First Bancorp Puerto Rico (FBP) Risk Analysis

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.

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

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.

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.

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.

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