these transactions expose us to credit risk in the event of a default by our counterparty or client. The credit risk

may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount

of the loan or derivative exposure due to us. Any losses resulting from our routine funding transactions may materially and adversely

affect our financial condition and results of operations.

RISKS RELATING TO THE CORPORATION’S BUSINESS

Certain funding sources may not be available to us, and our funding sources may prove insufficient and/or costly to replace.

FirstBank relies primarily on customer deposits, the issuance of brokered CDs, and advances from the FHLB of New York to

maintain its lending activities and to replace certain maturing liabilities. As of December 31, 2025, we had $593.6 million in brokered

CDs outstanding, representing approximately 4% of our total deposits. Approximately $394.0 million, or 66% in brokered CDs mature over the twelve months ending December 31, 2025, and the average remaining term to maturity of the brokered CDs outstanding as of

December 31, 2025 was approximately 1.0 year. None of these brokered CDs are callable at the Corporation’s option. In addition, the

Corporation had $290.0 million of long-term FHLB advances outstanding as of December 31, 2025, with an average remaining term

to maturity of 1.36 years.

Although FirstBank has historically been able to replace maturing deposits and advances, we may not be able to replace these funds

in the future if our financial condition or general market conditions change. If we are unable to maintain access to funding sources, our

results of operations and liquidity would be adversely affected.

Alternate sources of funding may carry higher costs than sources currently utilized. If we are required to rely heavily on more

expensive funding sources, profitability would be adversely affected.

We may determine to seek debt financing in the future to achieve our long-term business objectives. Additional borrowings, if

sought, may not be available to us, or if available, may not be on acceptable terms. The availability of additional financing will depend

on a variety of factors, such as market conditions, the general availability of credit, our credit ratings and our credit capacity. In

addition, FirstBank may seek to sell loans as an additional source of liquidity. If additional financing sources are unavailable or are not

available on acceptable terms, our profitability and future prospects could be adversely affected.

Downgrades in our credit ratings could further increase the cost of borrowing funds.

The Corporation’s ability to access new non-deposit sources of funding could be adversely affected by downgrades in our credit

ratings. The Corporation’s liquidity is to a certain extent contingent upon its ability to obtain external sources of funding to finance its

operations. The Corporation’s current credit ratings and any downgrades in such credit ratings can hinder the Corporation’s access to

new forms of external funding and/or cause external funding to be more expensive, which could in turn adversely affect results of

operations.

We depend on cash dividends from FirstBank to meet our cash obligations.

As a holding company, dividends from FirstBank, our banking subsidiary, have provided a substantial portion of our cash flow used

to service the interest payments on our obligations. FirstBank is limited by law in its ability to make dividend payments and other

distributions to us based on its earnings and capital position. A failure by FirstBank to generate sufficient cash flow to make dividend

payments to us may have a negative impact on our results of operations and financial condition.

Our level of non-performing assets may adversely affect our future results of operations.

Although non-performing assets decreased by $4.2 million to $114.1 million as of December 31, 2025, or 4%, from $118.3 million

as of December 31, 2024, we continue to have a relevant amount of nonaccrual loans. If we are unable to effectively maintain the

quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected.

Our ACL may not be adequate to cover actual losses, and we may be required to materially increase our ACL, which may

adversely affect our capital ratios, financial condition and results of operations.

We are subject, among other things, to the risk of loss from loan defaults and foreclosures with respect to the loans we originate and

purchase. We recognize periodic credit loss expenses on loans, which lead to reductions in our income from operations, in order to

maintain our ACL on loans at a level that our management deems to be appropriate based upon an assessment of the quality of the

loan and lease portfolios. Management may fail to accurately estimate the level of credit losses or may have to increase our credit loss

expense on loans in the future as a result of new information regarding existing loans, future increases in nonaccrual loans beyond

what was forecasted, foreclosure actions and loan modifications, changes in current and expected economic and other conditions

affecting borrowers or for other reasons beyond our control. In addition, the bank regulatory agencies periodically review the

adequacy of our ACL on loans and may require an increase in the credit loss expense on loans or the recognition of additional

classified loans and loan charge-offs, based on judgments that differ from those of management.

The level of the ACL reflects management’s estimates based upon various assumptions and judgments as to specific credit risks;

evaluation of industry concentrations; loan loss experience; current loan portfolio quality; present economic, political and regulatory

conditions; unidentified losses inherent in the current loan portfolio and reasonable and supportable forecasts. The determination of

the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires management to make

significant estimates and judgments regarding current credit risks and future trends, all of which may undergo material changes. If our

estimates prove to be incorrect, our ACL on loans may not be sufficient to cover losses in our loan portfolio and our credit loss

expense on loans could increase substantially.

In addition, any increases in our credit loss expense on loans or any loan losses in excess of our ACL on loans could have a material

adverse effect on our future capital ratios, financial condition and results of operations.

Defective and repurchased loans may harm our business and financial condition.

In connection with the sale and securitization of loans, we are required to make a variety of customary representations and

warranties relating to the loans sold or securitized. Our obligations with respect to these representations and warranties are generally

outstanding for the life of the loan, and relate to, among other things, the following: (i) compliance with laws and regulations; (ii)

underwriting standards; (iii) the accuracy of information in the loan documents and loan files; and (iv) the characteristics and

enforceability of the loan.

A loan that does not comply with the representations and warranties made may take longer to sell, may impact our ability to obtain

third-party financing for the loan, and may not be saleable or may be saleable only at a significant discount. If such a loan is sold

before we detect non-compliance, we may be obligated to repurchase the loan and bear any associated loss directly, or we may be

obligated to indemnify the purchaser against any loss, either of which could reduce our cash available for operations and liquidity.

Management believes that it has established controls to ensure that loans are originated in accordance with the secondary market’s

requirements, but certain employees may make mistakes or may deliberately violate our lending policies.

Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate and

operational risks could adversely affect our consolidated results of operations.

We may fail to identify and manage risks related to a variety of aspects of our business, including, but not limited to, liquidity risk;

interest rate risk; market risk; credit risk; operational risk; legal, regulatory and compliance risk; reputational risk; model risk; capital

risk; strategic risk; and information technology and cybersecurity risk. We have adopted and periodically improve various controls,

procedures, policies and systems to monitor and manage risk. Any improvements to our controls, procedures, policies and systems,

however, may not be adequate to identify and manage the risks in our various businesses. If our risk framework is ineffective, either

because it fails to keep pace with changes in the financial markets or our businesses or for other reasons, we could incur losses, suffer

reputational damage, or find ourselves out of compliance with applicable regulatory mandates or expectations.

We may also be subject to disruptions from external events, such as natural disasters and cyber-attacks, which could cause delays or

disruptions to operational functions, including information processing and financial market settlement functions. In addition, our

customers, vendors and counterparties could suffer from such events. Should these events affect us, or the customers, vendors or

counterparties with which we conduct business, our consolidated results of operations could be negatively affected. When we record

balance sheet reserves for probable loss contingencies related to operational losses, we may be unable to accurately estimate our

potential exposure, and any reserves we establish to cover operational losses may not be sufficient to cover our actual financial

exposure, which may have a material impact on our consolidated results of operations or financial condition for the periods in which

we recognize the losses.

Our businesses may be adversely affected by litigation.

We have, in the past, been party to claims and legal actions by our customers, or subject to regulatory supervisory actions by the

government on behalf of customers, relating to our performance of fiduciary or contractual responsibilities. In the past, we have also

been subject to securities class action litigation by our shareholders and we have also faced employment lawsuits and other legal

claims. In any future claims or actions, demands for substantial monetary damages may be asserted against us, resulting in financial

liability or an adverse effect on our reputation among investors or on customer demand for our products and services. A securities

class action suit against us in the future could result in substantial costs, potential liabilities and the diversion of management’s

attention and resources. We may be unable to accurately estimate our exposure to litigation risk when we record balance sheet

reserves for probable loss contingencies. As a result, reserves we establish to cover any settlements or judgments may not be sufficient

to cover our actual financial exposure, which has occurred in the past and may occur in the future, resulting in a material adverse

impact on our consolidated results of operations or financial condition.

In the ordinary course of our business, we are also subject to various regulatory, governmental and law enforcement inquiries,

investigations and subpoenas. These may be directed generally to participants in the businesses in which we are involved or may be

specifically directed at us. In regulatory enforcement matters, claims for disgorgement, the imposition of penalties and the imposition

of other remedial sanctions are possible.

The resolution of legal actions or regulatory matters, when unfavorable, has had, and could in the future have, a material adverse

effect on our consolidated results of operations for the quarter in which such actions or matters are resolved or a reserve is established.

Our businesses may be negatively affected by adverse publicity or other reputational harm.

Our relationships with many of our customers are predicated upon our reputation as a fiduciary and a service provider that adheres

to the highest standards of ethics, service quality and regulatory compliance. Adverse publicity, regulatory actions, litigation,

operational failures, the failure to meet customer expectations and other issues with respect to one or more of our businesses, including

FirstBank as our banking subsidiary, could materially and adversely affect our reputation, or our ability to attract and retain customers

or obtain sources of funding for the same or other businesses. Preserving and enhancing our reputation also depends on maintaining

systems and procedures that address known risks and regulatory requirements, as well as our ability to identify and mitigate additional

risks that arise due to changes in our businesses, the market places in which we operate, the regulatory environment and customer

expectations. If we fail to promptly address matters that bear on our reputation, our reputation may be materially adversely affected

and our business may suffer.

Any impairment of our goodwill or other intangible assets may adversely affect our operating results.

We review goodwill for impairment annually and assess other intangible assets whenever events or changes in circumstances

indicate that their carrying amount may not be recoverable. If goodwill or other intangibles are determined to be impaired, we may be

required to record a charge to earnings. Impairment risk factors include deterioration in financial performance of the reporting unit,

declining market valuation of the Corporation or comparable institutions, and adverse economic conditions impacting expected cash

flows. During the fourth quarter of 2025, a qualitative goodwill impairment analysis determined that it was more -likely-than-not that

the fair value of our reporting units exceeded their carrying value; therefore, no goodwill impairment was recorded.

As of December 31, 2025, our goodwill book value was $38.6 million, all recorded at FirstBank. Future goodwill impairments

could reduce earnings and affect FirstBank’s ability to pay dividends to the Corporation, subject to regulatory approval. While a

goodwill impairment would not impact our tangible book value or regulatory capital, it could reduce reported earnings.

Recognition of deferred tax assets is dependent upon the generation of future taxable income by the Bank.

As of December 31, 2025, the Corporation had a net deferred tax asset of $149.0 million (net of a valuation allowance of $75.0

million, of which $72.2 million was related to FirstBank). Under the PR Tax Code, the Corporation and its subsidiaries, including

FirstBank, are treated as separate taxable entities and are not entitled to file consolidated tax returns. Accordingly, in order to obtain a

tax benefit from a NOL, a particular subsidiary must be able to demonstrate sufficient taxable income within the applicable NOL

carry-forward period. Pursuant to the PR Tax Code, the carry-forward period for NOLs incurred during taxable years commencing

after December 31, 2012 is 10 years. The Corporation assesses deferred tax assets to determine the amount that is more-likely-than-

not to be realized. Valuation allowances are established, when necessary, to reduce deferred tax assets to such amount. Due to

significant estimates utilized in determining the valuation allowance and the potential for changes in facts and circumstances in the

future, the Corporation may not be able to reverse the remaining valuation allowance or may need to increase its current deferred tax

asset valuation allowance.

The Corporation’s judgments regarding tax accounting policies and the resolution of potential tax disputes may impact the

Corporation’s earnings and cash flow, and changes in the tax laws of multiple jurisdictions can materially affect our operations,

tax obligations, and effective tax rate.

Significant judgment is required in determining the Corporation’s effective tax rate and in evaluating its tax positions. The

Corporation provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement

criteria prescribed by applicable generally accepted accounting principles in the United States (“GAAP”).

Fluctuations in federal, state, local, and foreign taxes or a change to uncertain tax positions, including related interest and penalties,

may impact the Corporation’s effective tax rate. When particular tax matters arise, a number of years may elapse before such matters

are audited and finally resolved. In addition, the Puerto Rico Department of Treasury (“PRTD”), the U.S. Internal Revenue Service

(“IRS”), and the tax authorities in the jurisdictions in which we operate may challenge our tax positions and we may estimate and

provide for potential liabilities that may arise out of tax audits to the extent that uncertain tax positions fail to meet the recognition

standard under applicable GAAP. Unfavorable resolution of any tax matter could increase the effective tax rate and could result in a

material increase in our tax expense. Resolution of a tax issue may require the use of cash in the year of resolution.

First BanCorp. is subject to Puerto Rico income tax on its income from all sources. FirstBank is treated as a foreign corporation for

U.S. and USVI income tax purposes and is generally subject to U.S. and USVI income tax only on its income from sources within the

U.S. and USVI or income effectively connected with the conduct of a trade or business in those jurisdictions. The USVI jurisdiction

imposes income taxes based on the U.S. Internal Revenue Code under the “mirror system” established by the Naval Service

Appropriations Act of 1922. However, the USVI jurisdiction also imposes an additional 10% surtax on the USVI tax liability, if any.

These tax laws are complex and subject to different interpretations. We must make judgments and interpretations about the

application of these inherently complex tax laws when determining our provision for income taxes, our deferred tax assets and

liabilities, and our valuation allowance. In addition, legislative changes, particularly changes in tax laws, could adversely impact our

results of operations.

Changes in applicable tax laws in Puerto Rico, the U.S., or other jurisdictions or tax authorities’ new interpretations could result in

increases in our overall taxes and the Corporation’s financial condition or results of operations may be adversely impacted.

Our ability to use our NOL carryforwards may be limited.

The Corporation has U.S. and USVI sourced NOL carryforwards. Section 382 of the U.S. Internal Revenue Code (“Section 382”)

limits the ability to utilize U.S. and USVI NOLs for income tax purposes, respectively, at such jurisdictions following an event of an

ownership change. Generally, an “ownership change” occurs when certain shareholders increase their aggregate ownership by more

than 50 percentage points over their lowest ownership percentage over a three-year testing period. Upon the occurrence of a Section

382 ownership change, the use of NOLs attributable to the period prior to the ownership change is subject to limitations and only a

portion of the U.S. and USVI NOLs, as applicable, may be used by the Corporation to offset the annual U.S. and USVI taxable

income, if any. In 2017, the Corporation completed a formal ownership change analysis within the meaning of Section 382 covering a

comprehensive period, and concluded that an ownership change, for U.S. and USVI purposes only, had occurred during such period.

The Section 382 limitation has resulted in higher U.S. and USVI income tax liabilities than we would have incurred in the absence of

such limitation.

It is possible that the utilization of our U.S. and USVI NOLs could be further limited due to future changes in our stock ownership,

as a result of either sales of our outstanding shares or issuances of new shares that could separately or cumulatively trigger an

ownership change and, consequently, a Section 382 limitation. Any further Section 382 limitations may result in greater U.S. and

USVI tax liabilities than we would incur in the absence of such a limitation and any increased liabilities could adversely affect our

earnings and cash flow. We may be able to mitigate the adverse effects associated with a Section 382 limitation in the U.S. and USVI

to the extent that we could credit any resulting additional U.S. and USVI tax liability against our tax liability in Puerto Rico. However,

our ability to reduce our Puerto Rico tax liability through such a credit or deduction will depend on our tax profile at each annual

taxable period, which is dependent on various factors.

The utilization of our NOL carryforwards is subject to significant judgment and depends on future taxable income and the

continued applicability of current tax laws. Although we reversed a portion of our valuation allowance in 2025 following the

enactment of Act 65-2025, future changes in tax laws or sustained losses at the holding company or pass-through entity level, could

limit our ability to utilize these NOLs, require the reestablishment of a valuation allowance, or result in the expiration of unused

NOLs.

RISKS RELATING TO CYBERSECURITY AND TECHNOLOGY

Cyber-attacks, system risks and data security breaches to our computer systems and networks or those of third-party service

providers could adversely affect our ability to conduct business, manage our exposure to risk or expand our business, result in the

disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and

security systems and infrastructure, and present significant reputational, legal and regulatory costs.

Our business is highly dependent on the security, reliability, and effectiveness of our technology infrastructure and data

management systems, as well as those of our customers, vendors, and other third parties. Employees, customers, and other third

parties increasingly access our systems and services through personal or external devices and networks that are outside our direct

control and subject to their own cybersecurity risks. Our business relies on effective access controls and the secure collection,

processing, transmission, storage and retrieval of confidential, proprietary, personal and other information across our systems and

those of third parties.

Cybersecurity risks facing financial institutions have increased significantly due to the growing sophistication and frequency of

cyber threats, as well as our continued expansion of digital and online services. These risks may arise from deliberate attacks,

misconduct, human error, or system failures. Cyber incidents, such as malware infections, phishing attacks, denial-of-service attacks,

ransomware, or other security breaches, could result in unauthorized access to or loss, misuse, or destruction of sensitive information,

damages to systems, disruption of operations, or impairment of customer access to our services.

While we maintain a CISP that continuously monitors cyber-related risks and ultimately ensures protection for the processing,

transmission, and storage of confidential, proprietary, and other information in our computer systems and networks, as well as a

Vendor Management Program to oversee third party and vendor risks, there is no guarantee that we will not be exposed to or be

affected by a cybersecurity incident.

Cyber threats are rapidly changing, and future attacks or breaches could lead to other security breaches of the networks, systems, or

devices that our customers use to access our integrated products and services, which, in turn, could result in unauthorized disclosure,

release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary, and other information (including account data

information) or data security compromises. As cyber threats continue to evolve, we may be required to expend significant additional

resources to modify or enhance our protective measures, investigate, and remediate any information security vulnerabilities or

incidents and develop our capabilities to respond and recover. The scope and impact of a particular cyberattack may not be

immediately clear, which could delay remediation efforts and limit our ability to provide complete and accurate information to

customers, third-party vendors, regulators, and the public.

A successful penetration or circumvention of our system security, or the systems of our customers, suppliers, and other third parties,

could cause us serious negative consequences, including significant operational, reputational, legal, and regulatory costs and concerns.

Any of these adverse consequences could adversely impact our results of operations, liquidity, and financial condition. In addition, our

insurance policies may be insufficient to cover all losses associated with a significant cybersecurity incident, may become more costly,

or may be unavailable on economically reasonable terms in the future or at all Any of these results could harm our growth prospects,

financial condition, business, and reputation.

Our operational or security systems or infrastructure, or those of third parties, could fail or be breached. Any such future

incidents could potentially disrupt our business and adversely impact our results of operations, liquidity, and financial condition,

as well as cause legal or reputational harm.

Operational risk is inherent in our business and extends beyond our internal operations due to our reliance on third-party service

providers. Our performance depends on the effectiveness, reliability, and security of our operational and technology infrastructure,

including computer systems, data management, transaction processing, information security, online and mobile banking platforms,

and network connectivity, as well as those of third parties that support critical business functions. Failures or disruptions caused by

human error, misconduct, system defects, cyber incidents, or third-party performance issues could expose us to operational, financial,

and reputational risk.

Our ability to implement safeguards, controls, and backup systems with respect to third-party systems is more limited than for our

own. Our systems or those of our service providers may be damaged, disrupted, or rendered unavailable as a result of a number of

factors, including events that are wholly or partially beyond our control. In certain circumstances, we may need to take our systems

offline. While backup systems are utilized, they may not operate at the same speed or capacity as primary systems and temporary or

permanent loss of data could occur.

We frequently update our systems to support our business needs, growth, and regulatory compliance, and to respond to evolving

cybersecurity threats. These efforts may involve significant costs and risks associated with system implementation, and integration,

and may result in potential business interruptions. Operational failures or significant disruptions could adversely impact our

operations, liquidity, and financial condition, as well as cause reputational harm. In addition, our insurance coverage may be

insufficient to fully cover losses resulting from a major interruption.

We must respond to rapid technological changes, and these changes may be more difficult or expensive than anticipated. We

may also be negatively affected if we fail to identify and address operational risks associated with the introduction of or changes to

products and services, or if we fail to respond to emerging technologies that seek to displace traditional financial services.

Like most financial institutions, FirstBank significantly depends on technology to deliver its products and other services and to

otherwise conduct business. To remain technologically competitive and operationally efficient, FirstBank invests in system upgrades,

new technological solutions, and other technological initiatives. Competitors may introduce new products, services, or platforms that

leverage emerging technologies or new industry standards. If we are unable to timely adopt, develop, or integrate new technologies, or

if our existing systems and offerings become obsolete, we may lose current and future customers, which could have a material adverse

effect on our business, financial condition and results of operations. The financial services industry is changing rapidly and, in order to

remain competitive, we must continue to enhance and improve the functionality and features of our products, services and

technologies. These changes may be more difficult or expensive to implement than we anticipate.

We may not be able to effectively implement new technology-driven products and services or be successful in marketing these

products and services to our customers. Failure to effectively respond to technological change in the financial services industry could

have a material adverse effect on our business, financial condition, and results of operations.

Advances in artificial intelligence, digital platforms, and automated advisory tools are enabling non-bank competitors to offer

services traditionally provided by banks, including personal financial guidance, payments, and wealth management, often at lower cost

and with greater speed or convenience. Similarly, distributed ledger and blockchain-based technologies may enhance transaction

efficiency and security, but over time could reduce the role of banks as secure deposit-keepers and intermediaries. The continued

adoption of these and other emerging technologies could materially and adversely affect our business and results of operations.

The Corporation is subject to stringent and changing privacy laws, regulations, and standards as well as policies, contracts, and

other obligations related to data privacy and security. Our failure to comply with privacy laws and regulations, as well as other

legal obligations, could have a material adverse effect on our business.

State, federal, and foreign governments are increasingly enacting laws and regulations governing the collection, use, retention,

sharing, transfer, and security of personally identifiable information and data. A variety of federal, state, local, and foreign laws and

regulations, orders, rules, codes, regulatory guidance, and certain industry standards regarding privacy, data protection, consumer

protection, information security, and the processing of personal information and other data apply to our business. State laws are

changing rapidly, and new legislation proposed or enacted in a number of other states imposes, or has the potential to impose,

additional obligations on companies that process confidential, sensitive and personal information, and will continue to shape the data

privacy environment nationally. The U.S. federal government is also focused on privacy matters. Any failure by us or our business

partners to comply with applicable laws, rules, and regulations could result in investigations or actions against us by governmental

entities, private claims and litigation, fines, penalties or other liabilities. Such outcomes could increase our expenses, expose us to

liabilities, and harm our reputation, and have a material adverse effect on our business. While we aim to comply with applicable data

protection laws and obligations in all material respects, there is no assurance that we will not be subject to claims that we have

violated such laws and obligations, will be able to successfully defend against such claims, or will not be subject to significant fines

and penalties in the event of non-compliance. Additionally, to the extent multiple state-level laws are introduced in the U.S. with

inconsistent or conflicting standards and there is no federal law to preempt such laws, compliance with such laws could be difficult

and costly, or impossible, to achieve, and we could be subject to fines and penalties in the event of non -compliance.

In addition, the U.S. regulatory environment for financial services remains subject to change. Legislative, regulatory, or

administrative actions may result in amendments to existing banking and consumer protection laws, modifications to prior rulemaking

or guidance, or changes to the structure, authority, or enforcement priorities of federal regulatory agencies. The scope, timing, and

impact of any such changes are uncertain.

RISK RELATING TO THE REGULATION OF OUR INDUSTRY

We are subject to certain regulatory restrictions that may adversely affect our operations.

We are subject to supervision and regulation by the Federal Reserve Board and the FDIC. We are a bank holding company and a

financial holding company under the Bank Holding Company Act of 1956, as amended. The Bank is also subject to supervision and

regulation by OCIF.

Under federal law, financial holding companies are permitted to engage in a broader range of “financial” activities than those

permitted to bank holding companies that are not financial holding companies. A financial holding company that ceases to meet

certain standards is subject to a variety of restrictions, depending on the circumstances, including the prohibition from undertaking

new activities or acquiring shares or control of other companies. If we fail to comply with the requirements from our regulators, we

may become subject to regulatory enforcement action and other adverse regulatory actions that might have a material and adverse

effect on our operations.

The FDIC insures deposits at FDIC-insured depository institutions up to certain limits (currently, $250,000 per depositor at same

depository institution). The FDIC charges insured depository institutions premiums to maintain the DIF. In the event of a bank failure,

the FDIC takes control of a failed bank and, if necessary, pays all insured deposits up to the statutory deposit insurance limits using

the resources of the DIF. The FDIC is required by law to maintain adequate funding of the DIF, and the FDIC may increase premium

assessments to maintain such funding. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)

requires the FDIC to increase the DIF’s reserves against future losses, which will require institutions with assets greater than $10

billion, such as FirstBank, to bear an increased responsibility for funding the prescribed reserve to support the DIF.

The FDIC may further increase FirstBank’s premiums or impose additional assessments or prepayment requirements in the future.

The Dodd-Frank Act removed the statutory cap for the reserve ratio, leaving the FDIC free to set this cap going forward.

Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. Any deficiencies in our

compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or

perform other actions.

Our compensation practices are subject to oversight by the Federal Reserve Board and the FDIC. As discussed in Part I, Item 1,

“Business” of this Form 10-K, the Corporation is currently subject to the interagency guidance governing the incentive compensation

activities of regulated banks and bank holding companies, and other financial regulators have also implemented regulations regarding

compensation practices. Our failure to satisfy these restrictions and guidelines could expose us to adverse regulatory criticism,

lowered supervisory ratings, and restrictions on our operations and acquisition activities.

We are subject to regulatory capital adequacy guidelines, and, if we fail to meet these guidelines, our business and financial

condition will be adversely affected.

We are subject to stringent regulatory capital requirements. Although the Corporation and FirstBank met well-capitalized capital

ratios as of December 31, 2025, and we expect both companies will continue to exceed the minimum risk-based and leverage capital

ratio requirements for well-capitalized status under the current capital rules, we cannot assure that we will remain at such levels. If we

fail to meet these minimum capital guidelines and other regulatory requirements, our business and financial condition will be

materially and adversely affected. If we fail to maintain certain capital levels or are deemed not well managed under regulatory exam

procedures, or if we experience certain regulatory violations, our status as a financial holding company, and our ability to offer certain

financial products will be compromised and our financial condition and results of operations could be adversely affected.

Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and

results of operations.

In addition to general economic conditions, our earnings and growth are significantly influenced by the monetary policies and

regulatory actions of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply

and credit conditions. The Federal Reserve Board implements policy through various tools, including open market operations,

adjustments to the federal funds and discount rates, and changes in reserve requirements for bank deposits. These instruments are used

in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.

Their use also affects interest rates charged on loans or paid on deposits.

Changes in monetary policies and regulatory actions of the Federal Reserve Board have had, and may continue to have, a

significant impact on the operating results of commercial banks. The effects of such policies upon our business, financial condition

and results of operations have been adverse in the past and may be adverse in the future.

We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending

laws, and failure to comply with these laws could lead to a wide variety of sanctions.

The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and

regulations impose nondiscriminatory lending requirements on financial institutions. These laws are enforced by the U.S. Department

of Justice and other federal agencies A successful regulatory challenge related to our compliance with these requirements could result

in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, and restrictions on mergers and

acquisitions, expansion, or entry into new business lines. Private parties may also have the ability to challenge an institution’s

performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our

business, financial condition, and results of operations.

We face a risk of noncompliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering

statutes and regulations.

The Bank Secrecy Act, the USA PATRIOT Act, and related regulations require us to maintain an effective anti-money laundering

program and file suspicious activity and currency transaction reports as appropriate, among other duties. Enforcement agencies,

including the Financial Crimes Enforcement Network, federal banking regulators, and the U.S. Department of Justice, have

significantly increased coordination and enforcement activity in this area. We are also subject to increased scrutiny of compliance with

economic and trade sanctions administered by OFAC. If our AML, sanctions, or related compliance programs are deemed inadequate,

we could be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends

and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans.

Any such outcome could materially and adversely affect our business, financial condition, and results of operations.

Cybersecurity Risk Management and Strategy

The Corporation recognizes the significance of cybersecurity in the financial industry and the potential risks associated, such as the

risks arising from the loss of confidentiality, integrity, or availability of information systems.

The Corporation’s processes to identify,

assess, and monitor material risks from cybersecurity threats are part of its Enterprise Risk Management (“ERM”) Program, under

which the Corporation has

implemented

a comprehensive Corporate Information Security Program (“CISP”).

Cybersecurity risk is

managed as part of the overall information technology risk, under the direction of the Corporate Security Office (“CSO”) led by the

Chief Information Security Officer (“CISO”) who ultimately reports to the Chief Operating Officer (“COO”).

The CISP outlines the Corporation’s overall vision, direction, and governance to protect the confidentiality, integrity, and

availability of customer information and seeks to prevent unauthorized access as required by regulatory guidelines and industry

security best practices. The CISP is based on well-renowned frameworks such as the International Organizational Standard ISO 27000

series and the NIST Cybersecurity Framework. As such, it serves as a guide for the implementation of security safeguards across the

Corporation and its subsidiaries. The CISP also addresses cybersecurity breaches and procedures for appropriate response efforts,

including any required notification, depending on the severity of the specific security incident. In addition, the CISP incorporates a

risk-based approach to ensure that risk is treated in a consistent and effective matter and is designed to protect classified information

to prevent disclosure to unauthorized individuals; prioritize the use of information security resources by concentrating on critical

business applications; develop quality, cost-effective, and reliable systems; ensure the proper and secure disposal of sensitive

information; and implement adequate processes to ensure compliance.

The ERM Program includes a Corporate Incident Response Program, which features a risk-based escalation process to manage

corporate incidents, including cybersecurity incidents, and notify the Risk Committee of the Board of Directors and applicable

stakeholders as appropriate. The Corporation incorporates the Information Technology (“IT”) Risk Unit of the ERM Department,

which is comprised of several members such as IT Risk Managers and the ERM Director who is part of senior management, as well as

external expertise, in the review of its processes, including an independent internal assessment of cybersecurity measures and controls.

The Corporation also invests in threat intelligence, vulnerability management, and incident response drills. Furthermore, all of the

Corporation’s employees and consultants with access to the Corporation’s network are required to complete a comprehensive

cybersecurity awareness program on an annual basis. Additionally, awareness and training on information technology and

cybersecurity risk is provided to the Board on a regular basis.

The Corporation has a Vendor Management Program and a

Third-Party

Risk Management function to manage the cybersecurity

risks associated with conducting business with third-party vendors, which includes the requirement for third-party vendors to

implement

appropriate measures to ascertain security and confidentiality of the Corporation’s resources. The Corporation places

vendors into tiers based on the inherent risk due to the nature of the relationship with that vendor to determine any additional security

requirements commensurate to such level of risk.

The Corporation does not believe that risks from cybersecurity threats or attacks, including as a result of any previous cybersecurity

incidents, have

materially

affected the Corporation’s business strategy, results of operations or financial condition as of December 31,

2025. While the Corporation continues to closely monitor cyber risk and has implemented processes that are intended to assess,

identify, and manage material risks from cybersecurity threats, security controls, no matter how well designed or implemented, may

only partially mitigate and not fully eliminate these risks. Events, when detected by security tools or third parties, may not always be

immediately understood or acted upon. See Item 1A, “Risk Factors – Risks Relating to Cybersecurity and Technology” for more

information on how cybersecurity risk could adversely affect the Corporation, which should be read in conjunction with this Item 1C.

Governance

Responsibility for risk oversight and management generally lies with the Corporation’s Board of Directors.

To effectively manage

oversight of the CISP’s governance and cybersecurity risk management, the Board has delegated such responsibility to the Risk

Committee.

As part of its oversight, the Risk Committee receives reports from the Executive Risk Management Committee and IT

Steering Committee, which are committees at the management level, on the Corporation’s cybersecurity processes.

The Corporate

Internal Audit Department performs periodic audits of the Corporation’s information security practices and presents them to the Audit

Committee of the Board.

The scope of testing is in accordance with applicable regulatory guidance and prudent business practices.

The periodicity of testing is determined by the Corporate Internal Audit Department based on their risk assessment.

Findings from

internal audit procedures are reported to Management and the Audit Committee.

In addition, the Vendor Management Committee

periodically reports to the

Risk Committee

about the Vendor Management program status.

The Risk Committee

provides

the Board

with updated information on the matters discussed in the Risk Committee meetings as it relates to the CISP and the overall

information security strategic direction and evaluates and approves (if necessary) reports presented by executive management related

to the information security strategic direction of the Corporation.

The CSO oversees the CISP, its development, and any applicable updates in response to changes in operations and other

circumstances, and reports on a quarterly basis to the IT Steering Committee and to the Board’s Risk Committee. The Security and

Facilities Management Director, who has been in charge since 2016, has over 20 years of experience in functional expertise

concerning all aspects of information security, integrity and privacy of systems, and data resources, and holds several relevant licenses

and/or certifications. Also, certain topics related to information security are presented on an ad hoc basis to the Executive Risk

Management Committee. The CSO provides the Board’s Risk Committee regular reports and engages in discussions on the

effectiveness of the CISP, including risk mitigation strategy and progress. The Board’s Risk Committee reviews and approves the

CISP annually and receives a report on the security safeguards annually.

See “Risk Management – Risk Governance” for more information on the Corporation’s risk governance structure.

As of December 31, 2025, First BanCorp. has ownership in the following principal buildings:

Headquarters – Located at First Federal Building, 1519 Ponce de León Avenue, San Juan, Puerto Rico. Approximately 51%

of this 16-story office building is owned by the Corporation.

Service Center – Located at 1130 Muñoz Rivera Avenue, San Juan, Puerto Rico. This facility, which is fully occupied by the

Corporation, houses over 1,000 employees from Human Resources, Data processing and operations, Administrative

Operation, Mortgage operations, collections, and Loss Mitigation, and certain other departments.

Consumer Lending Center – Located at 876 Muñoz Rivera Avenue, San Juan, Puerto Rico. This three-story facility is fully

occupied by the Corporation and accommodates a retail branch, Money Express Headquarters, Auto Wholesale and Retail

Financing, and Leasing Financing, among others.

The Corporation owns 18 retail branches and 10 office centers, other facilities, and/or parking lots. It leases 88 branch premises,

loan and office centers and other facilities. In certain situations, financial services such as mortgage and insurance businesses and

commercial banking services are in the same building or branch. All of these premises are in Puerto Rico, Florida, the USVI and the

BVI. Management believes that the Corporation’s properties are well maintained and are suitable for the Corporation’s business as

presently conducted.

Reference is made to Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial

statements included in Part II, Item 8 of this Form 10-K, which is incorporated herein by reference.

OPERATIONS (“MD&A”)

The following MD&A relates to the accompanying audited consolidated financial statements of First BanCorp. (the “Corporation,”

“we,” “us,” “our,” or “First BanCorp.”) and should be read in conjunction with such financial statements and the notes thereto. This

section also presents certain financial measures that are not based on generally accepted accounting principles in the United States of

America (“GAAP”). See “Non-GAAP Financial Measures and Reconciliations” below for information about why non-GAAP

financial measures are presented, reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures,

and references to non-GAAP financial measures reconciliations presented in other sections.

The detailed financial discussion that follows focuses on 2025 results compared to 2024. For a discussion of 2024 results compared

to 2023, see Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the

Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 28, 2025.

In this discussion and analysis of our financial condition and results of operations, we have included information that may

constitute “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act and

Section 21E of the Exchange Act. Forward-looking statements are not historical facts or statements of current conditions, but instead

represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. By

identifying these statements for you in this manner, we are alerting you to the possibility that our actual results, financial condition,

liquidity and capital actions may differ materially from the anticipated results, financial condition, liquidity and capital actions in these

forward-looking statements. Important factors that could cause our results, financial condition, liquidity and capital actions to differ

from those in these statements include, among others, those described in “Risk Factors” in Part I, Item 1A of this Form 10-K.

EXECUTIVE SUMMARY

First BanCorp. is a diversified financial holding company headquartered in San Juan, Puerto Rico offering a full range of financial

products to consumers and commercial customers through various subsidiaries. First BanCorp. is the holding company of FirstBank

Puerto Rico (“FirstBank” or the “Bank”) and FirstBank Insurance Agency. Through its wholly -owned subsidiaries, the Corporation

operates in Puerto Rico, the United States Virgin Islands (“USVI”), the British Virgin Islands (“BVI”), and the state of Florida,

concentrating on commercial banking, residential mortgage loans, credit cards, personal loans, small loans, auto loans and leases, and

insurance agency activities.

Significant Events

Economy and Market Update

Economic conditions in Puerto Rico remained generally stable during 2025. The unemployment rate decreased from 5.63% in 2024

to 5.56% in 2025, remaining near historic lows and reflecting a resilient labor market with steady labor force participation.

In the broader U.S. economy, momentum moderated during the second half of 2025 following a strong first half. Labor market

indicators softened but remained orderly, with slower hiring activity and a modest increase in unemployment. The U.S. unemployment

rate stood at 4.3% in January, unchanged from August 2025, underscoring a transition toward a more balanced labor market rather

than a deterioration in employment conditions. In response to these trends, the Federal Reserve (the “FED”) implemented three 25

basis points (“bps”) rate cuts in September, October, and December 2025, reducing the federal funds target range to 3.50%-3.75%, its

lowest level in several years.

Looking ahead to 2026, the economic backdrop remains broadly constructive and supportive of our strategic priorities.

We

remain

focused on delivering organic loan growth, primarily on commercial and residential mortgage loans despite anticipated declines in the

consumer loan portfolio, and maintaining strong profitability metrics. Asset quality is expected to remain stable, with consumer credit

trends continuing to normalize. From an earnings perspective, we expect several of the favorable dynamics that drove net interest

margin expansion in 2025 to continue into 2026. Based on our current outlook, which assumes two additional FED rate cuts during the

second half of 2026, along with projected loan growth and deposit mix changes, we expect quarterly net interest margin expansion of

approximately 2 to 3 bps. Cash flows of approximately $1.1 billion from the investment securities portfolio (excluding U.S. Treasury

securities) are expected to be received during the year and redeployed into higher-yielding interest-earning assets. These dynamics,

combined with continued reductions in funding costs, including brokered CDs, non-brokered time deposits, and government accounts,

position us well to sustain margin performance. Overall, the Corporation enters 2026 with strong capital levels, ample liquidity,

diversified earnings profile, and expects to return close to 100% of annual earnings to shareholders through capital deployment actions

positioning it well to navigate a moderating economic environment while continuing to deliver value to shareholders.

Capital Deployment Actions and Dividend Payment Increase

In 2025, the Corporation delivered approximately $327.4 million, or 95% of 2025 earnings, in the form of capital deployment

actions through $150.0 million in repurchases of common stock, approximately $115.7 million in common stock dividends declared,

and $61.7 million in the redemption of the remaining outstanding trust-preferred securities (“TruPS”) issued by FBP Statutory Trusts I

and II. As of February 20, 2026, the Corporation has remaining authorization of approximately $187.2 million, which it expects to

execute during 2026.

On January 26, 2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, which

represents an increase of $0.02 per common share, or an 11% increase, compared to its most recent quarterly dividend paid in

December 12, 2025. The dividend is payable on March 13, 202 6 to shareholders of record at the close of business on February 26,

2026. The increased quarterly dividend level equates to an annualized dividend of $0.80 per common share.

Recent Tax Developments and Other Special Items

The financial results for 2025 include a one-time reversal of approximately $16.6 million in valuation allowance related to deferred

tax assets primarily associated with net operating loss (“NOL”) carryforwards at the holding company level following the enactment

of Act 65-2025, and a $2.3 million employee retention credit (“ERC”), net of $0.3 million in related commissions. For further details

related to these Special Items, refer to the

Non-GAAP Disclosures – Special Items

section below.

Legislative and Regulatory

A comprehensive discussion of legislative and regulatory matters affecting the Corporation can be found in Part I, Item 1,

“Business – Supervision and Regulation” of this Form 10-K.

Overview of Results of Operations

The Corporation’s results of operations depend primarily on its net interest income, which is the difference between the interest

income earned on its interest-earning assets, including investment securities and loans, and the interest expense incurred on its

interest-bearing liabilities, including deposits and borrowings. Net interest income is affected by various factors, including the

following: (i) the interest rate environment; (ii) the volumes, mix, and composition of interest-earning assets, and interest-bearing

liabilities; and (iii) the repricing characteristics of these assets and liabilities.

The Corporation had net income of $344.9 million ($2.15 per diluted common share), for the year ended December 31, 2025,

compared to $298.7 million ($1.81 per diluted common share), for the year ended December 31, 2024. Other relevant selected

financial indicators for the periods presented are included below:

Year Ended December 31,

2025

2024

2023

Key Performance Indicator:

(1)

Return on Average Assets

(2)

(5)

1.81

1.58

1.62

Return on Average Common Equity

(3) (5)

18.74

19.09

21.86

Efficiency Ratio

(4)

49.77

51.92

50.70

(1)

These financial ratios are used by management to monitor the Corporation’s financial performance and whether it is using its assets efficiently.

(2)

Indicates how profitable the Corporation is in relation to its total assets and is calculated by dividing net income by its average total assets.

(3)

Measures the Corporation’s performance based on its average common stockholders’ equity and is calculated by dividing net income by its average total common stockholders’ equity.

(4)

Measures how much the Corporation incurred to generate a dollar of revenue and is calculated by dividing non-interest expenses by total revenue.

(5)

For the year ended December 31, 2025, the employee retention credit (“ERC”) and the one-time reversal in valuation allowance related to deferred tax assets increased the return on

average assets by 10 bps and the return on average equity ratio by 98 bps.

The key drivers of the Corporation’s GAAP financial results for the year ended December 31, 2025, compared to the year ended

December 31, 2024, include the following:

Net interest income for the year ended December 31, 2025 increased to $868.9 million, compared to $807.5 million for the

year ended December 31, 2024, driven by a lower cost of funds and the redeployment of cash flows from lower-yielding

investment securities into loans and higher-yielding investment securities. See “Result of Operations – Net Interest Income”

below for additional information.

The provision for credit losses on loans, finance leases, unfunded loan commitments and debt securities for the year ended

December 31, 2025 was $86.0 million, compared to $59.9 million for the year ended December 31, 2024, driven by a $27.9

million increase in the provision for the commercial and construction loan portfolios mainly due to C&I loan growth and a

deterioration on the economic outlook of certain macroeconomic variables, particularly those related to commercial real

estate property performance and the forecasted CRE price index .

Net charge-offs totaled $80.8 million for each of the years ended December 31, 2025 and 2024, or 0.63% of average loans for

the year ended December 31, 2025, compared to 0.65% of average loans for the year ended December 31, 2024. See “Results

of Operations – Provision for Credit Losses” and “Risk Management” below for the analysis of the allowance for credit

losses (“ACL”) and non-performing assets and related ratios.

Non-interest income for the year ended December 31, 2025 increased to $131.9 million, compared to $130.7 million for the

year ended December 31, 2024, mainly due to a $1.4 million increase in revenues from mortgage banking activities. The

results for the year ended December 31, 2024 include $1.5 million in insurance proceeds mostly associated with insurance

claims associated with property damage caused by Hurricane Fiona.

Non-interest expenses for the year ended December 31, 2025 amounted to $498.1 million, compared to $487.1 million for the

year ended December 31, 2024. Non-interest expenses for the year ended December 31, 2025 include the aforementioned

benefit in payroll taxes related to the $2.3 million ERC, and the aforementioned benefit of $1.1 million related to the FDIC

special assessment, while non-interest expenses for the same period in 2024 include the $1.1 million additional FDIC special

assessment expense. On a non-GAAP basis, excluding the effect of these Special Items, adjusted non-interest expenses

increased by $15.5 million, driven by an $11.7 million increase in adjusted employees’ compensation and benefits expenses

and a $5.9 million unfavorable variance in net gain on OREO operations, which includes a $2.8 million valuation adjustment

recorded in a commercial OREO property in the Virgin Islands region. See “Results of Operations – Non-Interest Expenses”

below for additional information.

Income tax expense decreased to $71.9 million for the year ended December 31, 2025, compared to $92.5 million for the

same period in 2024, driven by a one-time reversal of approximately $16.6 million in valuation allowance related to deferred

tax assets primarily associated with NOL carryforwards at the holding company level as a result of the enactment of Act 65-

2025, and a lower annual effective tax rate due to a higher proportion of exempt to taxable income. See “Income Taxes”

below and Note 17 – “Income Taxes ” included in Part II, Item 8 of this Form 10-K for additional information.

As of December 31, 2025, total assets were approximately $19.1 billion, a decrease of $160.0 million from December 31,

2024, primarily related to a decrease in cash and cash equivalents resulting from the repayment of long-term borrowings and

a decrease in total deposits, partially offset by an increase in total loans and an increase in the fair value of available-for-sale

debt securities due to changes in market interest rates.

As of December 31, 2025, total liabilities were $17.2 billion, a decrease of $457.6 million from December 31, 2024, driven

by a $271.7 million decrease in borrowings, which includes the repurchase of $61.7 million in junior subordinated debentures

associated with the aforementioned TruPS redemption, and a $201.2 million decrease in deposits. See “Risk Management –

Liquidity Risk” below for additional information about the Corporation’s funding sources and strategy.

The Corporation’s primary sources of funding are consumer and commercial core deposits, which exclude government

deposits and brokered certificates of deposit (“CDs”). Excluding fully collateralized government deposits, estimated

uninsured deposits amounted to $4.8 billion as of December 31, 2025. The Corporation had approximately $2.6 billion in

cash and cash equivalents and free high-quality liquid securities as of December 31, 2025. When adding approximately $2.6

billion available for funding under the FED’s Discount Window and $1.1 billion available for additional borrowing capacity

on the Federal Home Loan Bank (“FHLB”) lines of credit based on collateral pledged at these entities, the Corporation had

$6.3 billion, or 132% of estimated uninsured deposits (excluding fully collateralized government deposits), available to meet

liquidity needs. See “Risk Management – Liquidity Risk” below for additional information about the Corporation’s funding

sources and strategy.

As of December 31, 2025, the Corporation’s total stockholders’ equity was $2.0 billion, an increase of $297.6 million from

December 31, 2024. The increase was driven by net income generated in 2025 and a $212.4 million increase in the fair value

of available-for-sale debt securities recorded as part of accumulated other comprehensive loss in the consolidated statements

of financial condition, partially offset by $150.0 million in common stock repurchases and $115.7 million, or $0.72 per

common share, in common stock dividends declared in 2025. The Corporation’s CET1 capital, tier 1 capital, total capital, and

leverage ratios were 16.76%, 16.76%, 18.01%, and 11.58%, respectively, as of December 31, 2025, compared to CET1

capital, tier 1 capital, total capital, and leverage ratios of 16.32%, 16.32%, 18.02%, and 11.07%, respectively, as of December

31, 2024. See “Risk Management – Capital” below for additional information.

Total loan production, including purchases, refinancings, renewals, and draws from existing revolving and non-revolving

commitments, decreased by $65.1 million to $5.4 billion for the year ended December 31, 2025. See “Financial Condition

and Operating Data Analysis” below for additional information.

Total non-performing assets were $114.1 million as of December 31, 2025, a decrease of $4.2 million, from December 31,

2024, driven by a $9.8 million decrease in the other real estate owned (“OREO”) portfolio balance, which includes a $2.8

million valuation adjustment recorded in a commercial OREO property in the Virgin Islands region, partially offset by a $5.1

million increase in nonaccrual loans, which includes a $9.2 million increase in nonaccrual commercial and construction

loans, driven by the inflows of three commercial and construction loans totaling $16.2 million, partially offset by a $3.1

million payoff of a C&I loan in the Puerto Rico region. See “Risk Management – Nonaccrual Loans and Non-Performing

Assets” below for additional information.

Adversely classified commercial and construction loans decreased by $5.9 million to $81.4 million as of December 31, 2025,

when compared to December 31, 2024, driven by the upgrade of a $12.0 million commercial mortgage loan in the Florida

region, partially offset by the downgrade of a $10.0 million C&I loan in the Puerto Rico region.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

The Corporation has included in this Annual Report on Form 10-K the following financial measures that are not recognized under

GAAP, which are referred to as non-GAAP financial measures:

Net Interest Income, Interest Rate Spread, and Net Interest Margin on a Tax -Equivalent Basis

Net interest income, interest rate spread, and net interest margin are reported on a tax-equivalent basis in order to provide to

investors additional information about the Corporation’s net interest income that management uses and believes should

facilitate comparability and analysis of the periods presented. The tax-equivalent adjustment to net interest income recognizes the

income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt

earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory

rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and

net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-

exempt loans, on a common basis that facilitates comparison of results to the results of peers.

See “Results of Operations – Net Interest Income – Part I” below for a reconciliation of the Corporation’s non-GAAP financial

measure of net interest income on a tax-equivalent basis to net interest income in accordance with GAAP.

Tangible Common Equity Ratio and Tangible Book Value Per Common Share

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management

believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity

less goodwill and other intangible assets. Similarly, tangible assets are total assets less goodwill and other intangible assets. Tangible

common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible

common equity divided by the number of common shares outstanding. Management uses and believes that many stock analysts use

the tangible common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital

ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets,

typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation

believes that disclosures of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets,

or the related measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure

calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible

assets, and any other related measures may differ from that of other companies reporting measures with similar names.

See “Risk Management – Capital” below for the table that reconciles the Corporation’s total equity and total assets in accordance

with GAAP to the tangible common equity and tangible assets figures used to calculate the non-GAAP financial measures of tangible

common equity ratio and tangible book value per common share.

Adjusted Net Income, Adjusted Non-Interest Income, Adjusted Non-Interest Expenses, and Adjusted Income Tax Expense

To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation uses, and believes that

investors benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income, non-interest income, non-

interest expenses, and income tax expense to exclude items that management believes are not reflective of core operating performance

(“Special Items”). The financial results for the years ended December 31, 2025, 2024, and 2023 included the following Special Items:

Years Ended December 31, 2025, 2024, and 2023

FDIC Special Assessment Expense

A benefit of $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) was recorded for the

year ended December 31, 2025, related to amendments to the FDIC special assessment collection terms. On December 16,

2025, the FDIC issued an interim final rule amending the collection terms of the special assessment, which included reducing

the collection rate in the eighth collection quarter from 3.36 basis points to 2.97 basis points, removing the previously

established extended assessment period provisions, and providing offsets to regular quarterly deposit insurance assessments if

aggregate collections exceed actual losses. As a result of these changes, the Corporation recorded a reversal of the charges of

$1.1 million ($0.7 million after-tax) that were recorded for the year ended December 31, 2024. This update follows the

FDIC’s 2023 final rule, which initially imposed the special assessment to recover certain estimated losses incurred by the

Deposit Insurance Fund following the failures of certain financial institutions in the first half of 2023. In connection with

such rule, the Corporation recorded a charge of $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate

of 37.5%) during the year ended December 31, 2023. The FDIC deposit special assessment is reflected in the consolidated

statements of income as part of “FDIC deposit insurance” expenses.

Enactment of Act 65-2025

A $16.6 million reversal in valuation allowance related to deferred tax assets primarily associated with NOL carryforwards at

the holding company level was reflected in the consolidated statements of income for the year ended December 31, 2025 as

part of “income tax expense”. On July 17, 2025, the Government of Puerto Rico enacted Act 65-2025 which, among other

things, allows domestic limited liability companies owned by legal entities to elect to be treated as disregarded entities for tax

purposes. This reversal reflects the Corporation’s expectation of realizing these tax benefits under the new election

established by the Act.

Employee Retention Credit (“ERC”)

A $2.3 million ERC, net of $0.3 million in related commissions, was reflected in the consolidated statements of income for

the year ended December 31, 2025 as part of “employees’ compensation and benefits” expenses. This credit was established

under the Coronavirus Aid, Relief, and Economic Security Act to support businesses that retained employees during the

COVID-19 pandemic. The credit recorded during the year ended December 31, 2025 is tax exempt for Puerto Rico tax

purposes.

Gain Recognized from Legal Settlement

A $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain recognized from a legal

settlement was reflected in the consolidated statements of income for the year ended December 31, 2023 as part of “other

non-interest income.”

Gain on Early Extinguishment of Debt

A $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures was reflected in the consolidated

statements of income for the year ended December 31, 2023 as “Gain on early extinguishment of debt.” The junior

subordinated debentures had been recorded in the consolidated statements of financial condition as “Long-term borrowings.”

The purchase price equated to 92.5% of the $21.4 million par value of the TruPS. The 7.5% discount resulted in the gain of

$1.6 million. The gain, realized at the holding company level, had no effect on the income tax expense recorded during 2023.

The following table reconciles, for the years ended December 31, 2025, 2024, and 2023, net income to adjusted net income, a non-

GAAP financial measure that excludes the Special Items identified above:

Year Ended December 31,

2025

2024

2023

(In thousands)

Net income, as reported (GAAP)

344,866

298,724

302,864

Adjustments:

Employee retention credit

(2,358)

FDIC special assessment (reversal) expense

(1,099)

1,099

6,311

Income tax impact related to the enactment of Act 65-2025

(16,553)

Gain recognized from legal settlement

(3,600)

Gain on early extinguishment of debt

(1,605)

Income tax impact of adjustments

(1)

412

(412)

(1,017)

Adjusted net income (Non-GAAP)

325,268

299,411

302,953

(1)

See “Adjusted Net Income, Adjusted Non -Interest Income, Adjusted Non-Interest Expenses, and Adjusted Income Tax Expense” above for the individual tax impact related to the above

adjustments, which were based on the Puerto Rico statutory tax rate of 37.5%, as applicable.

CRITICAL ACCOUNTING ESTIMATES

The accounting principles of the Corporation and the methods of applying these principles conform to GAAP. In preparing the

consolidated financial statements, management is required to make estimates, assumptions, and judgments that affect the amounts

recorded for assets, liabilities and contingent liabilities as of the date of the financial statements and the reported amounts of revenues

and expenses during the reporting periods. Accounting estimates require assumptions and judgments about uncertain matters that

could have a material effect on the consolidated financial statements. The Corporation’s critical accounting estimates that are

particularly susceptible to significant changes include the following: (i) the ACL and (ii) valuation of financial instruments. Actual

results could differ from estimates and assumptions if different outcomes or conditions prevail.

Allowance for Credit Losses

The Corporation maintains an ACL for loans and finance leases based upon management’s estimate of the lifetime expected credit

losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, the Corporation maintains an ACL

for held-to-maturity and available-for-sale debt securities, and other off-balance sheet credit exposures (

e.g.

, unfunded loan

commitments). For loans and finance leases, unfunded loan commitments, and held-to-maturity debt securities, the estimate of lifetime

credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over

the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical

experience. For purposes of the ACL for lending commitments, such allowance is determined using the same methodology as the

ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are

cancellable by us. The ACL for available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that

also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair

value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, the length

of the initial loss forecast period, the reversion of losses beyond the initial forecast period, historical loss expectations, usage of

macroeconomic scenarios, and qualitative factors, which may not be adequately captured in the loss model, as further discussed

below.

The macroeconomic scenarios utilized by the Corporation include variables that have historically been key drivers of increases and

decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate

prices, gross domestic product levels, retail sales, interest rate forecasts, corporate bond spreads, and changes in equity market prices.

The Corporation derives the economic forecasts it uses in its ACL model from Moody’s Analytics. The latter has a large team of

economists, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years.

The Corporation has currently set an initial forecast period (“reasonable and supportable period”) of two years and a reversion

period of up to three years, utilizing a straight-line approach and reverting back to the historical macroeconomic mean for Puerto Rico

and the Virgin Islands regions. For the Florida region, the methodology considers a reasonable and supportable forecast period and an

implicit reversion towards the historical trend that varies for each macroeconomic variable. After the reversion period, a historical loss

forecast period covering the remaining contractual life, adjusted for prepayments, is used based on the change in key historical

economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the

probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore

influence the amount of future cash flows for each instrument that the Corporation does not expect to collect.

Further, the Corporation periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be

related to and include, but not be limited to, factors such as the following: (i) management’s assessment of economic forecasts used in

the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii)

organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors

that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan

resolution strategies, among others. The qualitative factors applied at December 31, 2025, and the importance and levels of the

qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of

economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes,

compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires

significant management judgment.

The ACL can also be impacted by factors outside the Corporation’s control, which include unanticipated changes in asset quality of

the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio.

Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be

collateral dependent.

Our process for determining the ACL is further discussed in Note 1 – “Nature of Business and Summary of Significant Accounting

Policies” and Note 4 – “Allowance for Credit Losses and Finance Leases”

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

“Allowance for Credit Losses for Loans and Finance Leases” below for additional information on the weighting of economic

scenarios to estimate the ACL, changes in key economic variables, and the ACL sensitivity analysis performed as of December 31,

OTHER ESTIMATES

In addition to the critical accounting estimates we make in connection with the ACL, the use of estimates and assumptions is also

important in performing the accounting for income taxes, valuation of financial instruments, determining the accounting for goodwill,

pension and postretirement benefit obligations, and provisions for losses that may arise from litigation and regulatory proceedings

(including governmental investigations).

The Corporation’s accounting for income taxes involves estimating current tax obligations and assessing temporary differences

between financial reporting and tax bases. Management exercises judgment in interpreting tax regulations and evaluating the

likelihood of realizing deferred tax assets. Valuation allowances are established, when necessary, to reduce deferred tax assets to the

amount that is more likely than not to be realized. The Corporation updates its tax estimates and related accruals as facts and

circumstances evolve, including developments in audits, legislation, and economic conditions. For additional information, see Note 17

• “Income Taxes ” included in Part II, Item 8 of this Form 10-K.

Valuations of financial instruments often involve estimates due to the need to determine fair value in the absence of readily

available market prices. Since Level 1 and Level 2 financial instruments rely on observable market prices, estimates are minimal. On

the other hand, Level 3 valuations involve significant unobservable inputs, such as internal models or assumptions about future cash

flows, which introduce a higher degree of subjectivity and estimation uncertainty. Notwithstanding, as of December 31, 2025 and

2024, less than 1% of the available-for-sale debt securities portfolio was classified as Level 3. In addition, fair value is also used on a

non-recurring basis for measuring the fair value of certain Level 3 assets such as collateral dependent loans and OREO properties, as

disclosed in Note 19

• “Fair Value” included in Part II, Item 8 of this Form 10-K.

Goodwill is tested for impairment at least annually, or more frequently if circumstances indicate that a reporting unit’s fair value

may fall below its carrying amount. The impairment assessment begins with a qualitative assessment to determine whether it is more-

likely-than-not that fair value exceeds carrying value. If this assessment is inconclusive, a quantitative test is performed. Estimating

the fair value of our reporting units requires judgment and considers factors such as projected earnings, macroeconomic conditions,

interest rates, and peer performance. See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” included in

Part II, Item 8 of this Form 10-K for additional information. Based on our annual qualitative assessment conducted in the fourth

quarter of 2025, it was determined that it is more-likely-than-not that the fair value of the reporting units exceeded their carrying

value; therefore, no goodwill impairment was recognized.

The Corporation maintains two frozen qualified noncontributory defined benefit pension plans, and a related complementary

postretirement benefits plan covering medical benefits and life insurance after retirement. Calculation of the obligations and related

expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management

judgment and may differ if different assumptions are used. See Note 14 – “Employee Benefit Plans” included in Part II, Item 8 of this

Form 10-K, for disclosures related to the benefit plans.

We

record estimated losses related to litigation and regulatory matters when they are both probable and reasonably estimable. These

estimates require significant judgment, and actual outcomes may differ materially. Estimated liabilities are determined on a case-by-

case based on the latest available information, legal counsel’s advice, and applicable insurance coverage. Because legal outcomes are

inherently uncertain, it can be difficult to determine whether a loss is probable or reasonably possible, or to estimate the amount of any

such loss. Accordingly, actual losses may exceed the accrued amount or the range of reasonably possible losses. See Note 23 –

“Regulatory Matters, Commitments and Contingencies” included in Part II, Item 8 of this Form 10-K.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the excess of interest earned by First BanCorp. on its interest-earning assets over the interest incurred on its

interest-bearing liabilities. First BanCorp.’s net interest income is subject to interest rate risk due to the repricing and maturity

mismatch of the Corporation’s assets and liabilities. In addition, variable sources of interest income, such as loan fees, periodic

dividends, and collection of interest in nonaccrual loans, can fluctuate from period to period. Net interest income for the year ended

December 31, 2025 was $868.9 million, compared to $807.5 million for the year ended December 31, 2024. On a tax-equivalent basis,

net interest income for the year ended December 31, 2025 was $900.5 million, compared to $826.9 million for the year ended

December 31, 2024.

The following tables include a detailed analysis of net interest income for the indicated periods. Part I presents average volumes

(based on the average daily balance) and rates on an adjusted tax-equivalent basis and Part II presents, also on an adjusted tax-

equivalent basis, the extent to which changes in interest rates and changes in the volume of interest-related assets and liabilities have

affected the Corporation’s net interest income. For each category of interest-earning assets and interest-bearing liabilities, the tables

provide information on changes in (i) volume (changes in volume multiplied by prior period rates), and (ii) rate (changes in rate

multiplied by prior period volumes). The Corporation has allocated rate-volume variances (changes in rate multiplied by changes in

volume) to either the changes in volume or the changes in rate based upon the effect of each factor on the combined totals.

Net interest income on an adjusted tax equivalent basis is a non-GAAP financial measure. For the definition of this non -GAAP

financial measure, refer to the discussion in “Non-GAAP Financial Measures and Reconciliations” above.

Part I

Average volume

Interest income

(1)

/ expense

Average rate

(1)

Year Ended December 31,

2025

2024

2023

2025

2024

2023

2025

2024

2023

(Dollars in thousands)

Interest-earning assets:

Money market and other short-term investments

943,731

710,945

584,083

41,097

37,082

30,419

4.35

5.22

5.21

Government obligations

(2)

1,810,308

2,517,327

2,843,284

35,479

34,139

40,314

1.96

1.36

1.42

MBS

3,346,069

3,348,925

3,702,908

77,168

59,092

67,641

2.31

1.76

1.83

FHLB stock

27,296

34,161

36,606

2,423

3,266

2,799

8.88

9.56

7.65

Other investments

20,390

18,510

14,167

627

543

490

3.08

2.93

3.46

Total investments

(3)

6,147,794

6,629,868

7,181,048

156,794

134,122

141,663

2.55

2.02

1.97

Residential mortgage loans

2,868,887

2,816,732

2,814,102

168,321

164,238

160,009

5.87

5.83

5.69

Construction loans

244,769

221,822

172,952

23,891

19,260

14,811

9.76

8.68

8.56

C&I and commercial mortgage loans

5,968,858

5,606,827

5,244,503

410,319

405,481

365,177

6.87

7.23

6.96

Finance leases

899,270

879,437

789,870

70,167

69,218

60,909

7.80

7.87

7.71

Consumer loans

2,840,369

2,830,678

2,704,877

325,178

322,267

301,756

11.45

11.38

11.16

Total loans

(4)(5)

12,822,153

12,355,496

11,726,304

997,876

980,464

902,662

7.78

7.94

7.70

Total interest-earning assets - non-GAAP

(1)

18,969,947

18,985,364

18,907,352

1,154,670

1,114,586

1,044,325

6.09

5.87

5.52

Tax-equivalent adjustment

(31,514)

(19,433)

(20,839)

Interest income - GAAP

1,123,156

1,095,153

1,023,486

5.92

5.77

5.41

Interest-bearing liabilities:

Time deposits

3,280,404

2,999,078

2,590,313

110,974

105,712

68,605

3.38

3.52

2.65

Brokered CDs

543,154

627,454

348,829

24,010

31,833

16,630

4.42

5.07

4.77

Other interest-bearing deposits

7,467,571

7,567,514

7,664,793

102,699

115,562

100,226

1.38

1.53

1.31

Securities sold under agreements to repurchase

161

245

54,570

7

12

2,769

4.35

4.90

5.07

Advances from the FHLB

347,370

500,055

541,000

15,367

22,566

24,608

4.42

4.51

4.55

Other borrowings

15,694

146,044

171,184

1,159

11,989

13,538

7.38

8.21

7.91

Total interest-bearing liabilities - GAAP

11,654,354

11,840,390

11,370,689

254,216

287,674

226,376

2.18

2.43

1.99

Net interest income / margin - non-GAAP

(1)

900,454

826,912

817,949

4.75

4.36

4.33

Net interest income / margin - GAAP

868,940

807,479

797,110

4.58

4.25

4.22

Net interest spread - non-GAAP

(1)

3.91

3.44

3.53

Net interest spread - GAAP

3.74

3.34

3.42

(1)

On an adjusted tax-equivalent basis. The Corporation estimated the adjusted tax-equivalent yield by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax

rate of 37.5% and adding to it the cost of interest-bearing liabilities. The tax-equivalent adjustment recognizes the income tax savings when comparing taxable and tax-exempt assets.

Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread and net interest margin on a fully tax-equivalent basis.

Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons. See “Non-GAAP Financial Measures and

Reconciliations” above for additional information.

(2)

Government obligations include debt issued by government-sponsored agencies.

(3)

Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.

(4)

Average loan balances include the average of nonaccrual loans.

(5)

Interest income on loans includes $17.3 million, $13.4 million and $11.9 million for the years ended December 31, 2025, 2024 and 2023, respectively, of income from prepayment penalties

and late fees related to the Corporation’s loan portfolio.

Part II

Year Ended December 31,

2025 Compared to 2024

2024 Compared to 2023

Variance due to:

Variance due to:

Volume

Rate

Total

Volume

Rate

Total

(In thousands)

Interest income on interest-earning assets:

Money market and other short-term investments

11,237

(7,222)

4,015

6,516

147

6,663

Government obligations

(11,675)

13,015

1,340

(4,543)

(1,632)

(6,175)

MBS

48

18,028

18,076

(6,423)

(2,126)

(8,549)

FHLB stock

(617)

(226)

(843)

(215)

682

467

Other investments

58

26

84

138

(85)

53

Total investments

(949)

23,621

22,672

(4,527)

(3,014)

(7,541)

Residential mortgage loans

3,400

683

4,083

134

4,095

4,229

Construction loans

2,135

2,496

4,631

4,190

259

4,449

C&I and commercial mortgage loans

26,097

(21,259)

4,838

25,143

15,153

40,296

Finance leases

1,650

(701)

949

6,868

1,441

8,309

Consumer loans

1,444

1,467

2,911

13,623

6,888

20,511

Total loans

34,726

(17,314)

17,412

49,958

27,836

77,794

Total interest income

33,777

6,307

40,084

45,431

24,822

70,253

Interest expense on interest-bearing liabilities:

Time deposits

9,869

(4,607)

5,262

11,890

25,217

37,107

Brokered CDs

(3,962)

(3,861)

(7,823)

13,992

1,211

15,203

Other interest-bearing deposits

(462)

(12,401)

(12,863)

(1,537)

16,873

15,336

Securities sold under agreements to repurchase

(5)

(5)

(2,757)

(2,757)

Advances from the FHLB

(6,723)

(476)

(7,199)

(1,905)

(137)

(2,042)

Other borrowings

(9,732)

(1,098)

(10,830)

(2,044)

495

(1,549)

Total interest expense

(11,015)

(22,443)

(33,458)

17,639

43,659

61,298

Change in net interest income

44,792

28,750

73,542

27,792

(18,837)

8,955

Net interest income amounted to $868.9 million for the year ended December 31, 2025, an increase of $61.4 million when

compared to $807.5 million for the same period in 2024. The $61.4 million increase in net interest income was primarily due to:

A $33.4 million decrease in interest expense on interest-bearing liabilities, consisting of:

o

An $18.0 million decrease in interest expense associated with the redemption of junior subordinated debentures during

the second half of 2024 and first half of 2025, and $210.0 million in FHLB advances, that matured and were repaid in

o

A $15.4 million decrease in interest expense on interest-bearing deposits, a net effect of:

A $12.8 million decrease in interest expense on interest-bearing checking and saving accounts, of which $12.4

million was associated with lower interest rates paid when compared to 2024. The average cost of interest-bearing

checking and saving accounts decreased by 15 bps to 1.38% for 2025 as compared to 1.53% for 2024, mostly driven

by a 42 bps decrease in the cost of government deposits. Excluding government deposits, the average cost of

interest-bearing checking and saving accounts for 2025 was 0.72%, compared to 0.78% for 2024.

A $7.8 million decrease in interest expense on brokered CDs due to a $4.0 million decrease associated with an $84.3

million decline in the average balance , and a $3.8 million decrease mainly associated with new issuances at lower

interest rates than maturing brokered CDs.

Partially offset by:

A $5.2 million increase in interest expense on time deposits, excluding brokered CDs, driven by a $9.8 million

increase associated with a $281.3 million increase in the average balance, partially offset by a $4.6 million decrease

related to lower rates paid on new issuances and renewals. The average cost of time deposits for 2025, excluding brokered CDs, decreased 14 bps to 3.38% as compared to 3.52% for 2024. Excluding government deposits, the average cost of time deposits for 2025 was 3.39%, compared to 3.46% for 2024.

A $14.3 million net increase in investment securities and interest-bearing cash balances, driven by:

o

An $11.1 million increase in interest income on debt securities, mainly due to purchases of higher-yielding available-for-

sale debt securities replacing maturities of lower-yielding debt securities.

o

A $4.0 million increase in interest income from interest-bearing cash balances, due to an $11.2 million increase

associated with a $232.8 million net increase in the average balances, which consisted primarily of cash balances

deposited at the FED, partially offset by a $7.2 million decrease associated with the reduction of the federal funds rate.

A $13.7 million increase in interest income on loans, consisting of:

o

A $5.7 million increase in interest income on commercial and construction loans, driven by a $28.2 million increase

associated with a $385.0 million increase in the average balance, partially offset by a $22.5 million decrease due to the

effect of lower interest rates on the downward repricing of variable-rate loans.

As of December 31, 2025, the interest rate on approximately 50% of the Corporation’s commercial and construction

loans was tied to variable rates, with 32% based upon Secured Overnight Financing Rate (“SOFR”) of 3 months or less,

10% based upon the Prime rate index, and 8% based on other indexes. For the year ended December 31, 2025, the

average one-month SOFR decreased 91 bps, the three-month SOFR decreased 90 bps, and the average Prime rate

decreased 94 bps, compared to the average rates for such indexes for the year ended December 31, 2024.

o

A

$4.1 million increase in interest income on residential mortgage loans, of which $3.2 million was associated with a

$52.2 million increase in the average balance.

o

A $3.9 million increase in interest income on consumer loans and finance leases, due to higher yields and higher income

from late fees, mainly in the auto loans portfolio, and an increase in the average balance of auto loans and finance leases,

partially offset by a decline in the average balance of personal loans and credit cards.

Net interest margin for 2025 was 4.58%, compared to 4.25% for 2024. The increase in the net interest margin mostly reflects the

deployment of cash flows from lower-yielding investment securities to fund loan growth and purchases of higher-yielding investment

securities and the decrease in the cost of interest-bearing non-maturity deposits, primarily public sector deposits, and the

aforementioned redemption of junior subordinated debentures and repayments of FHLB advances. These factors were partially offset

by the downward repricing of variable-rate commercial loans and a lower federal funds rate on cash deposited at the FED.

Provision for Credit Losses

The provision for credit losses consists of provisions for credit losses on loans and finance leases, unfunded loan commitments, as

well as the debt securities portfolio. The principal changes in the provision for credit losses by main categories follow:

Provision for credit losses for loans and finance leases

The provision for credit losses for loans and finance leases was $85.9 million for the year ended December 31, 2025, compared to

$62.9 million for the year ended December 31, 2024. The variances by major portfolio category were as follows:

Provision for credit losses for the commercial and construction loan portfolios was an expense of $10.4 million for the year

ended December 31, 2025, compared to a net benefit of $17.5 million for year ended December 31, 2024. The expense

recorded during 2025 was mainly due to C&I loan growth and a deterioration in the economic outlook of the commercial real

estate property performance and forecasted CRE price index, partially offset by improved financial performance of certain

commercial borrowers. The net benefit recorded during 2024 was associated with the improved financial condition of certain

borrowers; an improvement on the economic outlook of certain macroeconomic variables, particularly variables associated

with commercial real estate property performance and the forecasted CRE price index; a recovery of $5.0 million associated

with a C&I loan in the Puerto Rico region; and $1.2 million in recoveries of two commercial loans in the Florida region;

partially offset by portfolio growth.

Provision for credit losses for the residential mortgage loan portfolio was an expense of $0.2 million for the year ended

December 31, 2025, compared to a net benefit of $16.2 million for year ended December 31, 2024. The net benefit recorded

during 2024 was driven by improvements in macroeconomic variables, mainly in the projection of the unemployment rate,

and updated historical loss experience used for determining the ACL estimate resulting in a downward revision of estimated

loss severities, partially offset by newly originated loans .

Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $75.3 million for the year

ended December 31, 2025, compared to an expense of $96.6 million for year ended December 31, 2024. The decrease in

provision expense was mainly due to updated historical loss experience and reductions in the unsecured loan portfolio,

partially offset by a lower favorable impact from updated macroeconomic variables, mainly in the projection of the

unemployment rate, and a $7.6 million decrease in recoveries associated with the bulk sales of fully charged -off loans that

took place in the first quarter of each year.

Provision for credit losses for unfunded loan commitments and debt securities

The provision for credit losses for unfunded commercial and construction loan commitments and standby letters of credit for the

year ended December 31, 2025 was a net benefit of $0.1 million, compared to a net benefit of $1.5 million for the same period in

2024. The net benefit recorded during 2024 was driven by an improvement in the economic outlook of certain macroeconomic

variables, particularly in variables associated with the CRE price index.

The provision for credit losses for held-to-maturity and available-for-sale debt securities for the year ended December 31, 2025

was an expense of $0.2 million, compared to a net benefit of $1.4 million for the same period in 2024. The net benefit recorded during

2024 was mostly driven by improvements in the underlying updated financial information of a Puerto Rico municipal bond issuer.

Non-Interest Income

Non-interest income for the year ended December 31, 2025 amounted to $131.9 million, compared to $130.7 million for the same

period in 2024. The $1.2 million increase in non-interest income was mainly due to a $1.4 million increase in revenues from mortgage

banking activities, driven by an increase in the net realized gain on sales of residential mortgage loans in the secondary market. During

2025 and 2024, net realized gains of $7.2 million and $5.4 million, respectively, were recognized as a result of GNMA securitization

transactions and whole loan sales to U.S. GSEs amounting to $173.0 million and $160.0 million, respectively. The results for the year

ended December 31, 2024 include $1.5 million in insurance proceeds mostly associated with insurance claims associated with

property damage caused by Hurricane Fiona.

Non-Interest Expenses

Non-interest expenses for the year ended December 31, 2025 amounted to $498.1 million, compared to $487.1 million for the same

period in 2024. The efficiency ratio for 2025 was 49.77%, compared to 51.92% for the same period in 2024. Non-interest expense s for

the year ended December 31, 2025 include the aforementioned $2.3 million ERC, and the aforementioned benefit of $1.1 million

related to the FDIC special assessment, while non-interest expenses for the same period in 2024 include the $1.1 million additional

FDIC special assessment expense. See “Non-GAAP Financial Measures and Reconciliations” above for additional information. On a

non-GAAP basis, excluding the effect of these Special Items, adjusted non-interest expenses increased by $15.5 million primarily due

to:

An $11.7 million increase in adjusted employees’ compensation and benefits expenses, driven by annual salary merit

increases; and a $4.2 million increase in bonus incentives, which includes a $1.4 million increase in stock-based

compensation expense, of which $0.4 million was associated with retirement -eligible employees.

A $5.9 million unfavorable variance in net gain on OREO operations, driven by a $2.8 million valuation adjustment

recorded during 2025 in connection with an ongoing litigation which could result in a potential loss of title of a

commercial OREO property in the Virgin Islands region, a $2.3 million realized gain on the sale of a commercial real

estate OREO property in the Puerto Rico region during 2024, and a decrease in net realized gains on sales of residential

OREO properties in the Puerto Rico region.

Partially offset by:

A $3.2 million decrease in other non-interest expenses, mainly due to a decrease in the amortization of core deposit

intangible assets from the Banco Santander Puerto Rico acquisition, including $1.2 million related to savings accounts

fully amortized in 2024 and $1.3 million related to non-interest checking accounts fully amortized in 2025. Additionally,

expenses declined due to a $2.1 million reduction in institutional insurance policy costs. These decreases were partially

offset by a $1.8 million increase in charges for operational and fraud losses.

Income Taxes

For the year ended December 31, 2025, the Corporation recorded an income tax expense of $71.9 million, compared to an income

tax expense of $92.5 million for the same period in 2024. The results for the year ended December 31, 2025 include a one-time

reversal of approximately $16.6 million in valuation allowance related to deferred tax assets primarily associated with NOL

carryforwards at the holding company level, which reflects the Corporation’s expectation of realizing these tax benefits under the new

election established by Act 65-2025. For further details, see “Non-GAAP Financial Measures and Reconciliations” above and Note 17

• “Income Taxes”. The decrease in income tax expense for the year ended December 31, 2025 was driven by the aforementioned one-

time reversal of approximately $16.6 million in valuation allowance and a lower annual effective tax rate due to a higher proportion of

exempt to taxable income.

The Corporation’s annual effective tax rate, excluding discrete items, decreased to 21.6% for the year ended December 31, 2025,

compared to 23.7% for the same period in 2024. See Note 17 – “Income Taxes” to the audited consolidated financial statements

included in Part II, Item 8 of this Form 10-K for additional information.

As of December 31, 2025, the Corporation had a net deferred tax asset of $149.0 million, net of a valuation allowance of $75.0

million, compared to a net deferred tax asset of $136.4 million, net of a valuation allowance of $119.1 million, as of December 31,

2024. The increase in the net deferred tax asset was driven by the aforementioned one-time reversal of approximately $16.6 million in

valuation allowance. Meanwhile, the decrease in the valuation allowance was primarily related to changes in the market value of

available-for-sale debt securities, which resulted in an equal change in the deferred tax asset without impacting earnings as they are

fully reserved as the Corporation does not expect to realize such benefits, and the aforementioned one-time reversal of approximately

$16.6 million.

OPERATING SEGMENTS

The Corporation’s operating segments are based primarily on the Corporation’s lines of business for its operations in Puerto Rico,

the Corporation’s principal market, and by geographic areas for its operations outside of Puerto Rico. As of December 31, 2025, the

Corporation had six reportable segments: Mortgage Banking; Consumer (Retail) Banking; Commercial and Corporate Banking;

Treasury and Investments; United States Operations; and Virgin Islands Operations. The Chief Executive Officer (“CEO”), who is the

designated chief operating decision maker (“CODM”), as ultimate decision maker, evaluates performance and allocates resources

based on financial information provided by management. In determining the reportable segments, the Corporation considers factors

such as the organizational structure, nature of the products, distribution channels, customer relationship management, and economic

characteristics of the business lines. For additional information regarding First BanCorp.’s reportable segments, please refer to Note

21, “Segment Information” to the audited financial statements included in Part II, Item 8 of this Form 10-K.

The accounting policies for segment reporting are consistent with those described in Note 1, “Nature of Business and Summary of

Significant Accounting Policies” to the audited financial statements included in Part II, Item 8 of this Form 10-K. The Corporation

evaluates the performance of the segments based on net interest income, the provision for credit losses, non-interest income, and non-

interest expenses. The segments are also evaluated based on the average volume of their interest-earning assets (net of fair value

adjustments of investment securities and the ACL).

The Corporation uses a funds transfer pricing system to match fund lending and deposit gathering functions with the Treasury and

Investments segment centrally managing funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking,

Commercial and Corporate Banking, the United States Operations, and the Virgin Islands Operations segments to support their

lending activities and compensating these units for deposits gathered. The mismatch between funds provided and funds used is

managed by the Treasury and Investments segment. The funds transfer pricing charged or credited are calculated using the

SOFR/swap curve with term rates-based approach, adjusted for a funding spread that reflects the Corporation’s cost of funds.

Mortgage Banking

The Mortgage Banking segment conducts its operations primarily through FirstBank. This segment consists of the origination, sale,

and servicing of a variety of residential mortgage loan products. 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 residential real estate loans, including those that conform to the Federal Housing Administration (the “FHA”), the Veterans

Administration (the “VA”), and U.S. Department of Agriculture Rural Development (“RD”) standards. Loans that meet FHA’s

standards qualify for FHA’s insurance, while loans that meet VA or RD standards are guaranteed by the respective federal agencies.

Mortgage loans that do not qualify for the FHA, VA, or RD programs are referred to as conventional 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

Association (“FNMA”) and the U.S. Federal Home Loan Mortgage Corporation (“FHLMC”) programs. Loans that do not meet

FNMA or FHLMC standards are referred to as non-conforming residential real estate loans. The Mortgage Banking segment also

acquires and sells mortgages in the secondary market. Conforming residential real estate loans are sold to investors such as FNMA

and FHLMC, and the Corporation has commitment authority to issue GNMA MBS.

For the year ended December 31, 2025, segment income before taxes for the Mortgage Banking segment decreased to $43.5

million, compared to $58.5 million for the same period in 2024. The highlights of the segment’s financial results are as follows:

Net interest income for the year ended December 31, 2025 was $70.9 million, compared to $72.5 million for the same

period in 2024. The decrease in net interest income of $1.6 million was primarily attributable to an increase in the cost of

funds charged to this segment, partially offset by an increase in average loan balances.

The provision for credit losses for the year ended December 31, 2025 was a net benefit of $0.9 million, compared to a

net benefit of $15.5 million for the same period in 2024. The net benefit recorded during 2024 was driven by

improvements in macroeconomic variables, mainly in the projection of the unemployment rate, and updated historical

loss experience used for determining the ACL estimate resulting in a downward revision of estimated loss severities,

partially offset by newly originated loans.

Non-interest income for the year ended December 31, 2025 was $14.9 million, compared to $13.5 million for the same

period in 2024. The increase of $1.4 million was driven by an increase in the net realized gain on sales of residential

mortgage loans in the secondary market.

Non-interest expenses for the year ended December 31, 2025 were $43.2 million, compared to $43.0 million for the same

period in 2024. The increase of $0.2 million was driven by: (i) a $1.1 million decrease in net gains on OREO operations,

driven by a decrease in net realized gains on sales of residential OREO properties in the Puerto Rico region; (ii) a $0.5

million increase in other non-interest expenses and (iii) a $0.4 million increase in employees’ compensation and benefits

expenses, driven by an increase in bonus incentives, partially offset by the aforementioned ERC recorded during 2025.

These variances were partially offset by a $1.3 million decrease in professional service fees, driven by lower collections,

appraisals, and credit -related fees; and a $0.4 million decrease in FDIC deposit insurance expense driven by the reversal

during 2025 of the FDIC special assessment charges that were recorded for the year ended December 31, 2024.

Consumer (Retail) Banking

The Consumer (Retail) Banking segment includes the Corporation’s consumer lending, commercial lending to small businesses,

commercial transaction banking, and deposit-taking activities (other than those assigned to the Commercial and Corporate Banking

segment) primarily conducted through FirstBank’s branch network and loan centers in Puerto Rico. Retail deposits gathered through

each branch of FirstBank’s retail network serve as one of the funding sources for the lending and investing activities. Other activities

included in this segment are insurance activities in the Puerto Rico region.

For the year ended December 31, 2025, segment income before taxes for the Consumer (Retail) Banking segment increased to

$289.0 million, compared to $243.3 million for the same period in 2024. The highlights of the segment’s financial results are as

follows:

Net interest income for the year ended December 31, 2025 was $583.7 million, compared to $550.8 million for the same

period in 2024. The increase of $32.9 million was primarily driven by higher income from funds loaned to the Treasury

and Investments segment, which resulted from higher average time deposit balances.

The provision for credit losses for the year ended December 31, 2025 decreased by $20.4 million to $74.9 million,

compared to $95.3 million for the same period in 2024. The decrease in provision expense was mainly due to updated

historical loss experience and reductions in the unsecured loan portfolio, partially offset by a lower favorable impact

from updated macroeconomic variables, mainly in the projection of the unemployment rate, and a $7.6 million decrease

in recoveries associated with the bulk sales of fully charged-off loans that took place in the first quarter of each year.

Non-interest income for the year ended December 31, 2025 was $95.4 million, compared to $96.2 million for the same

period in 2024. The decrease of $0.8 million was driven by a $1.1 million decrease in service charges and fees on deposit

accounts and a $0.3 million decrease in insurance commission income, partially offset by a $0.8 million increase in card

and processing income due to higher transactional fee income.

Non-interest expenses for the year ended December 31, 2025 were $315.2 million, compared to $308.4 million for the

same period in 2024. The increase of $6.8 million was driven by: (i) a $7.4 million increase in employees’ compensation

and benefits expenses, mainly related to annual salary merit increases and an increase in bonus incentives, partially offset

by the aforementioned ERC recorded during 2025; (ii) a $1.3 million increase in taxes, other than income taxes,

primarily related to higher municipal license taxes; and (iii) a $1.0 million increase in credit and debit card processing

fees driven by higher transactional volumes. These variances were partially offset by a $1.4 million decrease in other

non-interest expenses, mainly due to a decrease in the amortization of core deposit intangible assets from the Banco

Santander Puerto Rico acquisition, a $0.8 million decrease in FDIC deposit insurance expense driven by the reversal

during 2025 of the FDIC special assessment charges that were recorded for the year ended December 31, 2024, and a

$0.9 million decrease in business promotion expenses.

Commercial and Corporate Banking

The Commercial and Corporate Banking segment consists of the Corporation’s lending and other services for large customers

represented by specialized and middle-market clients and the government sector. This segment consists of the Corporation’s

commercial lending (other than small business commercial loans) and commercial deposit-taking 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.

For the year ended December 31, 2025, segment income before taxes for the Commercial and Corporate Banking segment

remained relatively flat at $137.8 million, compared to $137.9 million for the same period in 2024. The highlights of the segment’s

financial results are as follows:

Net interest income for the year ended December 31, 2025 was $173.8 million, compared to $157.7 million for the same

period in 2024. The increase of $16.1 million was primarily attributable to a $17.3 million decrease in the cost of funds

charged to this segment resulting from lower interest rates, partially offset by a $2.0 million decrease in interest income

mainly associated with the effect of lower interest rates on the downward repricing of variable-rate loans.

The provision for credit losses for the year ended December 31, 2025 was an expense of $4.1 million, compared to a net

benefit of $12.9 million for the same period in 2024. The expense recorded during 2025 was mainly due to C&I loan

growth and a deterioration in the economic outlook of the commercial real estate property performance and forecasted

CRE price index, partially offset by improved financial performance of certain commercial borrowers. The net benefit

recorded during 2024 was associated with the improved financial condition of certain borrowers; a recovery of $5.0

million associated with a C&I loan in the Puerto Rico region; and an improvement on the economic outlook of certain

macroeconomic variables, particularly variables associated with commercial real estate property performance and the

forecasted CRE price index; partially offset by loan growth.

Non-interest income for the year ended December 31, 2025 was $8.1 million, compared to $7.0 million for the same

period in 2024. The increase of $1.1 million was driven by a $1.4 million increase in service charges on deposits

primarily related to cash management fee income from corporate customers.

Non-interest expenses for the year ended December 31, 2025 were $40.0 million, compared to $39.7 million for the same

period in 2024. The increase of $0.3 million was mainly due to a $2.0 million decrease in net gains on OREO operations,

driven by a $2.3 million realized gain on the sale of a commercial real estate OREO property in the Puerto Rico region

during 2024, and a $0.6 million increase in employees’ compensation and benefits expenses, driven by increases in

bonus incentives, partially offset by the aforementioned ERC recorded during 2025. These variances were partially offset

by lower management fees, which are recorded as part of other non-interest expenses, and a decrease in FDIC deposit

insurance expense driven by the reversal during 2025 of the FDIC special assessment charges that were recorded for the

year ended December 31, 2024.

Treasury and Investments

The Treasury and Investments segment is responsible for the Corporation’s investment portfolio and treasury functions. The

treasury function centrally manages funding by providing funds to the Mortgage Banking, Consumer (Retail) Banking, Commercial

and Corporate Banking, United States Operations, and Virgin Islands Operations segments to support their respective lending

activities and by compensating these units for deposits gathered. The Treasury function also obtains funds through brokered deposits,

advances from the FHLB, and repurchase agreements involving investment securities, among other funding sources.

The investment function is intended to implement a funding strategy for the purposes of liquidity management, interest rate risk

management and earnings enhancement.

The funds transfer pricing charged or credited by Treasury and Investments are calculated using the SOFR/swap curve with term

rates, adjusted for a funding spread that reflects the Corporation’s cost of funds.

For the year ended December 31, 2025, segment loss before taxes for the Treasury and Investments segment increased to $121.9

million, compared to $120.8 million for the same period in 2024, in part due to a $0.4 million increase in net interest loss, which

primarily reflects a $45.8 million higher charge on funds loaned from the Consumer (Retail) Banking segment, which was largely

offset by lower interest expense and higher interest income. Interest expense decreased $30.1 million, mainly due to the redemption of

junior subordinated debentures during the second half of 2024 and first half of 2025, reduced interest expense on brokered CDs in the

Puerto Rico region, and the repayment in 2025 of $210.0 million of maturing FHLB advances. Interest income increased $15.2 million

primarily due to purchases of higher-yielding debt securities replacing maturing lower-yielding debt securities.

United States Operations

The United States Operations segment consists of all banking activities conducted by FirstBank on the U.S. mainland. FirstBank

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 consumer and commercial banking products and services. Consumer banking products

include checking, savings and money market accounts, retail CDs, internet banking services, residential mortgages, and home equity

loans and lines of credit. Retail deposits, as well as FHLB advances and brokered CDs, allocated to this operation serve as funding

sources for its lending activities.

Commercial banking services include checking, savings and money market accounts, retail CDs, internet banking services, cash

management services, remote data capture, and automated clearing house (“ACH”) transactions. Loan products include the traditional

C&I and commercial real estate products, such as lines of credit, term loans, and construction loans.

For the year ended December 31, 2025, segment income before taxes for the United States Operations segment decreased to $39.2

million, compared to $42.7 million for the same period in 2024. The highlights of the segment’s financial results are as follows:

Net interest income for the year ended December 31, 2025 was $87.3 million, compared to $78.0 million for the same

period in 2024. The increase of $9.3 million was mainly related to higher interest income on loans due to an increase in

average loan balances on commercial loans, partially offset by the effect of lower interest rates on the downward

repricing of variable-rate commercial loans, as well as higher interest expense on deposits due to an increase in the

average deposit balances, which outweighed the impact of lower rates paid on deposits during 2025.

The provision for credit losses for the year ended December 31, 2025 was an expense of $5.7 million, compared to a net

benefit of $6.7 million for the same period in 2024. The expense recorded during 2025 was mainly due to C&I loan

growth and a deterioration in the economic outlook of the commercial real estate property performance and forecasted

CRE price index. Meanwhile, the net benefit recorded during 2024 was associated with an improvement on the economic

outlook of certain macroeconomic variables, particularly variables associated with commercial real estate property

performance and the forecasted CRE price index; and $1.2 million in recoveries of two commercial loans; partially offset

by loan growth.

Virgin Islands Operations

The Virgin Islands Operations segment consists of all banking activities conducted by FirstBank in the USVI and BVI, including

commercial and consumer banking services. This segment operates through eight banking branches serving in the USVI islands of St.

Thomas, St. Croix, and St. John, as well as the island of Tortola in the BVI. This segment’s primary business activities include

consumer and commercial lending, and deposit-taking activities. Retail deposits gathered through each branch serve as the primary

funding sources for the segment’s lending activities.

For the year ended December 31, 2025, segment income before taxes for the Virgin Islands Operations segment was $29.1 million,

compared to $29.7 million for the same period in 2024. The highlights of the segment’s financial results are as follows :

Net interest income for the year ended December 31, 2025 was $65.8 million, compared to $60.7 million for the same

period in 2024. The increase of $5.1 million was mainly related to higher average loan balances on commercial and

construction loans and lower interest rates paid on government time deposits, partially offset by the effect of lower

interest rates on the downward repricing of variable-rate commercial loans.

The provision for credit losses for the year ended December 31, 2025 was an expense of $1.9 million, compared to a net

benefit of $0.2 million for the same period in 2024. The expense recorded during 2025 was mainly due to an increase in

the provision for credit losses for the commercial and construction loan portfolios due to C&I loan growth and a

deterioration in the economic outlook of the commercial real estate property performance and forecasted CRE price

index, partially offset by a decrease in the provision for credit losses for the consumer loan portfolio due to updated

historical loss experience and reductions in the unsecured loan portfolio.

Non-interest expenses for the year ended December 31, 2025 were $44.3 million, compared to $41.1 million for the same

period in 202 4. The increase of $3.2 million was mainly associated with a $2.8 million valuation adjustment recorded

during 2025 in connection with an ongoing litigation which could result in a potential loss of title of a commercial

OREO property in the Virgin Islands region.

FINANCIAL CONDITION AND OPERATING DATA ANALYSIS

Financial Condition

The following table presents an average balance sheet of the Corporation for the indicated periods:

December 31,

2025

2024

2023

(In thousands)

ASSETS

Interest-earning assets:

Money market and other short-term investments

943,731

710,945

584,083

U.S. and Puerto Rico government obligations

1,810,308

2,517,327

2,843,284

MBS

3,346,069

3,348,925

3,702,908

FHLB stock

27,296

34,161

36,606

Other investments

20,390

18,510

14,167

Total investments

6,147,794

6,629,868

7,181,048

Residential mortgage loans

2,868,887

2,816,732

2,814,102

Construction loans

244,769

221,822

172,952

Commercial loans

5,968,858

5,606,827

5,244,503

Finance leases

899,270

879,437

789,870

Consumer loans

2,840,369

2,830,678

2,704,877

Total loans

12,822,153

12,355,496

11,726,304

Total interest-earning assets, excluding valuation

allowances on investment securities and total ACL

18,969,947

18,985,364

18,907,352

Total non-interest-earning assets

786,155

834,855

838,955

Valuation allowances on investment securities and total ACL

(1)

(691,681)

(858,863)

(1,039,884)

Total assets

19,064,421

18,961,356

18,706,423

LIABILITIES

Interest-bearing liabilities:

Time deposits

3,280,404

2,999,078

2,590,313

Brokered CDs

543,154

627,454

348,829

Other interest-bearing deposits

7,467,571

7,567,514

7,664,793

Interest-bearing deposits

11,291,129

11,194,046

10,603,935

Securities sold under agreements to repurchase

161

245

54,570

Advances from the FHLB

347,370

500,055

541,000

Other borrowings

15,694

146,044

171,184

Total interest-bearing liabilities

11,654,354

11,840,390

11,370,689

Total non-interest-bearing liabilities

(2)

5,570,267

5,556,423

5,950,495

Total liabilities

17,224,621

17,396,813

17,321,184

STOCKHOLDERS’ EQUITY

Stockholders’ equity

1,839,800

1,564,543

1,385,239

Total liabilities and stockholders’ equity

19,064,421

18,961,356

18,706,423

(1) Includes, among other things, the ACL on loans and finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.

(2) Includes, among other things, non-interest-bearing deposits.

The Corporation’s total average assets were $19.1 billion for the year ended December 31, 2025, compared to $19.0 billion for the

year ended December 31, 2024, a net increase of $103.1 million. The variance primarily reflects the following: (i) a $466.7 million

increase in the average balance of total loans, primarily in the commercial and construction loan portfolios; (ii) an increase of $232.8

million in the average balance of interest-bearing cash, which consisted primarily of deposits maintained at the FED; and (iii) a

decrease of $156.8 million in unrealized losses on available-for-sale debt securities. These variances were partially offset by a

decrease of $709.9 million in debt securities, mainly due to maturities and principal repayments of U.S. agencies MBS and debentures

and U.S. Treasury securities, net of purchases.

The Corporation’s total average liabilities were $17.2 billion for the year ended December 31, 2025, a net decrease of $172.2

million compared to December 31, 2024. The net decrease was related to a decrease of $283.1 million in the average balance of total

borrowings, mostly associated with FHLB advances that matured and were repaid in 2025 and the redemption of the remaining

outstanding TruPS, partially offset by a $97.1 million increase in the average balance of interest-bearing deposits and a $13.8 million

increase in the average balance of non-interest-bearing liabilities, primarily in non-interest-bearing deposits.

Assets

The Corporation’s total assets were $19.1 billion as of December 31, 2025, a decrease of $160.0 million from December 31, 2024,

primarily related to a decrease in cash and cash equivalents resulting from the repayment of long-term borrowing and a decrease in

total deposits, partially offset by an increase in total loans and an increase in the fair value of available-for-sale debt securities due to

changes in market interest rates.

Loans Receivable, including Loans Held for Sale

As of December 31, 2025, the Corporation’s total loan portfolio before the ACL amounted to $13.1 billion, an increase of $380.2

million compared to December 31, 2024, of which $347.8 million was in commercial and construction loans. In the Florida region,

commercial and construction loans increased by $179.4 million, of which $129.2 million was in C&I loans and $92.2 million was in

commercial mortgage loans. In the Puerto Rico region, commercial and construction loans increased by $113.4 million driven by the

origination of several C&I term loans, each in excess of $15 million, that increased the portfolio balance by $141.4 million; a $67.9

million increase in construction loans; and higher utilization of C&I lines of credit; partially offset by the payoff of a $73.8 million

commercial mortgage loan in the hospitality industry; the repayment of a $36.8 million C&I term loan; and a $42.1 million reduction

in the balance of floor plan lines of credit. In the Virgin Islands region, commercial and construction loans increased by $55.0 million,

in part due to a $40.2 million disbursement of a government line of credit.

As of December 31, 2025, the Corporation’s loans held-for-investment portfolio was comprised of commercial and construction

loans (49%), consumer loans and finance leases (29%), and residential real estate loans (22%). Of the total gross loan portfolio held

for investment of $13.1 billion as of December 31, 2025, the Corporation had credit risk concentration of approximately 77% in the

Puerto Rico region, 19% in the United States region (mainly in the state of Florida), and 4% in the Virgin Islands region, as shown in

the following table:

As of December 31, 2025

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

2,227,053

150,551

530,698

2,908,302

Construction loans

249,466

14,174

1,928

265,568

Commercial mortgage loans

1,690,176

73,751

790,325

2,554,252

C&I loans

2,348,274

170,728

1,169,356

3,688,358

Total commercial loans

4,287,916

258,653

1,961,609

6,508,178

Consumer loans and finance leases

3,636,072

66,947

5,857

3,708,876

Total loans held for investment, gross

10,151,041

476,151

2,498,164

13,125,356

Loans held for sale

16,697

16,697

Total loans, gross

10,167,738

476,151

2,498,164

13,142,053

As of December 31, 2024

Puerto Rico

Virgin Islands

United States

Total

(In thousands)

Residential mortgage loans

2,166,980

156,225

505,226

2,828,431

Construction loans

181,607

2,820

43,969

228,396

Commercial mortgage loans

1,800,445

67,449

698,090

2,565,984

C&I loans

2,192,468

133,407

1,040,163

3,366,038

Total commercial loans

4,174,520

203,676

1,782,222

6,160,418

Consumer loans and finance leases

3,680,628

69,577

7,502

3,757,707

Total loans held for investment, gross

10,022,128

429,478

2,294,950

12,746,556

Loans held for sale

14,558

434

284

15,276

Total loans, gross

10,036,686

429,912

2,295,234

12,761,832

First BanCorp. relies primarily on its retail network of branches to originate residential and consumer personal loans. The

Corporation manages its construction and commercial loan originations through centralized units and most of its originations come

from existing customers, as well as through referrals and direct solicitations. Auto loans and finance leases originations rely primarily

on the relationships with auto dealers and dedicated sales professionals who serve selected locations in order to facilitate originations.

The following table sets forth certain additional data (including loan production) related to the Corporation's loan portfolio net of the

ACL on loans and finance leases as of and for the indicated dates:

For the Year Ended December 31,

2025

2024

2023

(Dollars in thousands)

Beginning balance as of January 1

12,517,890

11,931,008

11,304,667

Residential real estate loans originated

500,633

460,726

424,641

Construction loans originated

148,767

207,421

154,720

C&I and commercial mortgage loans originated and purchased

3,198,662

3,113,258

2,750,817

Finance leases originated

240,030

263,693

327,528

Consumer loans originated

1,264,454

1,372,537

1,468,794

Total loans originated and purchased

5,352,546

5,417,635

5,126,500

Sales of loans

(170,249)

(165,533)

(155,733)

Repayments and other decreases

(1)

(4,807,171)

(4,665,220)

(4,344,426)

Net increase

375,126

586,882

626,341

Ending balance as of December 31

12,893,016

12,517,890

11,931,008

Percentage increase

3.00%

4.92%

5.54%

(1)

Includes, among other things, the change in the ACL on loans and finance leases and cancellation of loans due to the repossession of the collateral and loans repurchased.

Residential mortgage loan originations for the year ended December 31, 2025 amounted to $500.6 million, compared to $460.7

million for 2024. The increase in residential mortgage loan originations of $39.9 million mainly consisted of a $56.3 million increase

in the Puerto Rico region, partially offset by a $18.2 million decrease in Florida region.

See “Risk Management – Exposure to Puerto Rico Government” and “Risk Management – Exposure to USVI Government” below

for information on the Corporation’s credit exposure to PR and USVI government entities.

As of December 31, 2025, the Corporation’s total commercial mortgage loan exposure amounted to $2.6 billion, or 19% of the

total loan portfolio. In terms of geography, $1.7 billion of the exposure was in the Puerto Rico region, $0.8 billion of the exposure was

in the Florida region, and $0.1 billion of the exposure was in the Virgin Islands region. The $1.7 billion exposure in the Puerto Rico

region was comprised mainly of 40% in the retail industry, 26% in office real estate, and 19% in the hotel industry. The $0.8 billion

exposure in the Florida region was comprised mainly of 36% in the retail industry, 20% in the hotel industry, and 6% in office real

estate. Of the Corporation’s total commercial mortgage loan exposure of $2.6 billion, $563.0 million matures within the next 12

months and has a weighted-average interest rate of approximately 5.64%. Commercial mortgage loan exposure in the office real estate

industry, which matures within the next 12 months, amounted to $136.3 million and has a weighted-average interest rate of

approximately 5.53%.

As of December 31, 2025 and 2024, the Corporation’s total exposure to shared national credit (“SNC”) loans (including unused

commitments) amounted to $1.1 billion and $1.3 billion, respectively. As of December 31, 2025, approximately $333.4 million of the

SNC exposure is related to the portfolio in the Puerto Rico region and $796.9 million is related to the portfolio in the Florida region.

Commercial and construction loan originations (excluding government loans) for the year ended December 31, 2025 amounted to

$3.2 billion, compared to $3.1 billion for 2024. The increase of $28.0 million for the year ended December 31, 2025 was mainly

related to a $64.7 million increase in the Florida region, mainly in commercial mortgage loans; and a $14.2 million increase in the

Virgin Islands region, of which $10.3 million was in construction loans. These variances were partially offset by a $50.9 million

decrease in Puerto Rico region, driven by a $175.0 million decrease in the floor plan portfolio and a $151.5 million decrease in the

commercial mortgage loans; partially offset by a $306.6 million increase in C&I loans, driven by higher utilization of C&I lines of

credit and the origination of several C&I relationships, each in excess of $25 million, with an aggregate balance of $223.6 million.

Government loan originations for the year ended December 31, 2025 amounted to $178.3 million, compared to $179.5 million for the

comparable period in 2024.

Originations of auto loans (including finance leases) for the year ended December 31, 2025 amounted to $868.4 million, compared

to $933.9 million for the same period in 2024. Other consumer loan originations, other than credit cards, for the year ended December

31, 2025 amounted to $217.2 million, compared to $236.7 million for the same period in 2024. Most of the decreases in auto loan

originations and other consumer loan originations were in the Puerto Rico region. The utilization activity on the outstanding credit

card portfolio for the year ended December 31, 2025 amounted to $418.9 million, compared to $465.6 million for the comparable

period in 2024.

Maturities of Loans Receivable

The following tables present the loans held for investment portfolio as of December 31, 2025 by remaining contractual maturities and

interest rate type:

After One Year

After Five Years

Total Portfolio

One Year or Less

Through Five Years

Through 15 Years

After 15 Years

(In thousands)

Residential mortgage

102,955

432,009

1,158,138

1,215,200

2,908,302

Construction loans

56,424

127,183

79,944

2,017

265,568

Commercial mortgage loans

700,924

1,517,427

332,225

3,676

2,554,252

C&I loans

1,545,796

1,784,328

355,467

2,767

3,688,358

Consumer loans

1,176,472

2,300,231

231,902

271

3,708,876

Total loans

(1)

3,582,571

6,161,178

2,157,676

1,223,931

13,125,356

Amount due in one year or less at:

Amount due after one year:

Total Portfolio

Fixed Interest Rates

Variable Interest

Rates

Fixed Interest Rates

Variable Interest

Rates

Residential mortgage

99,487

3,468

2,645,663

159,684

2,908,302

Construction loans

34,122

22,302

173,453

35,691

265,568

Commercial mortgage loans

499,456

201,468

1,446,555

406,773

2,554,252

C&I loans

390,630

1,155,166

699,228

1,443,334

3,688,358

Consumer loans

953,917

222,555

2,527,413

4,991

3,708,876

Total loans

(1)

1,977,612

1,604,959

7,492,312

2,050,473

13,125,356

(1)

Scheduled repayments are included in the maturity category in which the payment is due. The amounts provided do not reflect prepayment assumptions related to the loan portfolio.

Investment Activities

As part of its liquidity, revenue diversification, and interest rate risk management strategies, First BanCorp. maintains a debt

securities portfolio classified as available for sale or held to maturity.

Substantially all of the Corporation’s available-for-sale debt securities portfolio was invested in U.S. Treasury securities, U.S.

GSEs’ obligations, and fixed-rate GSEs’ MBS. The Corporation’s total available-for-sale debt securities portfolio as of December 31,

2025 amounted to $4.6 billion, an $11.3 million decrease from December 31, 2024. The decline was driven by $1.6 billion in

maturities, of which $1.1 billion were U.S. agencies debentures and $535.1 million were U.S. Treasury securities, and $536.2 million

in principal repayments of U.S. agencies MBS and debentures. These factors were partially offset by $1.9 billion in purchases, of

which $974.9 million were U.S. agencies MBS and debentures with an average yield of 4.76%, including $872.1 million of residential

MBS; and $963.2 million were U.S. Treasury securities with an average yield of 4.02%; and a $212.4 million increase in fair value

attributable to changes in market interest rates. As of December 31, 2025, the Corporation had a net unrealized loss on available-for-

sale debt securities of $347.2 million. This net unrealized loss is primarily attributable to instruments on books carrying a lower

interest rate than market rates. The Corporation expects that this unrealized loss will reverse over time and it is likely that it will not be

required to sell the securities before their anticipated recovery. The Corporation expects the portfolio will continue to decrease and the

accumulated other comprehensive loss will decrease accordingly, excluding the impact of market interest rates.

Held-to-maturity debt securities include fixed-rate GSEs’ MBS with a carrying value of $184.4 million (fair value of $178.8

million) as of December 31, 2025, compared to $225.3 million as of December 31, 2024. The decrease in GSEs’ MBS was driven by

$41.1 million in principal repayments. Held-to-maturity debt securities also include $80.9 million as of December 31, 2025, compared

to $92.4 million as of December 31, 2024, of financing arrangements with the government issued in bond form, which the Corporation

accounts for as securities, but which were underwritten as loans with features that are typically found in commercial loans. The

decrease in government bonds was driven by $12.6 million in principal repayments. As of December 31, 2025, approximately 59% of

the Corporation’s government bonds consisted of obligations issued by three of the largest municipalities in Puerto Rico.

As of December 31, 2025, cash inflows expected to be received during the next twelve months from maturities and expected

prepayments of the debt securities portfolio (excluding U.S. Treasury securities) amounted to approximately $1.1 billion and have an

average yield of 2.41%. These inflows are expected to be redeployed to fund loan growth, reinvested into higher-yielding securities, or

used to repay maturing brokered CDs. See Note 2 – “Debt Securities” for information and details about the Corporation’s available-

for-sale debt securities portfolio.

See “Risk Management – Exposure to Puerto Rico Government” below for information and details about the Corporation’s total

direct exposure to the Puerto Rico government, including municipalities, and “Risk Management – Credit Risk Management” below

and Note 2 – “Debt Securities” for the ACL of the exposure to government bonds.

The carrying values of debt securities as of December 31, 2025 and 2024 by contractual maturity (excluding MBS) and weighted-

average yield, are shown below:

December 31, 2025

December 31, 2024

Weighted-

Average Yield %

Carrying

Amount

Weighted-

Average Yield %

Carrying

Amount

(Dollars in thousands)

U.S government and agencies obligations:

Due within one year

2.54

895,052

0.79

1,127,041

After 1 to 5 years

1.45

483,916

0.96

764,679

After 5 to 10 years

4.75

14,985

After 10 years

3.97

6,501

4.73

7,800

2.19

1,400,454

(1)

0.87

1,899,520

Puerto Rico government obligation:

After 10 years

(2)

1,620

1,620

MBS:

Residential MBS:

FHLMC

1.72

901,779

1.58

923,501

GNMA

2.50

196,569

2.47

203,383

FNMA

1.90

1,138,925

1.69

1,128,379

CMOs

3.94

819,807

2.92

351,114

Private Label MBS

5.92

3,266

6.62

4,195

Commercial MBS

2.35

276,007

2.65

277,934

Total MBS

2.41

3,336,353

1.95

2,888,506

Other:

Due within one year

2.32

1,000

Government bonds:

Due within one year

4.94

1,044

5.07

2,214

After 1 to 5 years

7.05

54,611

7.33

61,289

After 5 to 10 years

4.78

10,376

5.79

13,184

After 10 years

7.46

14,870

8.07

15,755

6.81

80,901

7.18

92,442

ACL on held-to-maturity debt securities

(733)

(802)

Total debt securities

2.41

4,818,595

1.65

4,882,286

(1)

Includes approximately $566.3 million in callable debt securities with an average yield of 1.52%, of which approximately 58% were purchased at a discount and 4% at a premium. See “Risk

Management” below for further analysis of the effects of changing interest rates on the Corporation’s net interest income and the Corporation’s interest risk management strategies. Also,

refer to Note 2 - “Debt Securities” for additional information regarding the Corporation’s debt securities portfolio.

(2)

Consists of a residential pass-through MBS issued by the PRHFA that is collateralized by certain second mortgages originated under a program launched by the Puerto Rico government in

2010 and is in nonaccrual status based on the delinquency status of the underlying second mortgage loans collateral.

RISK MANAGEMENT

General

Risks are inherent in virtually all aspects of the Corporation’s business activities and operations. Consequently, effective risk

management is fundamental to the success of the Corporation. The primary goals of risk management are to ensure that the

Corporation’s risk-taking activities are consistent with the Corporation’s objectives and risk tolerance, and that there is an appropriate

balance between risks and rewards to maximize stockholder value.

The Corporation has in place a risk management framework to monitor, evaluate and manage the principal risks assumed in

conducting its activities. First BanCorp’s business is subject to eleven broad categories of risks: (i) liquidity risk; (ii) interest rate risk;

(iii) market risk; (iv) credit risk; (v) operational risk; (vi) legal and regulatory risk; (vii) reputational risk; (viii) model risk; (ix) capital

risk; (x) strategic risk; and (xi) information technology risk. First BanCorp. has adopted policies and procedures designed to identify

and manage the risks to which the Corporation is exposed.

Risk Definition

Liquidity Risk

Liquidity risk is the risk to earnings or capital arising from the possibility that the Corporation will not have sufficient cash to meet

its short-term liquidity demands, such as from deposit redemptions or loan commitments. See “Liquidity Risk and Capital Adequacy ”

below for further details.

Interest Rate Risk

Interest rate risk is the risk arising from adverse movements in interest rates. See “Interest Rate Risk Management” below for

further details.

Market Risk

Market risk is the risk of loss in the value of assets or liabilities due to changes in market conditions, including movements in

market rates or prices, such as interest rates or equity prices. The Corporation evaluates market risk together with interest rate risk.

Both changes in market values and changes in interest rates are evaluated and forecasted. See “Interest Rate Risk Management” below

for the effects of changes in interest rates on net interest income.

Credit Risk

Credit risk is the risk arising from a borrower’s or a counterparty’s failure to meet the terms of a contract with the Corporation or

otherwise to perform as agreed. See “Credit Risk Management” below for further details.

Operational Risk

Operational risk is the risk arising from problems with the delivery of services or products. This risk is a function of internal

controls, information systems, third party vendors, employees and operating processes. It also includes risks associated with the

Corporation’s preparedness for the occurrence of an unforeseen event. This risk is inherent across all functions, products, and services

of the Corporation. See “Operational Risk” below for further details.

Legal, Regulatory and Compliance Risk

Legal and regulatory risk is the risk arising from the Corporation’s failure to comply with laws or regulations that can adversely

affect the Corporation’s reputation and/or increase its exposure to litigation or penalties.

Reputational Risk

Reputational risk is the risk arising from any adverse effect on the Corporation’s market value, capital, or earnings arising from

negative public opinion, whether true or not. This risk affects the Corporation’s ability to establish new relationships or services, or to

continue servicing existing relationships.

Model Risk

Model risk is the potential for adverse consequences from decisions based upon incorrect or misused model outputs and reports or

based upon an incomplete or inaccurate model. The use of models exposes the Corporation to some level of model risk. Model errors

can contribute to incorrect valuations and lead to operational errors, inappropriate business decisions, or incorrect financial entries.

The Corporation seeks to reduce model risk through rigorous model identification and validation.

Capital Risk

Capital risk is the risk that the Corporation may lose value on its capital or have an inadequate capital plan, which would result in

insufficient capital resources to meet minimum regulatory requirements (the Corporation’s authority to operate as a bank is dependent

upon the maintenance of adequate capital resources), support its credit rating, or support its growth and strategic options.

Strategic Risk

Strategic risk is the risk arising from adverse business decisions, poor implementation of business decisions, or lack of

responsiveness to changes in the banking industry, and operating environment. This risk is a function of the compatibility of the

Corporation’s strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and

the quality of implementation.

Information Technology and Cybersecurity Risk

Information technology risk is the risk arising from the loss of confidentiality, integrity, or availability of information systems and

risk of cyber incidents or data breaches. It includes business risks associated with the use, ownership, operation, involvement,

influence, and adoption of information technology within the Corporation.

Risk Governance

The following discussion highlights the roles and responsibilities of the key participants in the Corporation’s risk management

framework:

Board of Directors

The Board of Directors oversees the Corporation’s overall risk governance program with the assistance of the Board committees

discussed below.

Risk Committee

The Board of Directors has appointed the Risk Committee to assist the Board in fulfilling its responsibility to oversee the

Corporation’s management of its 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

committee’s primary responsibilities are to:

Review and discuss management’s assessment of the Corporation’s aggregate enterprise-wide profile and the alignment of the

Corporation’s risk profile with the Corporation’s strategic plan, goals, and objectives;

Review and recommend to the Board the parameters and establishment of the Corporation’s risk tolerance and risk appetite;

Receive reports from management and, if appropriate, other Board committees, regarding the Corporation’s policies and

procedures related to the Corporation’s adherence to risk limits and its established risk tolerance and risk appetite or on

selected risk topics;

Oversee the strategies, policies, procedures, and systems established by management to identify, assess, measure, and manage

the major risks facing the Corporation, which may include an overview of the Corporation’s credit risk, operational risk,

information technology risk, compliance risk, interest rate risk, liquidity risk, market risk, and reputational risk, as well as

management’s capital management, planning, and process;

Oversee the Corporation’s Retail Quality Assurance and Loan Review Program;

Oversee management’s activities with respect to model validation of capital stress testing, model risk management, vendor

management, information technology risk and operational risk;

Review and discuss with management risk assessments for new products and services;

Review periodically the scope and effectiveness of the Corporation’s regulatory compliance policies and programs; and

Annually assess the Corporation’s institutional insurance programs.

The Risk Committee also receives regular reports and engages in discussions throughout the year on the effectiveness of the

Corporate Information Security Program (“CISP”), including its inherent risk, the roadmap for addressing those risks, and the progress

in doing so. The Risk Committee annually reviews and approves the CISP and annually receives a report on related security

safeguards in accordance with the Gramm-Leach-Bliley Act.

Asset and Liability Committee

The Board of Directors has appointed the Asset and Liability Committee to assist the Board in its oversight of the Corporation’s

asset and liability management policies related to the management of the Corporation’s funds, investments, liquidity, market and

interest rate risk, and the use of derivatives. In doing so, the committee’s primary functions involve:

The establishment of a process to enable the identification, assessment, and management of risks that could affect the

Corporation’s assets and liabilities management;

The identification of the Corporation’s risk tolerance levels for yield maximization relating to its assets and liabilities

management;

The evaluation of the adequacy, effectiveness, and compliance with the Corporation’s risk management process relating to

the Corporation’s assets and liabilities management, including management’s role in that process; and

Oversight of the Corporation’s liquidity position and liquidity stress testing.

Credit Committee

The Board of Directors has appointed the Credit Committee to assist the Board in its oversight of the Corporation’s policies related

to the Corporation’s lending function, or credit management. The committee’s primary responsibilities are to:

Monitor the performance and quality of the Corporation’s credit portfolio through the review of selected measures of credit

quality and trends and such other information as it deems appropriate;

Oversee the effectiveness and administration of credit-related policies through the review of such processes, reports and other

information as it deems appropriate, including the loan-quality grading and examination process, internal and external audits

and examinations of the Corporation’s credit processes, the incidence of new problem assets, the frequency and reasons for

credit policy exceptions, the loan review functions and the asset classification process;

Review on an annual basis and recommend to the Board the lending authorities;

Approve loans as required by the lending authorities approved by the Board; and

Report to the Board regarding credit management.

Audit Committee

The Board of Directors has appointed the Audit Committee to assist the Board in fulfilling its responsibility to oversee management

regarding:

Oversight of the charter, strategic plan execution, annual internal audit plan execution, staffing, budget and organizational

structure of the internal audit function;

The conduct and integrity of the Corporation’s financial reporting to any governmental or regulatory body, stockholders,

other users of the Corporation’s financial reports and the public;

The Corporation’s internal control over financial reporting and disclosure controls and procedures;

The qualifications, engagement, compensation, independence, and performance of the Corporation’s independent auditors,

their conduct of the annual audit of the Corporation’s financial statements, and their engagement to provide any other

services;

The application of the Corporation’s related parties transaction policy as established by the Board;

The application of the Corporation’s code of business conduct and ethics as established by management and the Board;

The preparation of the Audit Committee report required to be included in the proxy statement for the Corporation’s annual

stockholders’ meeting by the rules of the SEC;

The Corporation’s legal, ethical compliance and fraud risk;

Oversight responsibilities with respect to the Trust Department and its fiduciary responsibilities.

Corporate Governance and Nominating Committee

The Board of Directors has appointed the Corporate Governance and Nominating Committee to develop, review, and assess

corporate governance principles. The Corporate Governance and Nominating Committee is responsible for director succession,

orientation and compensation, identifying and recommending new director candidates, overseeing the evaluation of the Board and

management, annually recommending to the Board the designation of a candidate to hold the position of the Chairman of the Board,

and directing and overseeing the Corporation’s executive succession plan. In addition, the Corporate Governance and Nominating

Committee is responsible for overseeing the Corporation’s sustainability and environmental, social, and governance (“ESG”) policies.

Compensation and Benefits Committee

The Board of Directors has appoint ed the Compensation and Benefits Committee to oversee compensation policies and practices

including the evaluation and recommendation to the Board of the proper and competitive salaries and incentive compensation

programs of the executive officers and key employees of the Corporation.

Management Roles and Responsibilities

While the Board of Directors has the responsibility to oversee the risk governance program, management is responsible for

implementing the necessary policies and procedures, and internal controls. To carry out these responsibilities, the Corporation has a

clearly defined risk governance culture. To ensure that risk management is communicated at all levels of the Corporation, and each

area understands its specific role, the Corporation has established several management level committees to support risk oversight, as

follows:

Executive Risk Management Committee

The Executive Risk Management Committee is responsible for exercising oversight of information regarding the Corporation’s

enterprise risk management framework, including the significant policies, procedures, and practices employed to manage the

identified risk categories (credit risk, operational risk, legal and regulatory risk, reputational risk, model risk, and capital risk). In

carrying out its oversight responsibilities, each committee member is entitled to rely on the integrity and expertise of those people

providing information to the committee and on the accuracy and completeness of such information, absent actual knowledge of an

inaccuracy.

The Chief Executive Officer appoints the Executive Risk Management Committee and members of the Corporation’s senior and

executive management have the opportunity to share their insights about the types of risks that could impede the Corporation’s ability

to achieve its business objectives. The Chief Risk Officer of the Corporation directs the agenda for the meetings and serves as

secretary of the committee and maintains the minutes on behalf of the committee. The General Auditor also participates in the

committee as an observer.

The committee provides assistance and support to the Chief Risk Officer to promote effective risk management throughout the

Corporation. The Chief Risk Officer reports to the Committee matters related to the enterprise risk management framework of the

Corporation, including, but not limited to:

The risk governance structure;

The risk assessments and profile of the Corporation;

The Corporation’s risk appetite statement and risk tolerance;

The risk management strategy and associated risk management initiatives and how both support the business strategy

and business model of the Corporation; and

The Corporate Incident Response Program

Other Management Committees

As part of its governance framework, the Corporation has various additional risk management-related committees. These

committees are jointly responsible for ensuring adequate risk measurement and management in their respective areas of authority. At

the management level, these committees include the Management’s Investment and Asset Liability Committee (the “MIALCO”),

Information Technology Steering Committee, Bank Secrecy Act Committee, Credit Committees (consisting of a Credit Management

Committee and a Delinquency Committee), Vendor Management Committee, ESG Committee, Community Reinvestment Act

Executive Committee, Anti-Fraud Committee, Regulatory Compliance Committee, Regulatory Reporting Committee, Complaints

Management Committee, Project Portfolio Management Committee, Current Expected Credit Losses (“CECL”) Committee, Capital

Planning Committee, Business Continuity Committee, Emergency Committee, and Data Governance Council.

Officers

As part of its governance framework, the following officers play a key role in the Corporation’s risk management process:

The CEO is responsible for the overall risk governance structure of the Corporation. The CEO is ultimately responsible for

business strategies, strategic objectives, risk management priorities, and policies.

The General Auditor is responsible for leading the corporate internal audit function and reporting matters directly to the Audit

Committee and administratively to the Legal Counsel.

The Chief Operating Officer (“COO”) manages the Corporation’s operational framework, including information technology

(“IT”), facilities, banking operations, corporate security, and enterprise architecture. The COO, together with the Chief

Information Officer (“CIO”), jointly oversee the effective and efficient execution of the various technology initiatives to

support the Corporation’s growth and improve overall efficiency. The Chief Information Security Officer (“CISO”), who

reports to the Security and Facilities Management Director, leads the Corporate Security Office (“CSO”), which manages the

controls designed to identify, detect, protect against, respond to, and recover from physical and logical events, including

cybersecurity threats and cybersecurity incidents, and is responsible for developing and implementing a CISP and reporting

regularly to the Risk Committee. The COO together with the Chief Lending Officer manages and oversees the areas of Credit

Risk and Credit Administration including the approval of loans and reporting to the Board regarding Credit Management

activities as required by lending authorities. The COO jointly with the Chief Lending Officer, the Credit Risk Director, the

Loan Review Manager and other Senior Executives are responsible for managing and executing the Corporation’s credit risk

program. The credit risk program aims to i) maintain the quality of the Corporation’s credit portfolio, ii) review the trends

affecting the portfolio, and iii) oversee the effectiveness and administration of credit-related policies.

The Chief Financial Officer (“CFO”), together with the Corporation’s Treasurer and the Asset and Liability Management

(“ALM”) Director, manage the Corporation’s interest rate and market and liquidity risk programs, including the liquidity

stress testing and policy limits. The CFO supervises Capital Planning and Capital Stress Testing. The CFO, jointly with the

Chief Accounting Officer (“CAO”) and the Corporate Controller, are responsible for the development and implementation of

the Corporation’s accounting policies and practices and the review and monitoring of critical accounts and transactions to

ensure that they are reported in accordance with GAAP and the applicable regulatory requirements for financial and regulatory

reporting purposes. The CFO, jointly with the CAO, are responsible for the management of the CECL/allowance quarterly

financial assessment.

The CRO, who reports to the CFO, is responsible for the oversight of the risk management of the Corporation as well as the

risk governance processes. The CRO monitors key risks and manages the operational risk program. The CRO provides the

leadership and strategy for the Corporation’s risk management and monitoring activities and is responsible for the oversight of

regulatory compliance, loan review, model risk, and operational risk management. The CRO reports regularly to the Risk

Committee of the Board on risk management activities including risk assessments, risk tolerances, regulatory matters, and

emerging risks. The CRO also supervises the Corporate Incident Response Program. The Internal Controls and Model Risk

Director, IT Risk Director, Retail Quality Assurance Manager, Governance and Regulatory Affairs Director and Corporate

Risk Managers assist the CRO in the monitoring of key risks and oversight of risk management practices. The CRO assists the

CFO in the review and oversight of the Corporation’s internal control over financial reporting and disclosure controls and

procedures. The CRO reports functionally to the BOD Risk Committee and administratively to the CFO.

The Corporate Strategic and Business Development Director is responsible for the development of the Corporation’s strategic

and business plan, by coordinating and collaborating with the executive team and all corporate groups involved with the

strategic and business planning process.

The Corporate Strategy and Investor Relations Division Director is responsible for managing communications with the

investor community and sell-side research analysts and for coordinating and collaborating with the executive team and all

corporate groups involved with the adequate execution of the strategic and business planning process.

The Chief Consumer Officer and Corporate Chief of Staff is responsible for the oversight of the mortgage, unsecured

consumer lending, auto, leasing, and insurance lines of business, as well as the oversight of the Corporation’s human capital

strategic plan. The Human Resources Director supports the Chief Consumer Officer and Corporate Chief of Staff in leading

the human capital and talent management efforts.

The Compliance Director is responsible for oversight of regulatory compliance. The Compliance Director implements an

enterprise-wide compliance risk assessment, and monitors compliance with significant regulations. The Compliance Director

is responsible for building awareness of and educating business units and subsidiaries on regulatory risks.

The General Counsel is responsible for the oversight of legal risks, including matters such as contract structuring, litigation

risk, and all legal-related aspects of the Corporation’s business. The General Counsel is also responsible of managing and

overseeing the Regulatory Compliance and Bank Secrecy Act (“BSA”) business units. The Corporate Affairs Officer assists

the General Counsel with various legal areas, including, but not limited to SEC reporting matters, insurance coverage and

liability, and the Sustainability Program.

Effective June 30, 2026, Orlando Berges will retire from the Corporation, concluding his service as CFO. The Corporation has

appointed Said Ortiz, currently serving as CAO, to succeed Mr. Berges as CFO, effective July 1, 2026. For additional information,

please refer to our Current Report on Form 8-K, which was filed with the SEC on February 9, 2026.

Liquidity Risk and Capital Adequacy, Interest Rate Risk Management, Credit Risk Management, Operational Risk, Legal

and Compliance Risk and Concentration Risk

The following discussion highlights First BanCorp.’s adopted policies and procedures for liquidity risk and capital adequacy,

interest rate risk, credit risk, operational risk, legal and compliance risk, and concentration risk.

Liquidity Risk and Capital Adequacy

Liquidity risk involves the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and

business operations, and meet contractual obligations through unconstrained access to funding at reasonable market rates. Liquidity

management involves forecasting funding requirements and maintaining sufficient capacity to meet liquidity needs and

accommodate fluctuations in asset and liability levels due to changes in the Corporation’s business operations or unanticipated

events.

The Corporation manages liquidity at two levels. The first is the liquidity of the parent company, or First BanCorp., which is the

holding company that owns the banking and non-banking subsidiaries. The second is the liquidity of the banking subsidiary,

FirstBank.

The Asset and Liability Committee of the Corporation’s Board of Directors is responsible for overseeing management’s

establishment of the Corporation’s liquidity policy, as well as approving operating and contingency procedures and monitoring

liquidity on an ongoing basis. The Management’s Investment and Asset Liability Committee (“MIALCO”), which reports to the

Board’s Asset and Liability Committee, uses measures of liquidity developed by management that involve the use of several

assumptions to review the Corporation’s liquidity position on a monthly basis. The MIALCO oversees liquidity management,

interest rate risk, market risk, and other related matters.

The MIALCO is composed of senior management officers, including the CEO, the CFO, the CRO, the Treasurer, the Chief

Consumer Officer and Corporate Chief of Staff, the Corporate Strategic and Business Development Director, the Treasury and

Investments Risk Manager, the Financial Planning and Asset and Liability Management (“ALM”) Director, and the COO. The

Treasury and Investments Division is responsible for planning and executing the Corporation’s funding activities and strategy,

monitoring liquidity availability daily, and reviewing liquidity measures on a weekly basis. The Investments Accounting and

Operations area of the Corporate Controller’s Department is responsible for calculating the liquidity measurements used by the

Treasury and Investment Division to review the Corporation’s liquidity position on a weekly basis. The Financial Planning and

ALM Division is responsible for operating the liquidity and interest rate risk models.

To ensure adequate liquidity through the full range of potential operating environments and market conditions, the Corporation

conducts its liquidity management and business activities in a manner that is intended to preserve and enhance funding stability,

flexibility, and diversity. Key components of this operating strategy include a strong focus on the continued development of

customer-based funding, the maintenance of direct relationships with wholesale market funding providers, and the maintenance of

the ability to liquidate certain assets when, and if, requirements warrant.

The Corporation develops and maintains contingency funding plans. These plans evaluate the Corporation’s liquidity position

under various operating circumstances and are designed to help ensure that the Corporation will be able to operate through periods

of stress when access to normal sources of funds is constrained. The plans project funding requirements during a potential period of

stress, specify and quantify sources of liquidity, outline actions and procedures for effectively managing liquidity through a period of

stress, and define roles and responsibilities for the Corporation’s employees. Under the contingency funding plans, the Corporation

stresses the balance sheet and the liquidity position to critical levels that mimic difficulties in generating funds or even maintaining

the current funding position of the Corporation and the Bank and are designed to help ensure the ability of the Corporation and the

Bank to honor their respective commitments. The Corporation has established liquidity triggers that the MIALCO monitors in order

to maintain the ordinary funding of the banking business. The MIALCO has developed contingency funding plans for the following

three scenarios: a credit rating downgrade, an economic cycle downturn event, and a concentration event. The Board’s Asset and

Liability Committee reviews and approves these plans on an annual basis.

Liquidity Risk Management

The Corporation manages its liquidity in a proactive manner and in an effort to maintain a sound liquidity position. It uses multiple

measures to monitor its liquidity position, including core liquidity, basic liquidity, and time-based reserve measures. Cash and cash

equivalents amounted to $658.6 million as of December 31, 2025, compared to $1.2 billion as of December 31, 2024. When adding

$1.9 billion of free high-quality liquid securities that could be liquidated or pledged within one day (which includes assets such as U.S.

government and GSEs obligations), the total core liquidity amounted to $2.6 billion as of December 31, 2025, or 13.54% of total

assets, compared to $2.4 billion, or 12.54% of total assets as of December 31, 2024.

In addition to the aforementioned $2.6 billion in cash and free high quality liquid assets, the Corporation had $1.1 billion available

for credit with the FHLB based on the value of loan and securities collateral pledged with the FHLB. As such, the basic liquidity ratio

(which adds such available secured lines of credit to the core liquidity) was approximately 19.39% of total assets as of December 31,

2025, compared to 17.27% of total assets as of December 31, 2024.

Further, the Corporation also maintains borrowing capacity at the FED Discount Window and had approximately $2.6 billion

available for funding under the FED’s Borrower-in-Custody (“BIC”) Program as of each of December 31, 2025 and 2024 as an

additional source of liquidity. Total loans pledged to the FED BIC Program amounted to $3.4 billion as of each of December 31, 2025

and December 31, 2024. The Corporation does not rely on uncommitted inter-bank lines of credit (federal funds lines) to fund its

operations. In the aggregate, as of December 31, 2025, the Corporation had $6.3 billion available to meet liquidity needs, or 132% of

estimated uninsured deposits, excluding fully collateralized government deposits, compared to $5.9 billion or 124%, respectively, as

of December 31, 2024.

Liquidity at the Bank level is highly dependent on bank deposits, which fund 87.5% of the Bank’s assets (or 84.4% excluding

brokered CDs). In addition, as further discussed below, the Corporation maintains a diversified base of readily available wholesale

funding sources, including advances from the FHLB through pledged borrowing capacity, securities sold under agreements to

repurchase, and access to brokered CDs. Funding through wholesale funding may continue to increase the overall cost of funding for

the Corporation and adversely affect the net interest margin.

Commitments to extend credit and standby letters of credit

As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the

financial needs of its customers. These financial instruments may include loan commitments and standby letters of credit. These

commitments are subject to the same credit policies and approval processes used for on-balance sheet instruments. These

instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements

of financial condition. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any

condition established in the contract. Since certain commitments are expected to expire without being drawn upon, the total

commitment amount does not necessarily represent future cash requirements. For most of the commercial lines of credit, the

Corporation has the option to reevaluate the agreement prior to additional disbursements. There have been no significant or

unexpected draws on existing commitments. In the case of credit cards and personal lines of credit, the Corporation can cancel the

unused credit facility at any time and without cause.

The following table summarizes commitments to extend credit and standby letters of credit as of the indicated dates:

December 31, 2025

December 31, 2024

(In thousands)

Financial instruments whose contract amounts represent credit risk:

Commitments to extend credit:

Construction undisbursed funds

191,879

283,302

Unused credit card lines

760,531

787,849

Unused personal lines of credit

34,932

37,140

Commercial lines of credit

1,146,541

1,053,938

Letters of credit:

Commercial letters of credit

32,252

41,738

Standby letters of credit

21,430

24,635

The Corporation engages in the ordinary course of business in other financial transactions that are not recorded on the balance

sheet or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the

transaction and, thus, affect the Corporation’s liquidity position. These transactions are designed to (i) meet the financial needs of

customers, (ii) manage the Corporation’s credit, market and liquidity risks, (iii) diversify the Corporation’s funding sources, and (iv)

optimize capital.

In addition to the aforementioned off-balance sheet debt obligations and unfunded commitments to extend credit, the Corporation

has obligations and commitments to make future payments under contracts, amounting to approximately $4.5 billion as of December

31, 2025. Our material cash requirements comprise primarily of contractual obligations to make future payments related to time

deposits, long-term borrowings, and operating lease obligations.

We

also have other contractual cash obligations related to certain

binding agreements we have entered into for services including outsourcing of technology services, security, advertising and other

services which are not material to our liquidity needs.

We

currently anticipate that our available funds, credit facilities, and cash

flows from operations will be sufficient to meet our operational cash needs and support loan growth and capital plan execution for

the foreseeable future.

Off-balance sheet transactions are continuously monitored to consider their potential impact to our liquidity position and changes

are applied to the balance between sources and uses of funds, as deemed appropriate, to maintain a sound liquidity position.

Sources of Funding

The Corporation utilizes different sources of funding to help ensure that adequate levels of liquidity are available when needed.

Diversification of funding sources is of great importance to protect the Corporation’s liquidity from market disruptions. The

principal sources of short-term funding are deposits, including brokered CDs. Additional funding is provided by securities sold

under agreements to repurchase and lines of credit with the FHLB. In addition, the Corporation also maintains as additional sources

borrowing capacity at the FED’s BIC Program , as discussed above.

The Asset and Liability Committee reviews credit availability on a regular basis. The Corporation may also sell mortgage loans as

a supplementary source of funding and obtain long-term funding through the issuance of notes and long-term brokered CDs.

While liquidity is an ongoing challenge for all financial institutions, management believes that the Corporation’s available

borrowing capacity and efforts to grow core deposits will be adequate to provide the necessary funding for the Corporation’s business

plans in the next 12 months and beyond.

The Corporation’s principal sources of funding are discussed below:

Deposits

The following table presents the composition of total deposits as of the indicated dates:

As of December 31,

2025

2024

(Dollars in thousands)

Interest-bearing checking accounts

3,512,649

4,308,116

Interest-bearing saving accounts

3,452,192

3,530,382

Time deposits

4,155,886

3,485,262

Interest-bearing deposits

(1)

11,120,727

11,323,760

Non-interest-bearing deposits

5,549,416

5,547,538

Total

16,670,143

16,871,298

Interest-bearing deposits:

Average balance outstanding

11,291,129

11,194,046

Weighted average rate during the period on interest-bearing deposits

2.11%

2.26%

Non-interest-bearing deposits:

Average balance outstanding

5,389,187

5,351,124

(1)

The weighted-average interest rate on total interest-bearing deposits as of December 31, 2025 and 2024 was 2.07% and 2.18%, respectively.

Retail and commercial core deposits –

The Corporation’s deposit products include regular saving accounts, demand deposit

accounts, money market accounts, and retail CDs. As of December 31, 2025 and 2024, the Corporation’s core deposits, which exclude

government deposits and brokered CDs, totaled $13.1 billion and $12.9 billion, respectively. The $193.3 million increase in such

deposits was driven by increases of $277.1 million in the Puerto Rico region, partially offset by an $89.9 million decrease in the

Florida region. This increase includes a $418.0 million increase in time deposits, and a $34.6 million increase in non-interest-bearing

deposits, partially offset by a $259.3 million decrease in interest-bearing non -maturity deposits.

Government deposits (fully collateralized)

• As of December 31, 2025, the Corporation had $2.5 billion of Puerto Rico public

sector deposits ($2.3 billion in transactional accounts and $225.8 million in time deposits), compared to $3.1 billion as of December

31, 2024. Government deposits are insured by the FDIC up to the applicable limits and the uninsured portions are fully collateralized.

Approximately 23% of the public sector deposits as of December 31, 2025 were from municipalities and municipal agencies in Puerto

Rico and 77% were from public corporations, the central government and its agencies, and U.S. federal government agencies in Puerto

Rico.

The uninsured portions of government deposits were collateralized by securities and loans with an amortized cost of $3.0 billion

and $3.7 billion as of December 31, 2025 and 2024, respectively, and an estimated market value of $2.8 billion and $3.3 billion as of

December 31, 2025 and 2024, respectively. In addition to securities and loans, as of December 31, 2025 and 2024, the Corporation

used $225.0 million and $175.0 million, respectively, in letters of credit issued by the FHLB as pledges for a portion of public deposits

in the Virgin Islands.

Estimate of Uninsured Deposits –

As of December 31, 2025 and 2024, the estimated amounts of uninsured deposits totaled $7.5

billion and $8.1 billion, respectively, including government deposits, generally representing the portion of deposits that exceed the

FDIC insurance limit of $250,000 and amounts in any other uninsured deposit account. As of December 31, 2025 and 2024, the

uninsured portion of fully collateralized government deposits amounted to $2.7 billion and $3.3 billion, respectively. Excluding fully

collateralized government deposits, the estimated amounts of uninsured deposits amounted to $4.8 billion, which represents 29.79% of

total deposits (excluding brokered CDs), as of December 31, 2025, compared to $4.8 billion, or 29.36%, as of December 31, 2024.

The estimated amount of uninsured deposits is calculated based on the same methodologies and assumptions used for our bank

regulatory reporting requirements adjusted for cash held by wholly-owned subsidiaries at the Bank.

The following table presents by contractual maturities the amount of U.S. time deposits in excess of FDIC insurance limits (over

$250,000) and other time deposits that are otherwise uninsured as of December 31, 2025:

(In thousands)

3 months or

less

3 months to

6 months

6 months to

1 year

Over 1 year

Total

U.S. time deposits in excess of FDIC insurance limits

622,714

162,414

265,859

188,645

1,239,632

Other uninsured time deposits

19,858

15,429

14,392

4,029

53,708

Brokered CDs

• Total brokered CDs increased by $115.4 million to $593.6 million as of December 31, 2025, primarily in the

Florida region. The increase reflects $371.8 million of new issuances with original average maturities of approximately 1.2 years and

an all-in cost of 4.11%, partially offset by maturing brokered CDs amounting to $256.4 million with an all-in cost of 4.76% that were

paid off during 2025.

The average remaining term to maturity of the brokered CDs outstanding as of December 31, 2025 was approximately 1.0 year.

The future use of brokered CDs will depend on multiple factors including excess liquidity at each of the regions, future cash needs

and any tax implications. Also, depending on lending or other investment opportunities available, cash inflows from repayments of

investment securities may be used as well to repay brokered CDs. Brokered CDs are insured by the FDIC up to regulatory limits and

can be obtained faster than regular retail deposits.

The following table presents the remaining contractual maturities and weighted-average interest rates of brokered CDs as of

December 31, 2025:

Total

Weighted-average

interest rate %

(In thousands)

Three months or less

119,459

4.30

Over three months to six months

92,153

4.17

Over six months to one year

182,339

3.97

Over one year to two years

141,187

3.85

Over two years to three years

33,097

4.38

Over three years to four years

9,848

4.05

Over four years to five years

5,950

4.63

Over five years

9,522

4.60

Total

593,555

4.08

Refer to “Net Interest Income” above for information about average balances of interest-bearing deposits and the average interest

rate paid on such deposits for the years ended December 31, 2025, 2024 and 2023.

Borrowings

As of December 31, 2025, total borrowings amounted to $290.0 million, compared to $561.7 million as of December 31, 2024.

Advances from the FHLB –

The Bank is a member of the FHLB system and obtains advances to fund its operations under a

collateral agreement with the FHLB that requires the Bank to maintain qualifying mortgages and/or investments as collateral for

advances taken. As of December 31, 2025 and 2024, the outstanding balance of long-term fixed-rate FHLB advances was $290.0

million and $500.0 million, respectively. Of the $290.0 million in FHLB advances as of December 31, 2025, $190.0 million were

pledged with investment securities and $100.0 million were pledged with mortgage loans. As of December 31, 2025, the Corporation

had $1.1 billion available for additional credit on FHLB lines of credit based on collateral pledged at the FHLB of New York.

The following table presents the remaining contractual maturities and weighted-average interest rates of advances from the FHLB

as of December 31, 2025:

Total

Weighted-average

interest rate %

(In thousands)

Three months or less

90,000

4.49

Over one year to two years

200,000

4.25

Total

(1)

290,000

4.32

(1) Average remaining term to maturity of 1.36 years.

Securities sold under agreements to repurchase –

From time to time, the Corporation enters into repurchase agreements as an

additional source of funding. As of each of December 31, 2025 and 2024, there were no outstanding repurchase agreements.

When the Corporation enters into repurchase agreements, as is the case with derivative contracts, the Corporation is required to

pledge cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as

collateral declines due to changes in interest rates, a liquidity crisis or any other factor, the Corporation is required to deposit

additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Given the quality of the

collateral pledged, the Corporation has not experienced margin calls from counterparties arising from credit-quality-related write-

downs in valuations.

Trust-Preferred Securities –

In 2004, FBP Statutory Trusts I and II, wholly-owned by the Corporation and not consolidated in the

Corporation’s financial statements, sold to institutional investors variable-rate TruPS and used the proceeds of these issuances,

together with the proceeds of the purchases by the Corporation of variable rate common securities, to purchase junior subordinated

deferrable debentures.

During the first half of 2025, the Corporation redeemed the remaining $61.7 million of outstanding TruPS as of December 31,

2024, which had been reported as part of “Long-term borrowings” in the Corporation’s consolidated financial statements, at a

contractual call price of 100%. Following the redemption of these TruPS, FBP Statutory Trusts I and II were liquidated by the

Corporation. See Note 24 – “First BanCorp. (Holding Company Only) Financial Information” for additional informatio n.

FED Discount Window

• The Corporation participates in the BIC Program of the FED. Through the BIC Program, a broad range of

loans may be pledged as collateral for borrowings through the FED Discount Window. As previously mentioned, as of December 31,

2025, the Corporation had approximately $2.6 billion fully available for funding under the FED’s Discount Window based on

collateral pledged at the FED.

Effect of Credit Ratings on Access to Liquidity

The Corporation’s liquidity is contingent upon its ability to obtain deposits and other external sources of funding to finance its

operations. The Corporation’s current credit ratings and any downgrade in credit ratings can hinder the Corporation’s access to new

forms of external funding and/or cause external funding to be more expensive, which could, in turn, adversely affect its results of

operations. Also, changes in credit ratings may further affect the fair value of unsecured derivatives whose value takes into account the

Corporation’s own credit risk.

The Corporation does not have any outstanding debt or derivative agreements that would be affected by credit rating downgrades.

Furthermore, given the Corporation’s non-reliance on corporate debt or other instruments directly linked in terms of pricing or volume

to credit ratings, the liquidity of the Corporation has not been affected in any material way by downgrades. The Corporation’s ability

to access new non-deposit sources of funding, however, could be adversely affected by credit downgrades.

As of the date hereof, the Corporation’s long-term issuer credit ratings are BB+ from Fitch and BBB from Kroll Bond Rating

Agency (“KBRA”). As of the date hereof, FirstBank’s long-term issuer credit ratings are BB+ from Fitch, which is one notch below

the minimum BBB- level required to be considered investment grade, and BBB+ from KBRA, which is considered investment grade.

The Corporation’s credit ratings are dependent on a number of factors, both quantitative and qualitative, and are subject to change at

any time. The disclosure of credit ratings is not a recommendation to buy, sell or hold the Corporation’s securities. Each rating should

be evaluated independently of any other rating.

Cash Flows

Cash and cash equivalents were $658.6 million as of December 31, 2025, a decrease of $500.8 million when compared to

December 31, 2024. The following discussion highlights the major activities and transactions that affected the Corporation’s cash

flows during 2025 and 2024:

Cash Flows from Operating Activities

First BanCorp.’s operating assets and liabilities vary significantly in the normal course of business due to the amount and timing of

cash flows. Management believes that cash flows from operations, available cash balances, and the Corporation’s ability to generate

cash through short and long-term borrowings will be sufficient to fund the Corporation’s operating liquidity needs for the foreseeable

future.

For the years ended December 31, 2025 and 2024, net cash provided by operating activities was $448.6 million and $404.2 million,

respectively. Net cash generated from operating activities was higher than reported net income largely as a result of adjustments for

non-cash items such as depreciation and amortization, and the provision for credit losses, as well as cash generated from sales and

repayments of loans held for sale.

Cash Flows from Investing Activities

The Corporation’s investing activities primarily relate to originating loans to be held for investment, as well as purchasing, selling,

and repaying available-for-sale and held-to-maturity debt securities. For the year ended December 31, 2025, net cash used in investing

activities was $170.4 million, primarily due to purchases of U.S. agencies MBS and debentures and U.S. Treasury securities, as well

as net disbursements on loans held for investment, partially offset by maturities of U.S. agencies debentures and U.S. Treasury

securities, principal repayments of U.S. agencies MBS and debentures , proceeds from sales of repossessed assets, and proceeds from

the bulk sale of fully charged-off consumer loans and finance leases during the first quarter of 2025.

For the year ended December 31, 2024, net cash provided by investing activities was $136.2 million, primarily due to principal

repayments of U.S. agencies MBS and debentures, and government bonds; proceeds from sales of repossessed assets; and proceeds

from sales of loans, driven by the bulk sale of fully charged-off consumer loans and finance leases during the first quarter of 2024 and

the sale of an $8.2 million nonaccrual C&I loan; partially offset by net disbursements on loans held for investment and purchases of

U.S. agencies MBS during 2024.

Cash Flows from Financing Activities

The Corporation’s financing activities primarily include the receipt of deposits and the issuance of brokered CDs, the issuance

and/or repayment of long-term borrowings, the issuance of equity instruments, return of capital, and activities related to its short -term

funding. For the year ended December 31, 2025, net cash used in financing activities was $779.0 million, mainly reflecting the

repayments of long-term borrowings, consisting of $210.0 million in FHLB advances and the redemption of junior subordinated

debentures, capital returned to stockholders, and a decrease in total deposits. See Note 24 – “First BanCorp. (Holding Company Only)

Financial Information” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K, for additional

information on the redemption of junior subordinated debentures.

For the year ended December 31, 2024, net cash used in financing activities was $44.1 million, mainly reflecting capital returned to

stockholders and the redemption of junior subordinated debentures , partially offset by a net increase in deposits.

Capital

As of December 31, 2025, the Corporation’s stockholders’ equity was $2.0 billion, an increase of $297.6 million from December

31, 2024. The increase was driven by net income generated in 2025 and a $212.4 million increase in the fair value of available-for -sale

debt securities due to changes in market interest rates recognized as part of accumulated other comprehensive loss in the consolidated

statements of financial condition, partially offset by $150.0 million in common stock repurchases and $115.7 million, or $0.72 per

common share, in common stock dividends declared in 2025.

On January 26, 2026, the Corporation’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, which

represents an increase of $0.02 per common share, or an 11% increase, compared to its most recent quarterly dividend paid in

December 12, 2025. The dividend is payable on March 13, 202 6 to shareholders of record at the close of business on February 26,

2026. The Corporation intends to continue to pay quarterly dividends on common stock. However, the Corporation’s common stock

dividends, including the declaration, timing, and amount, remain subject to consideration and approval by the Corporation’s Board of

Directors at the relevant times.

On July 22, 2024, the Corporation announced that its Board of Directors had approved a repurchase program authorizing up to $250

million in repurchases, which could include common stock and/or junior subordinated debentures. Under this program, the

Corporation repurchased approximately 7.1 million shares of common stock for a total cost of $138.3 million during 2025 and

redeemed $111.7 million of junior subordinated debentures, of which $61.7 million were redeemed during 2025. These transactions

completed the $250 million repurchase program.

Furthermore, on October 22, 2025, the Corporation announced that its Board of Directors approved a new stock repurchase

program authorizing up to $200 million of its outstanding common stock, which it expects to execute through the end of the fourth

quarter of 2026. Under this program, the Corporation repurchased approximately 0.6 million shares of common stock for a total cost

of $11.7 million during 2025. For more information, see Part II, Item 5, “Market for Registrant’s Common Equity and Related

Stockholder Matters and Issuer Purchases of Equity Securities,” of this Form 10-K.

From January 1, 2026 to February 20, 2026, the Corporation repurchased approximately 0.1 million shares of common stock for a

total cost of $1.1 million. Therefore, the Corporation has remaining authorization of approximately $187.2 million as of February 20,

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by

the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other

intangible assets. Tangible assets are total assets less the previously mentioned intangible assets. See “Non-GAAP Financial Measures

and Reconciliations” above for additional information.

The following table is a reconciliation of the Corporation’s tangible common equity and tangible assets, non-GAAP financial

measures, to total equity and total assets, respectively, as of the indicated dates:

December 31, 2025

December 31, 2024

(In thousands, except ratios and per share information)

Total common equity - GAAP

1,966,865

1,669,236

Goodwill

(38,611)

(38,611)

Other intangible assets

(3,458)

(6,967)

Tangible common equity - non-GAAP

1,924,796

1,623,658

Total assets - GAAP

19,132,892

19,292,921

Goodwill

(38,611)

(38,611)

Other intangible assets

(3,458)

(6,967)

Tangible assets - non -GAAP

19,090,823

19,247,343

Common shares outstanding

156,619

163,869

Tangible common equity ratio - non-GAAP

10.08%

8.44%

Tangible book value per common share - non-GAAP

12.29

9.91

See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in

Part II, Item 8 of this Form 10-K for the regulatory capital positions of the Corporation and FirstBank as of December 31, 2025 and

2024, respectively.

The Puerto Rico Banking Law of 1933, as amended (the “Puerto Rico Banking Law”), requires that a minimum of 10% of

FirstBank’s net income for the year be transferred to a legal surplus reserve until such surplus equals the total of paid-in-capital on

common and preferred stock. Amounts transferred to the legal surplus reserve from retained earnings are not available for distribution

to the Corporation without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The Puerto Rico Banking Law

provides that, when the expenditures of a Puerto Rico commercial bank are greater than receipts, the excess of the expenditures over

receipts must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the legal

surplus reserve, as a reduction thereof. If the legal surplus reserve is not sufficient to cover such balance in whole or in part, the

outstanding amount must be charged against the capital account and the Bank cannot pay dividends until it can replenish the legal

surplus reserve to an amount of at least 20% of the original capital contributed. During the years ended December 31, 2025, 2024 and

2023, the Corporation transferred $32.3 million, $30.6 million and $31.1 million, respectively, to the legal surplus reserve. FirstBank’s

legal surplus reserve, included as part of retained earnings in the Corporation’s consolidated statements of financial condition,

amounted to $262.5 million as of December 31, 2025 and $230.2 million as of December 31, 2024.

Capital risk is the risk that our capital is insufficient to support our business activities under normal or stressed market conditions or

we face capital reductions or risk-weighted assets increases, including from new or revised rules or changes in interpretations of

existing rules, and are therefore unable to meet our internal capital targets or external regulatory capital requirements. To mitigate this

risk, we maintain a comprehensive capital management framework that defines objectives, establishes guidelines, and incorporates

stress testing to ensure adequate capitalization even under stressed conditions. Governance of capital planning is overseen by the

Capital Planning Committee, chaired by the CEO and including the CFO, CRO, and the Corporate Strategy and Investor Relations

Officer. In addition, committees and members of senior management are responsible for the ongoing monitoring of our capital

adequacy and evaluating current and future regulatory capital requirements, reviewing the results of our capital planning and stress

tests processes and the results of our capital models, and reviewing our contingency funding and capital plan and key capital adequacy

metrics, including regulatory capital ratios.

Interest Rate Risk Management

First BanCorp. manages its asset/liability position to limit the effects of changes in interest rates on net interest income and to

maintain stability of profitability under varying interest rate scenarios. The MIALCO oversees interest rate risk and monitors, among

other things, current and expected conditions in global financial markets, competition and prevailing rates in the local deposit market,

liquidity, loan originations pipeline, securities market values, recent or proposed changes to the investment portfolio, alternative

funding sources and related costs, hedging and the possible purchase of derivatives such as swaps and caps, and any tax or regulatory

issues which may be pertinent to these areas. The MIALCO approves funding decisions in light of the Corporation’s overall strategies

and objectives.

On at least a quarterly basis, the Corporation performs a consolidated net interest income simulation analysis to estimate the potential

change in future earnings from projected changes in interest rates. These simulations are carried out over a one-to-five-year time

horizon. The rate scenarios considered in these simulations reflect gradual upward or downward interest rate movements in the yield

curve, for gradual (ramp) parallel shifts in the yield curve of 200 and 300 bps during a twelve-month period, or immediate upward or

downward changes in interest rate movements of 200 bps, for interest rate shock scenarios. The Corporation carries out the

simulations in two ways:

(1)

Using a static balance sheet, as the Corporation had on the simulation date, and

(2)

Using a dynamic balance sheet based on recent patterns and current strategies.

The balance sheet is divided into groups of assets and liabilities by maturity or repricing structure and their corresponding interest

yields and costs. As interest rates rise or fall, these simulations incorporate expected future lending rates, current and expected future

funding sources and costs, the possible exercise of options, changes in prepayment rates, deposit decay and other factors, which may

be important in projecting net interest income.

The Corporation uses a simulation model to project future movements in the Corporation’s balance sheet and income statement.

The starting point of the projections corresponds to the actual values on the balance sheet on the simulation date. These simulations

are highly complex and are based on many assumptions that are intended to reflect the general behavior of the balance sheet

components over the modeled periods. It is unlikely that actual events will match these assumptions in all cases. For this reason, the

results of these forward-looking computations are only approximations of the sensitivity of net interest income to changes in market

interest rates. Several benchmark and market rate curves were used in the modeling process, primarily, SOFR curve, Prime Rate, U.S.

Treasury yield curve, FHLB rates, and brokered CDs rates.

As of December 31, 2025, the Corporation forecasted the 12-month net interest income assuming December 31, 2025 interest rate

curves remain constant. Then, net interest income was estimated under rising and falling rates scenarios. For the rising rate scenario, a

gradual (ramp) and immediate (shock) parallel upward shift of the yield curve is assumed during the first twelve months (the “+300

ramp”, “+200 ramp” and “+200 shock” scenarios). Conversely, for the falling rate scenario, a gradual (ramp) and immediate (shock)

parallel downward shift of the yield curve is assumed during the first twelve months (the “-300 ramp”, “-200 ramp” and “-200 shock”

scenarios).

The SOFR curve for December 31, 2025, as compared with December 31, 2024, reflects a decrease of 69 bps on average in the

short-term sector of the curve, or between one to twelve months; a decrease of 68 bps in the medium-term sector of the curve, or

between 2 to 5 years; and a decrease of 23 bps in the long-term sector of the curve, or over 5-year maturities . A similar change in

market rates was observed in the Constant Maturity Treasury yield curve with a decrease of 67 bps in the short-term sector of the

curve, a decrease of 72 bps in the medium-term sector of the curve, and a decrease of 14 bps in the long-term sector of the curve.

The following table presents the results of the static simulations as of December 31, 2025 and 2024. Consistent with prior years,

these exclude non-cash changes in the fair value of derivatives:

Net Interest Income Risk

(% Change Projected for the next 12 months)

December 31, 2025

December 31, 2024

Gradual Change in Interest Rates:

+ 300 bps ramp

3.73

3.05

+ 200 bps ramp

2.52

2.04

- 300 bps ramp

-5.31

-4.79

- 200 bps ramp

-3.49

-3.15

Immediate Change in Interest Rates:

+ 200 bps shock

4.44

3.51

- 200 bps shock

-8.47

-7.17

The Corporation continues to manage its balance sheet structure to control and limit the overall interest rate risk by managing its

asset composition while maintaining a sound liquidity position. See “Risk Management – Liquidity Risk Management” above for

liquidity ratios.

As of December 31, 2025 and 2024, the net interest income simulations show that the Corporation continues to have an asset

sensitive position for the next twelve months under a static balance sheet simulation.

Under gradual rising and falling rate scenarios, the net interest income simulation reflects increased rate sensitivity compared to

December 31, 2024. There was a lower sensitivity in the liabilities side primarily driven by lower balances in government non-

maturity deposits, which are market linked. Additionally, there was a slightly higher sensitivity in the assets side due to earlier

scheduled maturities of U.S. government and agencies obligations which were reinvested in short-term U.S. Treasury securities and

MBS, coupled with growth in the C&I loan portfolio, offset by a lower interest-bearing cash position.

Under the static simulation, the Corporation assumes that maturing instruments are replaced with similar instruments at the

repricing rate upon maturity. The Corporation’s results may vary significantly from the ones presented above under alternative balance

sheet compositions, such as a dynamic balance sheet scenario which, for example, would assume that cash flows from the investment

securities portfolio and loan repayments could be redeployed into higher yielding alternatives.

Credit Risk Management

First BanCorp. is subject to credit risk mainly with respect to its portfolio of loans receivable and off-balance-sheet instruments,

principally loan commitments. Loans receivable represents loans that First BanCorp. holds for investment and, therefore, First

BanCorp. is at risk for the term of the loan. Loan commitments represent commitments to extend credit, subject to specific conditions,

for specific amounts and maturities. These commitments may expose the Corporation to credit risk and are subject to the same review

and approval process as for loans made by the Bank. See “Risk Management – Liquidity Risk” above for further details. The

Corporation manages its credit risk through its credit policy, underwriting, monitoring of loan concentrations and related credit

quality, counterparty credit risk, economic and market conditions, and legislative or regulatory mandates. The Corporation also

performs independent loan review and quality control procedures, statistical analysis, comprehensive financial analysis, established

management committees, and employs proactive collection and loss mitigation efforts. Furthermore, personnel performing structured

loan workout functions are responsible for mitigating defaults and minimizing losses upon default within each region and for each

business segment. In the case of the C&I, commercial mortgage and construction loan portfolios, the Special Asset Group (“SAG”)

focuses on strategies for the accelerated reduction of non-performing assets through note sales, short sales, loss mitigation programs,

and sales of OREO. In addition to the management of the resolution process for problem loans, the SAG oversees collection efforts for

all loans to prevent migration to the nonaccrual and/or adversely classified status. The SAG utilizes relationship officers, collection

specialists and attorneys.

The Corporation may also have risk of default in the securities portfolio. The securities held by the Corporation are principally

fixed-rate U.S. agencies MBS and U.S. Treasury and agencies securities. Thus, a substantial portion of these instruments is backed by

mortgages, a guarantee of a U.S. GSE or the full faith and credit of the U.S. government.

Management, consisting of the Corporation’s Chief Risk Officer, Commercial Credit Risk Officer, Retail Credit Risk Officer, Chief

Credit Officer, and other senior executives, has the primary responsibility for setting strategies to achieve the Corporation’s credit risk

goals and objectives. Management has documented these goals and objectives in the Corporation’s Credit Policy.

Allowance for Credit Losses and Non-Performing Assets

Allowance for Credit Losses for Loans and Finance Leases

The ACL for loans and finance leases represents the estimate of the level of reserves appropriate to absorb expected credit losses

over the estimated life of the loans. The amount of the allowance is determined using relevant available information, from internal and

external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience

is a significant input for the estimation of expected credit losses, as well as adjustments to historical loss information made for

differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level,

or term. Additionally, the Corporation’s assessment involves evaluating key factors, which include credit and macroeconomic

indicators, such as changes in unemployment rates, property values, and other relevant factors to account for current and forecasted

market conditions that are likely to cause estimated credit losses over the life of the loans to differ from historical credit losses. Such

factors are subject to regular review and may change to reflect updated performance trends and expectations. The process includes

judgments and quantitative elements that may be subject to significant change. Further, the Corporation periodically considers the

need for qualitative reserves to the ACL. Qualitative adjustments may be related to and include, but are not limited to, factors such as

the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with

management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit

concentrations, collateral specific risks, nature and size of the portfolio and external factors that may ultimately impact credit quality ;

and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The

ACL for loans and finance leases is reviewed at least on a quarterly basis as part of the Corporation’s continued evaluation of its asset

quality.

The Corporation generally applies probability weights to the baseline and alternative downside economic scenarios to estimate the

ACL with the baseline scenario carrying the highest weight. The scenarios that are chosen each quarter and the weighting given to

each scenario for the different loan portfolio categories depend on a variety of factors including recent economic events, leading

national and regional economic indicators, and industry trends. However, as of December 31, 2025 and December 31, 2024, the

Corporation applied 100% probability to the baseline scenario for the commercial mortgage and construction loan portfolios since

certain macroeconomic variables associated with commercial real estate property performance and the CRE price index, particularly

in the Puerto Rico region, are expected to continue to perform in a more favorable manner than the alternative downside economic

scenario. The economic scenarios used in the ACL determination contained assumptions related to economic uncertainties associated

with geopolitical instability, the CRE price index, unemployment rate, inflation levels, and expected future interest rate adjustments in

the Federal Reserve Board’s funds rate.

As of December 31, 2025, the Corporation’s ACL model considered the following assumptions for key economic variables in the

probability-weighted economic scenarios:

CRE price index at the national level with an average projected contraction of 1.32% and 1.72% for the year 2026 and for the

year 2027, respectively, compared to an average projected appreciation of 4.42% and 6.96% for the year 2026 and for the

year 2027, respectively, as of December 31, 2024.

Regional House Price Index forecast in Puerto Rico (purchase only prices) is expected to increase by 2.72% for the next two

years as of December 31, 2025, compared to an increase of 2.13% for the first two years of the projection as of December 31,

2024. For the Florida region, the House Price Index forecast as of December 31, 2025 and 2024 was projected to decrease by

0.23% and 1.72%, respectively, for the first two years of the projection.

Average regional unemployment rate in Puerto Rico is forecasted at 6.38% for the year 2026 and 6.42% for the year 2027,

compared to 6.21% for the year 2026 and 5.94% for the year 2027 as of December 31, 2024. For the Florida region and the

U.S. mainland, average unemployment rate is forecasted at 4.93% and 5.36%, respectively, for the year 2026, and 4.71% and

5.18%, respectively, for the year 2027, compared to 4.15% and 4.60%, respectively, for the year 2026, and 3.52% and 3.99%,

respectively, for the year 2027, as of December 31, 2024.

Annualized change in GDP in the U.S. mainland of 1.31% for the year 2026 and 1.63% for the year 2027, compared to

1.91% for the year 2026 and 2.40% for the year 2027, as of December 31, 2024.

It is difficult to estimate how potential changes in one factor or input might affect the overall ACL because management considers a

wide variety of factors and inputs in estimating the ACL. Changes in the factors and inputs considered may not occur at the same rate

and may not be consistent across all geographies or product types, and changes in factors and inputs may be directionally inconsistent,

such that improvement in one factor or input may offset deterioration in others. However, to demonstrate the sensitivity of credit loss

estimates to macroeconomic forecasts as of December 31, 2025, management compared the modeled estimates under the probability-

weighted economic scenarios against a more adverse scenario. Such scenario incorporates an additional adverse scenario and

decreases the weight applied to the baseline scenario. Under this more adverse scenario, as an example, average unemployment rate

for the Puerto Rico region increases to 6.75% for the year 2026, compared to 6.38% for the same period on the probability-weighted

economic scenario projections.

To demonstrate the sensitivity to key economic parameters used in the calculation of the ACL at December 31, 2025, management

calculated the difference between the quantitative ACL and this more adverse scenario. Excluding consideration of qualitative

adjustments, this sensitivity analysis would result in a hypothetical increase in the ACL of approximately $43 million at December 31,

2025. This analysis relates only to the modeled credit loss estimates and is not intended to estimate changes in the overall ACL as it

does not reflect any potential changes in other adjustments to the qualitative calculation, which would also be influenced by the

judgment management applies to the modeled lifetime loss estimates to reflect the uncertainty and imprecision of these estimates

based on current circumstances and conditions. Recognizing that forecasts of macroeconomic conditions are inherently uncertain,

particularly in light of recent economic conditions and challenges, which continue to evolve, management believes that its process to

consider the available information and associated risks and uncertainties is appropriately governed and that its estimates of expected

credit losses were reasonable and appropriate for the period ended December 31, 2025.

As of December 31, 2025, the ACL for loans and finance leases was $249.0 million, an increase of $5.1 million, from $243.9

million as of December 31, 2024. The increase was mainly related to the ACL for C&I loans, which increased by $8.3 million, mainly

due to loan growth, partially offset by improved financial performance of certain commercial borrowers. Also, the ACL for residential

mortgage loans increased by $0.4 million driven by loan growth, partially offset by improvements in macroeconomic variables, such

as the unemployment rate and the House Price Index, and updated historical loss experience used for determining the ACL estimate

resulting in a downward revision of estimated loss severities and lower required reserve levels.

Meanwhile, the ACL for consumer loans decreased by $6.9 million, driven by improvements in macroeconomic variables, mainly

in the projection of the unemployment rate, and reductions in the unsecured loan portfolio volumes, partially offset by updated

historical loss experience used for determining the ACL estimate in the unsecured loan portfolio.

The ratio of the ACL for loans and finance leases to total loans held for investment decreased to 1.90% as of December 31, 2025,

compared to 1.91% as of December 31, 2024. An explanation for the change for each portfolio follows:

The ACL to total loans ratio for the residential mortgage loan portfolio decreased from 1.44% as of December 31, 2024 to

1.41% as of December 31, 2025, driven by improvements in macroeconomic variables and updated historical loss

experience.

The ACL to total loans ratio for the construction loan portfolio increased from 1.67% as of December 31, 2024 to 2.14%

as of December 31, 2025, driven by the aforementioned deterioration in the economic outlook of commercial real estate

property performance and the inflow to nonaccrual status of a $4.3 million loan in the Puerto Rico region which triggered

an additional ACL of $0.4 million based on the collateral value.

The ACL to total loans ratio for the commercial mortgage loan portfolio increased from 0.87% as of December 31, 2024 to

0.93% as of December 31, 2025, driven by the aforementioned deterioration in the commercial real estate property

performance and the forecasted CRE price index, and updated historical prepayment experience, partially offset by

improved financial performance of certain commercial borrowers.

The ACL to total loans ratio for the C&I loan portfolio increased from 0.98% as of December 31, 2024 to 1.12% as of

December 31, 2025,

driven by the impact of renewals and refinancings.

The ACL to total loans ratio for the consumer loan portfolio decreased from 3.83% as of December 31, 2024 to 3.70% as

of December 31, 2025, mainly due to the aforementioned improvements in macroeconomic variables and a change in asset

mix due to the reduction in the unsecured loan portfolio, partially offset by updated historical loss experience.

The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 269.05% as of December 31,

2025, compared to 278.90% as of December 31, 2024.

See “Results of Operations - Provision for Credit Losses” above and Note 4 – “Allowance for Credit Losses for Loans and Finance

Leases” above for additional information.

Year Ended December 31,

2025

2024

2023

(Dollars in thousands)

ACL for loans and finance leases, beginning of period

243,942

261,843

260,464

Impact of adoption of ASU 2022-02

2,116

Provision for credit losses - (benefit) expense:

Residential mortgage

233

(16,225)

(6,866)

Construction

1,494

(1,912)

1,408

Commercial mortgage

1,230

(10,717)

(2,086)

C&I

7,667

(4,749)

6,372

Consumer loans and finance leases

75,282

96,464

67,816

Total provision for credit losses - expense

85,906

62,861

66,644

Charge-offs:

Residential mortgage

(1,131)

(1,971)

(3,245)

Construction

(62)

Commercial mortgage

(92)

(1,133)

C&I

(499)

(2,956)

(6,936)

Consumer loans and finance leases

(102,197)

(108,901)

(76,726)

Total charge offs

(103,919)

(113,828)

(88,102)

Recoveries:

Residential mortgage

1,315

1,453

2,692

Construction

354

131

1,951

Commercial mortgage

247

533

786

C&I

1,214

6,743

841

Consumer loans and finance leases

(1)

19,978

24,206

14,451

Total recoveries

23,108

33,066

20,721

Net charge-offs

(80,811)

(80,762)

(67,381)

ACL for loans and finance leases, end of period

249,037

243,942

261,843

ACL for loans and finance leases to period-end total loans held for investment

1.90%

1.91%

2.15%

Net charge-offs to average loans outstanding during the period

(2)

0.63%

0.65%

0.58%

Provision for credit losses - expense for loans and finance leases to net charge-offs during the period

1.06x

0.78x

0.99x

(1)

For the years ended December 31, 2025 and 2024, includes recoveries totaling $2.4 million and $10.0 million, respectively, associated with the bulk sales of fully charged-off consumer loans and finance leases.

(2)

The recoveries associated with the aforementioned bulk sales reduced the ratio of total net charge-offs to related average loans by 2 bps and 9 bps for the years ended December 31, 2025 and 2024, respectively.

The following tables set forth information concerning the composition of the Corporation's loan portfolio and related ACL by loan

category, and the percentage of loan balances in each category to the total of such loans as of the indicated dates:

As of December 31, 2025

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer Loans

and Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

2,908,302

265,568

2,554,252

3,688,358

3,708,876

13,125,356

Percent of loans in each category to total loans

22

2

19

28

29

100

Allowance for credit losses

41,071

5,672

23,832

41,416

137,046

249,037

Allowance for credit losses to amortized cost

1.41

2.14

0.93

1.12

3.70

1.90

As of December 31, 2024

Residential

Mortgage

Loans

Commercial

Mortgage

Loans

C&I Loans

Consumer Loans

and Finance

Leases

Construction

Loans

(Dollars in thousands)

Total

Total loans held for investment:

Amortized cost of loans

2,828,431

228,396

2,565,984

3,366,038

3,757,707

12,746,556

Percent of loans in each category to total loans

22

2

20

26

30

100

Allowance for credit losses

40,654

3,824

22,447

33,034

143,983

243,942

Allowance for credit losses to amortized cost

1.44

1.67

0.87

0.98

3.83

1.91

Allowance for Credit Losses for Unfunded Loan Commitments

The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk as a

result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for

commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance

sheet credit exposures is adjusted as a provision for credit loss expense. As of December 31, 2025, the ACL for off-balance sheet

credit exposures decreased by $0.1 million to $3.0 million, when compared to December 31, 2024.

Allowance for Credit Losses for Debt Securities

As of December 31, 2025, the ACL for debt securities was $1.5 million, of which $0.7 million was related to Puerto Rico municipal

bonds classified as held-to-maturity, compared to $1.3 million and $0.8 million, respectively, as of December 31, 2024.

Nonaccrual Loans and Non-Performing Assets

Total non-performing assets consist of nonaccrual loans (generally loans held for investment or loans held for sale for which the

recognition of interest income was discontinued when the loan became 90 days past due or earlier if the full and timely collection of

interest or principal is uncertain), foreclosed real estate and other repossessed properties (generally repossessed automobiles), and non-

performing investment securities, if any. See Note 1 – “Nature of Business and Summary of Significant Accounting Policies” to the

audited consolidated financial statements included in Part II, Item 8 of this Form 10-K for information on the policies followed by the

Corporation to classify loans in nonaccrual status or 90 days and still accruing.

The following table shows non-performing assets by geographic segment as of the indicated dates:

December 31, 2025

December 31, 2024

(In thousands)

Puerto Rico:

Nonaccrual loans held for investment:

Residential mortgage

12,637

16,854

Construction

4,581

403

Commercial mortgage

1,913

2,716

C&I

27,211

19,595

Consumer loans and finance leases

20,891

22,538

Total nonaccrual loans held for investment

67,233

62,106

OREO

6,661

13,691

Other repossessed property

12,216

11,637

Other assets

(1)

1,620

1,620

Total non-performing assets

87,730

89,054

Past due loans 90 days and still accruing

30,643

39,307

Virgin Islands:

Nonaccrual loans held for investment:

Residential mortgage

5,407

6,555

Construction

955

962

Commercial mortgage

6,469

8,135

C&I

644

919

Consumer loans

529

205

Total nonaccrual loans held for investment

14,004

16,776

OREO

(2)

861

3,615

Other repossessed property

173

219

Total non-performing assets

15,038

20,610

Past due loans 90 days and still accruing

1,270

3,083

United States:

Nonaccrual loans held for investment:

Residential mortgage

11,125

8,540

C&I

187

Consumer loans

14

45

Total nonaccrual loans held for investment

11,326

8,585

Other repossessed property

3

Total non-performing assets

11,326

8,588

Total:

Nonaccrual loans held for investment:

Residential mortgage

29,169

31,949

Construction

5,536

1,365

Commercial mortgage

8,382

10,851

C&I

28,042

20,514

Consumer loans and finance leases

21,434

22,788

Total nonaccrual loans held for investment

92,563

87,467

OREO

7,522

17,306

Other repossessed property

12,389

11,859

Other assets

(1)

1,620

1,620

Total non-performing assets

114,094

118,252

Past due loans 90 days and still accruing

(3) (4) (5) (6)

31,913

42,390

Non-performing assets to total assets

0.60%

0.61%

Nonaccrual loans held for investment to total loans held for investment

0.71%

0.69%

ACL for loans and finance leases

249,037

243,942

ACL for loans and finance leases to total nonaccrual loans held for investment

269.05%

278.90%

ACL for loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans

392.84%

439.39%

(1)

Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.

(2)

During 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with an ongoing litigation involving a commercial OREO property in the Virgin Islands

region. See Note 23 - “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K, for further details.

(3)

Includes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election to treat each pool as a single asset, both at the time of

adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can

reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more amounted to $4.8 million and

$6.2 million as of December 31, 2025 and 2024, respectively.

(4)

Includes FHA/VA government-guaranteed residential mortgage loans as loans past due 90 days and still accruing as opposed to nonaccrual loans. The Corporation continues accruing interest on

these loans until they have passed the 15 months delinquency mark, taking into consideration the FHA interest curtailment process. These balances include $4.1 million and $8.0 million of FHA

government guaranteed residential mortgage loans that were over 15 months delinquent as of December 31, 2025 and 2024, respectively.

(5)

These includes rebooked loans, which were previously pooled into GNMA securities, amounting to $6.7 million and $5.7 million as of December 31, 2025 and 2024, respectively. Under the GNMA

program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to the repurchase

option are required to be reflected on the financial statements with an offsetting liability.

(6)

Includes credit cards that continue accruing interest until charged-off at 180 days delinquent.

Total non-performing assets decreased by $4.2 million to $114.1 million as of December 31, 2025, compared to $118.3 million as of

December 31, 2024. The decrease in non-performing assets was driven by a $9.8 million decrease in the OREO portfolio balance,

mainly attributable to the sales of residential OREO properties in the Puerto Rico region and the aforementioned $2.8 million

valuation adjustment recorded in a commercial OREO property in the Virgin Islands region; and a $2.8 million decrease in nonaccrual

residential mortgage loans; partially offset by a $9.2 million increase in nonaccrual commercial and construction loans, driven by the

inflows of a $10.0 million C&I loan in the Puerto Rico region in the telecommunications industry, a $4.3 million construction loan in

the Puerto Rico region in the hospitality industry, and a $1.9 million C&I loan in the Puerto Rico region in the dairy farm industry,

partially offset by a $3.1 million payoff of a C&I loan in the Puerto Rico region in the food retail industry.

The following tables present the activity of commercial and construction nonaccrual loans held for investment for the indicated

periods:

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Year Ended December 31, 2025

Beginning balance

1,365

10,851

20,514

32,730

Plus:

Additions to nonaccrual

4,371

(1)

13,540

(1)

13,849

(1)

31,760

Less:

Loans returned to accrual status

(118)

(1,579)

(393)

(2,090)

Nonaccrual loans transferred to OREO

(54)

(286)

(340)

Nonaccrual loans charge-offs

(92)

(346)

(438)

Loan collections

(82)

(14,284)

(2)

(5,296)

(19,662)

Ending balance

5,536

8,382

28,042

41,960

(1)

Include inflows to nonaccrual status of a $12.6 million commercial mortgage loan in the Florida region, two C&I loans in the Puerto Rico region totaling $11.9 million, and a $4.3

million construction loan in the Puerto Rico region.

(2)

Mostly related to the aforementioned inflow during the first quarter of 2025 of a commercial mortgage loan in the Florida region, which was subsequently paid off during the fourth

quarter of 2025.

Construction

Commercial

Mortgage

C&I

Total

(In thousands)

Year Ended December 31, 2024

Beginning balance

1,569

12,205

15,250

29,024

Plus:

Additions to nonaccrual

3,300

(1)

151

28,064

(1)

31,515

Less:

Loans returned to accrual status

(35)

(209)

(9,495)

(2)

(9,739)

Nonaccrual loans transferred to OREO

(48)

(1,008)

(1,056)

Nonaccrual loans charge-offs

(2,742)

(2,742)

Loan collections

(288)

(1,296)

(4,488)

(6,072)

Reclassification

(3,133)

3,133

Nonaccrual loans sold, net of charge-offs

(8,200)

(8,200)

Ending balance

1,365

10,851

20,514

32,730

(1)

Include inflows to nonaccrual status of a $10.5 million participated C&I loan in the Florida region in the power generation industry and a $16.5 million commercial relationship in the

Puerto Rico region in the food retail industry.

(2)

Mainly related to the restoration to accrual status of the aforementioned participated C&I loan in the Florida region associated with the power generation industry that entered in

nonaccrual status during the first quarter of 2024.

The following table presents the activity of residential nonaccrual loans held for investment for the indicated periods:

Year Ended December 31,

2025

2024

(In thousands)

Beginning balance

31,949

32,239

Plus:

Additions to nonaccrual

16,867

16,880

Less:

Loans returned to accrual status

(12,579)

(9,553)

Nonaccrual loans transferred to OREO

(1,224)

(1,935)

Nonaccrual loans charge-offs

(65)

(376)

Loan collections

(5,779)

(5,306)

Ending balance

29,169

31,949

The amount of nonaccrual consumer loans, including finance leases, decreased by $1.4 million to $21.4 million as of December 31,

2025, mainly related to a decrease in auto loans, finance leases, and personal loans. The inflows of nonaccrual consumer loans during

the year ended December 31, 2025 amounted to $107.6 million, compared to inflows of $118.2 million for the same period in 2024.

As of December 31, 2025, approximately $32.0 million, or 35%, of the loans placed in nonaccrual status, mainly commercial and

residential mortgage loans, were current, or had delinquencies of less than 90 days in their interest payments. Collections on

nonaccrual loans are being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant.

During the year ended December 31, 2025, interest income of approximately $1.4 million related to nonaccrual commercial and

construction loans with a carrying value of $29.8 million as of December 31, 2025 was applied against the related principal balances

under the cost-recovery method.

Total loans in early delinquency (

i.e.

, 30-89 days past due loans, as defined in regulatory reporting instructions) amounted to $145.0

million as of December 31, 2025, a decrease of $8.0 million, compared to $153.0 million as of December 31, 2024, mainly due to a

$5.9 million decrease in consumer loans, mainly in finance leases, personal loans, and credit cards; and a $4.6 million decrease in

residential mortgage loans; partially offset by a $2.5 million increase in commercial and construction loans.

In addition, the Corporation provides homeownership preservation assistance to its customers through a loss mitigation

program. Depending upon the nature of a borrower’s financial condition, restructurings or loan modifications through this program are

provided, as well as other modifications of individual C&I, commercial mortgage, construction, and residential mortgage loans. For

the year ended December 31, 2025, loans modified to borrowers experiencing financial difficulty had an amortized cost basis of $42.3

million, which included $30.2 million related to a commercial mortgage loan in the Puerto Rico region that had been previously

modified during 2023 and reported as a financial difficulty modification; compared to $146.4 million for the same period in 2024,

which included $108.7 million related to a commercial mortgage relationship in the Puerto Rico region that had been previously

reported as a troubled debt restructuring under ASC 310 -40. See Note 3 – “Loans Held for Investment” for additional information and

statistics about the Corporation’s modified loans.

The following tables show the composition of the OREO portfolio as of December 31, 2025 and 2024, as well as the activity of the

OREO portfolio by geographic area during the year ended December 31, 2025:

OREO Composition by Region

As of December 31, 2025

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

5,663

861

6,524

Construction

386

386

Commercial

612

(1)

612

6,661

861

7,522

As of December 31, 2024

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Residential

12,092

805

12,897

Construction

522

522

Commercial

1,077

2,810

(1)

3,887

13,691

3,615

17,306

OREO Activity by Region

Year Ended December 31, 2025

(In thousands)

Puerto Rico

Virgin Islands

Florida

Consolidated

Beginning balance

13,691

3,615

17,306

Additions

3,777

78

3,855

Sales

(9,994)

(9,994)

Subsequent measurement adjustments

(352)

(2,832)

(1)

(3,184)

Other adjustments

(461)

(461)

Ending balance

6,661

861

7,522

(1)

During 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with an ongoing litigation involving a commercial

OREO property in the Virgin Islands region. See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements

included in Part II, Item 8 of this Form 10-K, for further details.

The following table presents information about the OREO inventory and related gains and losses for the indicated periods:

Year Ended December 31,

2025

2024

2023

OREO activity (number of properties):

Beginning property inventory

181

277

344

Properties acquired

35

93

171

Properties disposed

(121)

(189)

(238)

Ending property inventory

95

181

277

Average holding period (in days)

Residential

668

517

483

Construction

2,030

1,560

2,412

Commercial

4,237

3,752

1,491

Total average holding period (in days)

1,901

1,275

911

OREO operations (gain) loss:

Market adjustments and (gains) losses on sale:

Residential

(4,747)

(6,648)

(8,962)

Construction

(169)

(602)

(61)

Commercial

2,348

(1)

(2,272)

(305)

Total net gain

(2,568)

(9,522)

(9,328)

Other OREO operations expenses

1,043

2,048

2,190

Net Gain on OREO operations

(1,525)

(7,474)

(7,138)

(1)

During 2025, the Corporation recorded the aforementioned $2.8 million valuation adjustment in connection with an ongoing litigation involving a commercial OREO property in the Virgin

Islands region. See Note 23 – “Regulatory Matters, Commitments and Contingencies” to the audited consolidated financial statements included in Part II, Item 8 of this Form 10-K, for

further details.

Net Charge-offs and Total Credit Losses

Net charge-offs totaled $80.8 million for each of the years ended December 31, 2025 and 2024. The results for the year ended

December 31, 2025 reflect lower net charge-offs in consumer loans and finance leases, primarily in the unsecured loan portfolio,

which were offset by a $7.6 million decrease in recoveries related to the bulk sales of fully charged -off consumer loans and finance

leases and a $5.0 million recovery recognized in 2024 associated with a C&I loan in the Puerto Rico region.

The following table presents net (recoveries) charge-offs to average loans held-in-portfolio for the indicated periods:

Year Ended December 31,

2025

2024

2023

Residential mortgage

(0.01)

0.02

0.02

Construction

(0.14)

(0.06)

(1.09)

Commercial mortgage

(0.01)

(0.02)

0.01

C&I

(0.02)

(0.12)

0.21

Consumer loans and finance leases

(1)

2.20

2.28

1.78

Total loans

(1)

0.63

0.65

0.58

(1)

The net charge-offs for the years ended December 31, 2025 and 2024 included $2.4 million and $10.0 million, respectively, in recoveries associated with the bulk sales of fully charged -off

consumer loans and finance leases. These recoveries reduced the ratios of consumer loans and finance leases and total net charge-offs to related average loans for the year ended December

31, 2025 by 6 bps and 2 bps, respectively, and by 27 bps and 9 bps, respectively, for the year ended December 31, 2024.

The following table presents net (recoveries) charge-offs to average loans held in various portfolios by geographic segment for the

indicated periods:

Year Ended December 31,

2025

2024

2023

PUERTO RICO:

Residential mortgage

-0.01

0.03

0.03

Construction

(2.66)

Commercial mortgage

(0.00)

(0.00)

0.03

C&I

(0.03)

(0.14)

(0.00)

Consumer loans and finance leases

(1)

2.21

2.27

1.78

Total loans

(1)

0.81

0.82

0.65

VIRGIN ISLANDS:

Residential mortgage

(0.00)

Construction

0.03

Commercial mortgage

(0.17)

(0.25)

(0.02)

C&I

0.01

0.02

(0.00)

Consumer loans and finance leases

1.84

3.35

0.26

Total loans

0.25

0.53

0.04

FLORIDA:

Residential mortgage

(0.00)

(0.01)

(0.01)

Construction

(1.29)

(0.22)

(0.05)

Commercial mortgage

(0.06)

(0.02)

C&I

(0.00)

(0.09)

0.67

Consumer loans and finance leases

(0.45)

(1.40)

(0.50)

Total loans

(0.02)

(0.07)

0.30

(1)

The recoveries associated with the aforementioned bulk sales of fully charged-off consumer loans and finance leases reduced the ratios of consumer loans and finance leases and total net charge-offs to related average

loans for the year ended December 31, 2025 by 6 bps and 2 bps, respectively, and by 28 bps and 10 bps, respectively, for the year ended December 31, 2024.

Operational Risk

The Corporation is exposed to operational risk arising from the processes involved in delivering banking and financial products, as

well as from external factors such as market conditions, cybersecurity threats, and legal or regulatory developments. These risks can

result in operational or reputational loss. To manage them, the Corporation maintains and continually enhances internal controls,

policies, and procedures designed to identify, assess, and manage operational risks across the organization and to provide reasonable

assurance that operations function within established limits.

Operational risk is categorized as business-specific or corporate-wide. Enterprise Risk Management partners with business units to

ensure consistent policies and assessments for business-specific risks. Corporate -wide risks, including information security, business

continuity, and legal and compliance risk, are managed through specialized groups, such as Legal, Information Security, Corporate

Compliance, Operations, and Enterprise Risk Management. These groups assist the lines of business in the development and

implementation of risk management practices specific to the needs of the business groups.

Legal and Compliance Risk

Legal and compliance risk arises from potential noncompliance with laws and regulations, adverse legal judgments, or

unenforceable counterparty obligations. The Corporation operates in highly regulated jurisdictions and continues to strengthen its

procedures to comply with applicable legal and regulatory requirements. The Compliance Director, reporting to the Chief Risk

Officer, oversees enterprise-wide compliance and manages the Corporation’s compliance risk assessment process. Compliance

officers embedded in major business areas report directly to the Corporate Compliance Group.

Concentration Risk

The Corporation’s operations are geographically concentrated in Puerto Rico, its main market. Of the total gross loan portfolio held

for investment of $13.1 billion as of December 31, 2025, the Corporation had credit risk of approximately 77% in the Puerto Rico

region, 19% in the United States region, and 4% in the Virgin Islands region.

Update on the Puerto Rico Fiscal and Economic Situation

A significant portion of the Corporation’s business and credit exposure is concentrated in the Commonwealth of Puerto Rico, which

has faced prolonged economic and fiscal challenges. See “Risk Management – Exposure to Puerto Rico Government” below. Since

declaring bankruptcy and benefitting from the enactment of the federal Puerto Rico Oversight, Management and Economic Stability

Act (“PROMESA”) in 2016, the Government of Puerto Rico has made progress on fiscal matters primarily by restructuring a large

portion of its outstanding public debt and identifying funding sources for its underfunded pension system.

Economic Indicators

In October 2025, the Puerto Rico Planning Board (“PRPB”) reported in its preliminary estimates that real gross national product

(“GNP”) grew by 0.4% in fiscal year 2025, marking the fifth consecutive year of positive economic growth, driven by personal

consumption and fixed investments in both construction and machinery and equipment. The latest PRPB’s baseline projections reflect

0.4% real GNP growth in fiscal year 2026 and 0.3% in fiscal year 2027.

There are other indicators that gauge economic activity and are published with greater frequency, for example, the Economic

Development Bank for Puerto Rico’s Economic Activity Index (“EDB-EAI”). Although not a direct measure of Puerto Rico’s real

GNP, the EDB-EAI is correlated to Puerto Rico’s real GNP. During the 11-month period ended on November 30, 2025, the EDB-EAI

averaged 127.7, decreasing by 0.4% on a year-over-year basis, primarily reflecting reductions in electric energy generation and

gasoline consumption. For November 2025, estimates showed that the EDB-EAI stood at 128.1, up 0.8% on a year-over-year basis.

Labor market trends remain positive. Data published by the Bureau of Labor Statistics showed that non-farm payrolls in 2025 in

Puerto Rico increased by 0.9% when compared to 2024, primarily driven by payrolls in the private sector as these increased by 1.2%

from the comparable figure a year earlier. Key industries driving private-sector payroll growth include Construction with a year-over-

year increase of 4.8% and Leisure & Hospitality with a positive variance of 3.4%. The unemployment rate continued to move in the

right direction, decreasing from 5.63% in 2024 to 5.56% in 2025.

Fiscal Plan

On June 6, 2025, the PROMESA oversight board certified a revised 2024 Fiscal Plan for Puerto Rico for the purpose of including

the currently anticipated fiscal performance and updated Fiscal Year 2025 revenue forecast based on the most recent available data on

revenue collections. The Fiscal Plan intends to serve as a roadmap to promote economic growth and achieve long-term fiscal stability.

The original 2024 Fiscal Plan outlines the Commonwealth’s financial condition, key fiscal risks, and the actions required to achieve

long-term fiscal responsibility and access to credit markets. It identifies priority areas such as improved economic and revenue

forecasting, adoption of budget best practices, enhanced government service delivery, and strengthened financial reporting, along with

initiatives to support economic growth through human capital development, tax reform, and infrastructure improvements. The original

2024 Fiscal Plan also incorporates updated macroeconomic projections, including modest near-term GNP growth followed by slight

declines, and anticipates stable population levels supported by positive net migration. In addition, it reflects the significant role of

federal disaster relief, COVID-19 recovery funds, and Bipartisan Infrastructure Law funding in supporting Puerto Rico’s

reconstruction and economic outlook.

Debt Restructuring

Over 80% of Puerto Rico’s outstanding debt has been restructured to date. Key actions include the 2022 central government Plan of

Adjustment, which exchanged more than $33 billion of existing bonds and other claims for about $7 billion in new bonds, reducing

debt service by more than $50 billion. Also, the restructurings of the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the

Highways and Transportation Authority (“HTA”), and the Puerto Rico Aqueducts and Sewers Authority (“PRASA”) are expected to

yield savings of approximately $17.5 billion, $3.0 billion, and $400 million, respectively, in future debt service payments.

The remaining major restructuring is that of the Puerto Rico Electric Power Authority (“PREPA”). Litigation remains largely

stayed. On March 28, 2025, the PROMESA oversight board filed its fifth amended plan of adjustment, which would reduce PREPA’s

debt almost 80%, to the equivalent of $2.6 billion in cash or bonds, excluding pension liabilities. It also incorporates several

amendments to the previous structure, including a Rate Reduction Fund to support PREPA’s pensions, and the elimination of the

Legacy Charge contemplated in the previous versions of the plan of adjustment to repay the significantly reduced debt.

Other Developments

Puerto Rico gained momentum as a hub for reshoring, particularly in the manufacturing sector. During 2025, the Government

announced 17 companies with expansion projects representing over $2 billion in committed capital investments and over 4,000 jobs to

be created over the short-to-medium term. This reflects part of the Government’s policy efforts to prioritize growth -oriented initiatives

that are critical to sustaining long-term economic growth and competitiveness.

Infrastructure reconstruction continues to advance, particularly in the aftermath of Hurricane Maria in 2017. During the 12-month

period ended September 30, 2025, over $3.4 billion in disaster relief funds were disbursed through the Federal Emergency

Management Agency (“FEMA”) Public Assistance program and the HUD Community Development Block Grant (“CDBG”)

program, a 6.9% increase when compared to the same period in 2024. Excluding Hurricane Fiona-related emergency funds, which

occurred in September 2022, disbursements rose 14.3% on a year-over-year basis. As of February 9, 2026, over 4,600 projects had

already been completed under FEMA’s Public Assistance Permanent Work programs while nearly 20,000 projects were active across

different stages of execution for a total cost of $12.1 billion, equivalent to approximately 34% of the agency’s $37.4 billion obligation,

according to the Central Office for Recovery, Reconstruction and Resiliency (“COR3”).

On June 27, 2025, the PROMESA oversight board certified the $32.7 billion fiscal year 2026 Budget for the Commonwealth of

Puerto Rico consisting of the $13.1 billion general fund budget, the $5.4 billion special revenue fund budget, and the $14.2 billion

federal fund budget. According to the oversight board, the fiscal year 2026 Budget was developed jointly with the local government

and reflects the unprecedented uncertainty around federal funding, economic growth, and Medicaid costs in the coming fiscal year.

More than 60% of total government funding is allocated to health, education, public safety, housing and retirees. The general fund

budget increases total spending by 1.5% from the previous fiscal year, excluding certain reclassifications of general fund revenues as

special revenue, while funding from the U.S. Government was budgeted to decline by approximately $1.2 billion, mainly due a

reduction in federal funding for education. According to the PROMESA oversight board, the fiscal year 2026 Budget prepares the

Government for potential further declines in federal funding over the fiscal year that began on July 1, 2025. Specifically, the budget

holds back 5% of most agencies spending for eight months to prevent deficits should the general fund revenue decline, federal funding

decreases or Medicaid costs increase. Certain expenses are exempt from the hold back, including pensions, public safety, certain

transportation costs, and sales tax.

Exposure to Puerto Rico Government

As of December 31, 2025, the Corporation had $297.8 million of direct exposure to the Puerto Rico government, its municipalities

and public corporations, an increase of $9.2 million compared to $288.6 million as of December 31, 2024. As of December 31, 2025,

approximately $211.3 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by

assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable

municipality have been pledged to their repayment, and $42.2 million consisted of loans and obligations which are supported by one

or more specific sources of municipal revenues. The Corporation’s exposure to Puerto Rico municipalities consisted primarily of senior priority loans and obligations concentrated in six of the largest municipalities in Puerto Rico. The municipalities are required by law to levy special property taxes in such amounts as are required for the payment of all of their respective general obligation bonds and notes. In addition to municipalities, the total direct exposure also included $8.7 million in a loan extended to an affiliate of

PREPA, $32.9 million in loans to a public corporation of the Puerto Rico government, and an obligation of the Puerto Rico

government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $2.7 million as part of its

available-for-sale debt securities portfolio (fair value of $1.6 million as of December 31, 2025).

The following table details the Corporation’s total direct exposure to Puerto Rico government obligations according to their

maturities:

As of December 31, 2025

Investment

Portfolio

(Amortized cost)

Loans

Total

Exposure

(In thousands)

Puerto Rico Housing Finance Authority:

After 10 years

2,700

2,700

Total Puerto Rico Housing Finance Authority

2,700

2,700

Public corporation of the Puerto Rico government:

Due within one year

14,416

14,416

After 1 to 5 years

18,476

18,476

Total public corporation of the Puerto Rico government

32,892

32,892

Affiliate of the Puerto Rico Electric Power Authority:

After 1 to 5 years

8,656

8,656

Total Puerto Rico government affiliate

8,656

8,656

Total Puerto Rico public corporations and government affiliate

41,548

41,548

Municipalities:

Due within one year

1,044

1,044

After 1 to 5 years

53,265

112,628

165,893

After 5 to 10 years

10,376

61,399

71,775

After 10 years

14,870

14,870

Total Municipalities

79,555

174,027

253,582

Total Direct Government Exposure

82,255

215,575

297,830

Also, as of December 31, 2025, the outstanding balance of construction loans funded through conduit financing structures to

support the federal programs of Low-Income Housing Tax Credit combined with other federal programs amounted to $92.4 million,

compared to $59.2 million as of December 31, 2024. The main objective of these programs is to spur development in new or

rehabilitated and affordable rental housing. PRHFA, as program subrecipient and conduct issuer, issues tax-exempt obligations which

are acquired by private financial institutions and are required to co-underwrite with PRHFA a mirror construction loan agreement for

the specific project loan to which the Corporation will serve as ultimate lender , but where the PRHFA will be the lender of record.

In addition, as of December 31, 2025, the Corporation had $67.1 million in exposure to residential mortgage loans that are

guaranteed by the PRHFA, a governmental instrumentality that has been designated as a covered entity under PROMESA (December

31, 2024 – $72.5 million). Residential mortgage loans guaranteed by the PRHFA are secured by the underlying properties and the

guarantees serve to cover shortfalls in collateral in the event of a borrower default. The Puerto Rico government guarantees up to $75

million of the principal for all loans under the mortgage loan insurance program. According to the most recently released audited

financial statements of the PRHFA, as of June 30, 2024, the PRHFA’s mortgage loans insurance program covered loans in an

aggregate amount of approximately $355 million. The regulations adopted by the PRHFA require the establishment of adequate

reserves to guarantee the solvency of the mortgage loans insurance program. As of June 30, 2024, the most recent date as of which

information is available, the PRHFA had a liability of approximately $0.7 million as an estimate of the losses inherent in the portfolio.

As of December 31, 2025 and 2024, the Corporation had $2.5 billion and $3.1 billion, respectively, of public sector deposits in

Puerto Rico. Approximately 23% of the public sector deposits as of December 31, 2025 were from municipalities and municipal

agencies in Puerto Rico and 77% were from public corporations, the Puerto Rico central government and agencies, and U.S. federal

government agencies in Puerto Rico.

Exposure to USVI Government

The Corporation has operations in the USVI and has credit exposure to USVI government entities.

For many years, the USVI has been experiencing several fiscal and economic challenges that have deteriorated the overall financial

and economic conditions in the area. On June 17, 2024, the United States Bureau of Economic Analysis (the “BEA”) released its

estimates of GDP for 2022. According to the BEA, the USVI’s real GDP decreased 1.3% in 2022 after increasing 3.7% in 2021. The

decrease in real GDP reflected declines in exports, private fixed investment, government spending, and personal consumption

expenditures. These negative variances were partly offset by an increase in inventory investment, while imports, a subtraction item in

the calculation of GDP, decreased. The annual publication of BEA’s GDP statistics for the USVI is made possible through funding by

the Office of Insular Affairs (“OIA”) of the U.S. Department of the Interior. OIA has paused funding of this work to conduct an

exploratory assessment of territorial source data with the goal of informing how to strategically invest in and support the USVI's

economic statistics into the future. Without funding, BEA is pausing the production of GDP statistics for the USVI. When funding and

improved data sources become available, BEA plans to resume production of these statistics.

Over the past four years, the USVI has been recovering from the adverse impact caused by COVID-19 and has continued to make

progress on its rebuilding efforts related to Hurricanes Irma and Maria, which occurred in September 2017. According to data

published by FEMA, there were over $26.2 billion in obligated disaster recovery funds for the USVI as of September 30, 2025, up

$9.7 billion (or 59%) from the comparable figure a year earlier. During the 12-month period ended September 30, 2025, over $597

million were disbursed in the territory, representing a year-over-year increase of 2%.

Finally, PROMESA does not apply to the USVI and, as such, there is currently no federal legislation permitting the restructuring of

the debts of the USVI and its public corporations and instrumentalities. To the extent that the fiscal condition of the USVI government

deteriorates again, the U.S. Congress or the government of the USVI may enact legislation allowing for the restructuring of the

financial obligations of the USVI government entities or imposing a stay on creditor remedies, including by making PROMESA

applicable to the USVI.

As of December 31, 2025 and 2024, the Corporation had $138.7 million and $100.4 million, respectively, in loans to USVI public

corporations, of which $108.0 million and $68.2 million, respectively, were fully collateralized by cash balances held at the Bank. As

of December 31, 2025, all loans were currently performing and up to date on principal and interest payments.

CEO and CFO Certifications

First BanCorp.’s Chief Executive Officer and Chief Financial Officer have filed with the SEC certifications required by Section 302

and Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-K.

In addition, in 2025, First BanCorp’s Chief Executive Officer provided to the NYSE his annual certification, as required for all

NYSE listed companies, that he was not aware of any violation by the Corporation of the NYSE corporate governance listing

standards.

The information required herein is incorporated by reference to the information included under the sub-caption “Interest Rate Risk

Management” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this

Form 10-K.

Disclosure Controls and Procedures

First BanCorp.’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of

First BanCorp.’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the

end of the period covered by this Form 10-K. Based on this evaluation as of the period covered by this Form 10-K, our CEO and CFO

concluded that the Corporation’s disclosure controls and procedures were effective and provide reasonable assurance that the

information required to be disclosed by the Corporation in reports that the Corporation files or submits under the Exchange Act is

recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and

reported to the Corporation’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required

disclosure.

Management’s Report on Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting is included in Part II, Item 8 of this Form 10-K and

incorporated herein by reference.

The effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2025 has been audited by Crowe

LLP, an independent registered public accounting firm, as stated in their report included in Part II, Item 8 of this Annual Report on

Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes to the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-

15(f) under the Exchange Act) during our most recent quarter ended December 31, 2025 that have materially affected, or are

reasonably likely to materially affect, the Corporation’s internal control over financial reporting.