FIRST BANCORP /PR/ (FBP) Business

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

6

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

7

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.

8

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.

9

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.

10

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.

11

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.

12

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

13

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

14

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.

15

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

16

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.

17

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.

18

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.

19

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

(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.

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

(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.