1057706--3/2/2010--FIRST_BANCORP

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{loan, real, estate}

{tax, income, asset}

{regulation, change, law}

{stock, price, share}

{capital, credit, financial}

{condition, economic, financial}

{loss, insurance, financial}

{acquisition, growth, future}

{competitive, industry, competition}

{financial, litigation, operation}

{debt, indebtedness, cash}

{personnel, key, retain}

{control, financial, internal}

{regulation, government, change}

{stock, price, operating}

Changes in collateral valuation for properties located in stagnant or distressed economies may require increased reserves. Worsening in the financial condition of critical counterparties may result in higher losses than expected. Interest rate shifts may reduce net interest income. Increases in interest rates may reduce the value of holdings of securities. Increases in interest rates may reduce demand for mortgage and other loans. Accelerated prepayments may adversely affect net interest income. Decreases in interest rates may reduce net interest income due to the current unprecedented re-pricing mismatch of assets and liabilities tied to short-term interest rates, which is referred to as basis risk. If all or a significant portion of the unrealized losses in our investment securities portfolio on our consolidated balance sheet were determined to be other-than-temporarily impaired, we would recognize a material charge to our earnings and our capital ratios would be adversely affected. Downgrades in the Corporation s credit ratings could further increase the cost of borrowing funds. The Corporation s funding is significantly dependent on brokered deposits. The Corporation s funding sources may prove insufficient to replace deposits and support future growth. Adverse credit market conditions may affect the Corporation s ability to meet liquidity needs. Our controls and procedures may fail or be circumvented, our risk management policies and procedures may be inadequate, and operational risk could adversely affect our consolidated results of operations. Competition for our employees is intense, and we may not be able to attract and retain the highly skilled people we need to support our business. Banking regulators could take adverse action against the Corporation. Further increases in the FDIC deposit insurance premium may have a significant financial impact on the Corporation. The Corporation may not be able to recover all assets pledged to Lehman Brothers Special Financing, Inc. Our businesses may be adversely affected by litigation. Our businesses may be negatively affected by adverse publicity or other reputational harm. Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect the Corporation s financial statements. The Corporation may need additional capital resources in the future and these capital resources may not be available when needed or at all. Unexpected losses in future reporting periods may require the Corporation to adjust the valuation allowance against our deferred tax assets. If the Corporation s goodwill or amortizable intangible assets become impaired, it may adversely affect the operating results. RISK RELATED TO BUSINESS ENVIRONMENT AND OUR INDUSTRY Difficult market conditions have affected the financial industry and may adversely affect the Corporation in the future. A prolonged economic slowdown or decline in the real estate market in the U.S. mainland could continue to harm the results of operations. The Corporation s business concentration in Puerto Rico imposes risks. The Corporation s credit quality may be adversely affected by Puerto Rico s current economic condition. Rating downgrades on the Government of Puerto Rico s debt obligations may affect the Corporation s credit exposure. The failure of other financial institutions could adversely affect the Corporation. Legislative and regulatory actions taken now or in the future as a result of the current crisis in the financial industry may impact our business, governance structure, financial condition or results of operations. Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations. The Corporation faces extensive and changing government regulation, which may increase our costs of and expose us to risks related to compliance. We are subject to regulatory capital adequacy guidelines, and if we fail to meet these guidelines our business and financial condition may be adversely affected. The imposition of additional property tax payments in Puerto Rico may further deteriorate our commercial, consumer and mortgage loan portfolios. RISKS RELATING TO AN INVESTMENT IN THE CORPORATION S SECURITIES The market price of the Corporation s common stock may be subject to significant fluctuations and volatility. Our suspension of dividends could adversely affect our stock price and result in the expansion of our board of directors. Dividends on the Corporation s common stock have been suspended and a holder may not receive funds in connection with its investment in our common stock without selling its shares of common stock. Offerings of debt, which would be senior to the common stock upon liquidation and/or to preferred equity securities, which may be senior to the common stock for purposes of dividend distributions or upon liquidation, may adversely affect the market price of the common stock. There may be future dilution of the Corporation s common stock.

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1057706--3/2/2010--FIRST_BANCORP_/PR/