Earnings call transcript: First BanCorp Q3 2025 beats EPS forecasts, stock dips

First BanCorp reported its third-quarter earnings for 2025, posting an adjusted earnings per share (EPS) of $0.51, surpassing analysts’ expectations of $0.49. Despite this positive surprise, the company’s revenue of $248.71 million fell short of the projected $256.25 million. The market reacted with a 2.29% drop in First BanCorp’s stock price, closing at $20.52. With a market capitalization of $3.2 billion, First BanCorp maintains a solid financial foundation, earning a "GOOD" overall health score according to InvestingPro analysis. The platform’s comprehensive assessment reveals several key strengths, including a 7-year consecutive dividend growth streak.

Key Takeaways

• Adjusted EPS of $0.51 exceeded forecasts by 4.08%.
• Revenue missed expectations by 2.94%, leading to a negative market reaction.
• Net income reached $100 million, with a strong return on average assets of 2.1%.
• Continued loan portfolio growth and a new share buyback program were announced.
• The stock fell 2.29% post-earnings, reflecting investor concerns over revenue performance.

Company Performance

First BanCorp demonstrated resilience in Q3 2025 with a net income of $100 million and a return on average assets of 2.1%. The bank’s loan portfolio surpassed $13 billion for the first time since 2010, driven by a diversified strategy across commercial, construction, and residential lending. Trading at a P/E ratio of 10.7x and offering a 3.5% dividend yield, the bank presents an interesting value proposition despite current revenue challenges. InvestingPro analysis indicates the stock is trading slightly above its Fair Value, with additional insights available in the platform’s detailed Pro Research Report, part of its coverage of over 1,400 US equities.

Financial Highlights

• Revenue: $248.71 million, below expectations of $256.25 million
• Earnings per share: $0.51, exceeding the forecast of $0.49
• Net interest income: $217.9 million, up 8% year-over-year
• Net interest margin: 4.57%, a 32 basis point increase over the past year

Earnings vs. Forecast

First BanCorp’s adjusted EPS of $0.51 surpassed the forecasted $0.49, resulting in a 4.08% positive earnings surprise. However, the revenue of $248.71 million missed the anticipated $256.25 million by 2.94%. This mixed result reflects strong cost management and profitability but highlights challenges in meeting revenue growth expectations.

Market Reaction

Despite the earnings beat, First BanCorp’s stock fell by 2.29% to $20.52, likely due to the revenue miss. This decline positions the stock closer to its 52-week low of $16.40, contrasting with the broader market’s stable performance. The lack of pre-market trading activity suggests investor caution ahead of the earnings announcement.

Outlook & Guidance

Looking forward, First BanCorp anticipates a loan growth rate of 3-4% for 2025 and expects the net interest margin to remain flat in Q4. The company continues to reinvest in its securities portfolio and has announced a $200 million share buyback authorization through 2026, signaling confidence in its long-term strategy. InvestingPro data shows the bank has maintained strong revenue growth with a 5-year CAGR of 8%, though current metrics suggest a high P/E ratio relative to near-term earnings growth potential. Subscribers to InvestingPro can access over 30 additional financial metrics and insights about First BanCorp’s valuation and growth prospects.

Executive Commentary

Aurelio Alemán, CEO, highlighted the company’s robust financial performance, stating, "We earned $100 million in net income during the quarter." He also addressed potential cost reductions, noting, "We do expect some reduction in deposit costs coming down as a result of the reduction in rates."

Risks and Challenges

• Revenue growth: The revenue miss raises concerns about sustaining growth.
• Economic conditions: Potential impacts from a federal government shutdown could affect operations.
• Market competition: Expansion into mainland Florida presents both opportunities and challenges.
• Regulatory environment: Changes in tax legislation and regulations may influence future earnings.

Q&A

During the earnings call, analysts inquired about the impacts of new tax legislation, consumer credit trends, and deposit cost dynamics. CEO Aurelio Alemán addressed these topics, emphasizing the company’s proactive approach to navigating economic and regulatory changes.

Full transcript - First Bancorp (FBP) Q3 2025:

Carla, Call Coordinator, First BanCorp: Thank you for your patience, everyone. The First BanCorp third quarter 2025 financial results will begin in five minutes’ time. In the meantime, you can register to ask questions by pressing the star followed by one on your telephone keypad. Hello and welcome to the First BanCorp third quarter 2025 financial results. My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask questions by pressing the star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I would now like to hand you over to the Investor Relations Officer, Ramon Rodríguez, to begin. Please go ahead when you’re ready.

Ramon Rodríguez, Investor Relations Officer, First BanCorp: Thank you, Carla. Good morning, everyone, and thank you for joining First BanCorp’s conference call and webcast to discuss the company’s financial results for the third quarter of 2025. Joining you today from First BanCorp are Aurelio Alemán, President and Chief Executive Officer, and Orlando Berges-González, Executive Vice President and Chief Financial Officer. Before we begin today’s call, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company’s business. The company’s actual results could differ materially from the forward-looking statements made due to the important factors described in the company’s latest SEC filings. The company assumes no obligation to update any forward-looking statements made during the call.

If anyone does not already have a copy of the webcast presentation or press release, you can access them at our website at fbbinvestor.com. At this time, I’d like to turn the call over to our CEO, Aurelio Alemán.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Thank you, Ramon, and good morning to everyone, and thanks for joining our call again today. I will begin by briefly discussing our financial performance for the third quarter, then move on to discuss our outlook for the franchise. We’re definitely very pleased with the progress on the quarter as we delivered another exceptional quarter of financial results that underscore our ability to produce consistent returns to our shareholders and consistent progress in our franchise metrics. We earned $100 million in net income during the quarter, including the benefit of certain non-recurring special items that Orlando will explain later. However, adjusted for these items, normalized earnings per share grew 13% when compared to the prior year. Most of the improvement came from record net interest income, a well-managed expense base, and disciplined loan production.

Turning to the balance sheet, our strong capital position enabled us to continue supporting our clients on the loan production side. We grew total loans by $181 million for 5.6% linked quarter annualized, surpassing $13 billion in total loans for the first time since 2010. Since the beginning of the second quarter, we’ve been experiencing slowdown in consumer credit demand. Especially, I want to comment on the auto industry, which has been below our original expectation for the year. After the sector-specific studies were announced in April, industry-wide sales began trading down, which has negatively impacted overall loan origination in this space during the year and loan mix production. For some additional context, total retail sales in our industry are down 7% year to date as of September. When looking at the third quarter sales, they are below 17% compared to the third quarter of the prior year.

Thankfully, we’ve been able to mitigate this slowdown by executing our growth plan within the commercial and construction lending segment, coupled with a steady loan production progress in the residential mortgage business. It’s about business diversification and regional diversification contributing to that. In terms of deposit, it was a good quarter. We grew $140 million on core franchise deposits. Trends in the market flows remain favorable. Although we’re seeing higher competition in new seeking flows, we believe that could be temporary, particularly from affluent customers and government relations. That said, we continue to focus on what is our core deposit franchise while deploying a measured approach to retaining valuable core customer relationships. In terms of asset quality, credit continues to behave in line with expectations, consumer charge-offs stabilizing, healthy commercial credit trends, and a 7% reduction in non-performing assets.

Finally, our earning performance translated into growth across all capital ratios while expanding our loan book organically and being able to repurchase another $50 million in shares of common stock. Consistent with the strategy of returning 100% of annual earnings to shareholders, as we announced yesterday, our board authorized an additional $200 million share buyback program that we expect to execute through 2026. Please, let’s move to slide five for some additional highlights on the macro. In terms of the macro, the operating background remains, I have to say, stable with uncertain elements that are surrounding us as we continue to monitor and assess the potential impact that evolving trade dynamics are bringing to the market. Any potential impact of federal government shutdown that is related to inflationary pressures are having pressure on businesses and consumers across our regions, as you know everybody’s realizing.

That said, we are encouraged by the resiliency of the labor markets in Puerto Rico, the continued improving trend of the tourism activity, and the recently announced investments of manufacturing companies expanding production capacity in Puerto Rico or establishing new facilities. We believe that the ongoing expansion of the manufacturing sector, coupled with the consistent flow of federal disaster funds earmarked for infrastructure, will continue to support local economies for the years to come. Our franchise is in a great position to benefit from the tailwinds, and we expect to strategically deploy our excess capital to continue growing organically our regions. Year to date, total loan originations, auto and credit card utilization activity are up by 7% when compared to prior year. Being supported by self-discipline, client outreach, well-managed regional and business line diversification, which is really the strength of our franchise.

Based on current financial lending pipelines, the evolving rate environment, and the ongoing normalization of industry-wide auto sales, our loan growth guide for the year will probably be closer to the 3% to 4% range, depending on commercial credit line usage and any level of unexpected payments that we don’t have knowledge today. We will provide an updated guide for 2026 once we report our fourth quarter in January and also full year forecast for next year. With that, I would like to thank you for your interest in First BanCorp. I’m definitely very proud of our team’s accomplishments through 2025. I look forward to a strong end of the year. I will turn the call to Orlando to go over financial results in more detail before we open the call for questions. Orlando?

Orlando Berges-González, Executive Vice President and Chief Financial Officer, First BanCorp: Hey, good morning, everyone. As Aurelio Alemán mentioned, we had a strong quarter with net income reaching $100 million or $0.63 a share. That compares to $80 million or $0.50 a share in the second quarter. Return on average assets for the quarter was 2.1%, much higher than last quarter. This quarter did include a few things that I’m going to touch upon. We had a $16.6 million reversal of valuation allowance on deferred tax assets that are related to net operating losses of the holding company. This quarter, new legislation was enacted in Puerto Rico, allowing limited liability companies to be treated as disregarded entities. Based on this change, we now expect that NOLs of the holding company will be mostly utilized against revenues from one of its subsidiaries, resulting in the reversal.

Also, during the quarter, we collected $2.3 million in payroll taxes related to the employee retention credit. That’s been outstanding for a while, but we collected it this quarter, and it resulted in a reduction of payroll costs, obviously. We also recorded a $2.8 million valuation allowance for a commercial auto real estate property in the Virgin Islands as a result of ongoing litigation which involved a potential loss of title of the property. If we were to exclude the DTA valuation allowance and the employee retention credit components from results, non-GAAP adjusted earnings per share were $0.51, and return on average assets was 1.7%. The quarter also had a reduction of $3 million in provision as compared to last quarter. Provision was $17.6 million. This was mostly due to a $2.2 million benefit in the allowance for residential mortgages.

We’ve seen improved updated loss experience in this portfolio, and also the projected macroeconomic for unemployment has an improvement in the trends. In terms of net interest income, we reached $217.9 million for the quarter, which is $2 million higher than last quarter. That includes a $1.3 million improvement due to an extra day in the quarter. Compared to the third quarter, net interest income, third quarter of 2024, I’m sorry, net interest income, it’s 8% higher. Net interest margin for the quarter was 4.57%, one basis point higher than last quarter. Over the last four quarters, margin has grown 32 basis points. As debated in prior calls, the reinvestment of the cash flows from the investment portfolio resulted in a 16 basis points expansion in the investment portfolio yields. However, the margin ended up growing less than the 5 to 7 basis points guidance we had provided.

As Aurelio Alemán mentioned, we saw a slowdown in consumer lending originations for the quarter, which was below our expectations and ended up reducing the average balance in the portfolio by $12 million. Remember, these are high-yielding portfolios, and they are more accretive to net interest income. Also, we saw increased competitive pricing pressures that led to a 15 basis points increase in the cost of government deposits and a 2 basis points increase in the cost of time deposits. The average cost of all other retail and commercial deposits remained flat at 72 basis points as compared to the prior quarter. In addition, when we look at the mix of deposits, we see a shift with time deposits growing $166 million at the end of the quarter, while lower cost interest-bearing non-maturity deposits decreased $45 million.

Regarding other loan portfolios, we saw improvements in the quarter with net interest income on commercial loans increasing $3.8 million, related to a $126 million increase in average balances, 3 basis points increase in yields. We had an extra day in the quarter, which also improved the net interest income. The average balance on the residential portfolio grew $19 million for the quarter. For the fourth quarter, we will continue to benefit from yield improvements from the reinvestment of the cash flows from the investment portfolio, but this will be partially offset by the two projected Federal Reserve rate cuts that would result in a reduction in yields on the floating commercial loan portfolio, as well as the cash balances at the Fed. Remember, we have a floating commercial portfolio, which about half of it, it’s floating with either prime or SOFR mostly as it’s priced today.

Considering that we have an asset-sensitive position, repricing on the asset side will happen faster than on the liability side. We expect that margin for this fourth quarter to be sort of flat, with increases in net interest income coming from loan portfolio growth. In terms of other income for the quarter, it was relatively flat. Slight reduction on card processing income due to lower transaction volumes. Expenses for the quarter were $124.9 million, which is $1.6 million higher than last quarter, which is mostly due to the net loss on the auto operation related to the $2.8 million valuation adjustment I just mentioned. Also, payroll expenses decreased $300,000 due to the $2.3 million employee retention credit that basically compensated for the $1.8 million increase we had from annual margin increases and from an additional payroll day in the quarter.

If we were to exclude aerials and excluding the employee retention credit, expenses were $126.2 million, which compares to $124 million in the second quarter, which is slightly above our guidance, but very much in line with the $125 to $126 million we had provided. The efficiency ratio for the quarter was 50%, pretty much unchanged also when compared to prior to the second quarter. The projected expense trend for technology projects and business promotion efforts, we plan to do in the fourth quarter. We reiterated our guidance expense base of $125 to $126 million for the next couple of quarters and still believe our efficiency ratio will be in that range of 50% to 52%, considering expenses and income components. In terms of asset quality, it remained fairly stable in the quarter.

In the quarter, non-performing assets decreased $8.6 million, basically $3.8 million decrease in non-accrual loans, mostly residential mortgages and CRE loans, and a $5 million reduction in aerial balances. That includes the $2.8 million adjustment on the VI property I mentioned. Inflows to non-accrual were $32.2 million, which is $2.2 million lower than last quarter, mostly commercial and residential mortgage inflows of $6.7 million, which are offset by a reduction of $6.7 million in residential and commercial, with an offset of $4.5 million increase in consumer inflows. Loans in early delinquency, which we define as 30 to 89 days past due, increased $8.9 million, mostly one case in the Florida region, a $6 million commercial case that the payment was not received until later in October. In terms of consumer loans, early delinquency remained relatively flat from the second quarter, increasing only $300,000.

Moving on to the allowance, the allowance is down $1.6 million to $247 million. The decrease was mainly in the residential mortgage portfolio as loss severities have continued to improve. On the other hand, the allowance for commercial loans increased based on the portfolio growth and some deterioration that is projected on the CRE price index as part of the macroeconomic forward projections. The ratio of the allowance for credit losses to loans decreased 4 basis points to 1.89%, and this was mostly a decrease of 9 basis points in the allowance for credit losses on the residential mortgage portfolio. Net charge-offs for the quarter were $19.9 million, 0.62% of average loans, which is up about $800,000 from prior quarter or 2 basis points. Last quarter, we had an $800,000 commercial loan recovery, and this quarter, we did not have any of this size to offset some of the charge-offs.

As Aurelio Alemán mentioned, consumer charge-off levels continue to be normalizing and commercial charge-offs continue to be very low. On the capital front, again, our strong capital base continues to support the actions of share repurchases and dividends. During the quarter, we declared $29 million in dividends and repurchased the $50 million in common stock we had mentioned. Regulatory capital ratios continue to be low, but these capital actions were offset by the earnings generated in the quarter. In addition to all of this, we registered a 6% increase in the tangible book value per share to $11.79, and the tangible common equity ratio expanded to 9.7%, also due to the $49 million improvement in the fair value of available for sale securities. The remaining allowance for credit losses still represents $2.42 in tangible book value per share and over 1.77% in the tangible common equity ratio.

As we announced yesterday, our board approved an additional $200 million in share repurchase. Our intention is to continue the approach of opportunistically executing on our capital actions based on market circumstances, with the base assumption of repurchasing approximately $50 million per quarter through the end of 2026. As we have done so far, we will continue to deploy our excess capital in a thoughtful manner, looking for long-term best interests of our franchise and our shareholders. With that, operator, I would like to open the call for questions.

Carla, Call Coordinator, First BanCorp: Sure. We will now begin the question and answer session. If you’d like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We will make a quick pause here for the questions to be registered. Our first question comes from Brett Rabatin with Hovde Group.

Brett Rabatin, Analyst, Hovde Group: Hey, guys. Good morning.

Carla, Call Coordinator, First BanCorp: Hey, Brett, good morning.

Brett Rabatin, Analyst, Hovde Group: I wanted to start off, just want to make sure. On the tax situation, that’s one time, right? That doesn’t continue from here in terms of any benefit?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: There will be a benefit in the sense that we won’t have reversals of deferred tax assets at these levels, but there is a benefit on the normal operating losses or expenses we have at the holding company. Those are annual expenses that now we’re not yielding any tax benefit, and they will be offset also against revenues from this stock. It’s not that it’s a huge amount, but you saw that the effective tax rate came down a bit, and that’s reflecting some of that benefit. Not at the level of this reversal of DTA, but there is a little benefit on the effective tax rate going forward.

Brett Rabatin, Analyst, Hovde Group: Okay. That’s helpful. I wanted just to talk about, I’ve seen the stats, and I know that the auto lending has finally come in as expected for some time a bit. You know, any thoughts on the health of the consumer in Puerto Rico? You know your credit trends seem fairly stable from a consumer perspective, but just wanted to hear any thoughts on how you guys are seeing, on the ground, consumer activity.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: I think it’s clearly auto sales, we can call it normalizing. We were expecting for the year a 5% adjustment coming down. It’s actually 7% year to date, but obviously it’s disrupted by increased sales in the second quarter because of the tariff, and they were coming. Now you see a reduction. Some sales were accelerated. I think we need to see what happened this quarter to normalize those auto sales and see what is the real stable volume. They have fluctuated between 100,000 to 120,000 units per year for some years. We expect somewhere in that range. Probably the second half of the year will determine how we project 2026. Yes, credit demand has been lower. On the other hand, unsecured credit demand has been a little bit lower. We remember three years ago, two years ago, we have been doing adjusted policies.

We’ve seen the good performance of the portfolios across the board, and some of the higher losses that we experienced in credit cards and unsecured are being leveling. We expect stability on the consumer, but we don’t expect portfolio growth as we achieved for some years. The portfolio growth will come from residential mortgage loans, which is performing excellent, and from the commercial portfolios that we continue to gain some share across the different sectors. I would say stability on the consumer, obviously working hard to diminish any contraction of the portfolio as we continue to move on with products and services on that segment.

Brett Rabatin, Analyst, Hovde Group: Okay. One last one, if I can, just around the margin guidance for flatish in the fourth quarter. Does that assume, you know, in the face of the rate cuts, does that assume you are able to lower funding costs, you know, deposits, even though the beta in Puerto Rico on the way up was obviously a lot slower than the mainland’s? Are you expecting the beta on deposits to be better on the way down?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: I think, you know, one element that definitely will come down, we have some index deposits at the government that are, they move with the rates, and some of that will come down. We don’t see the other core retail products, you know, coming down yet.

Brett Rabatin, Analyst, Hovde Group: Other than time deposits, we do see some reduction.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Other than time that they happen, you know, they move with the market. There will be some reduction in cost of deposits, expected to happen during the quarter. Obviously, how much that can offset the mix of the portfolio, you know, obviously, the margin is very strong. Having less consumer loans at high yield impacts the margin directly, as well as if, you know, which segments of the deposits are growing, which this quarter we have growth on the city book at market, not necessarily above market, as an example. It depends on the whole mix of the balance sheet, which is big. Yeah.

Brett Rabatin, Analyst, Hovde Group: Okay, great. Appreciate all the color, guys.

Carla, Call Coordinator, First BanCorp: Thank you. The next question comes from Timur Braziler with Wells Fargo.

Timur Braziler, Analyst, Wells Fargo: Hi, good morning.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Good morning, Timur.

Timur Braziler, Analyst, Wells Fargo: Back on the deposits, can you just elaborate a little bit more on the competitive pressures that you’re seeing on the government side? I guess, how much economics are you having to give up? How much of that is going to potentially lower some of the benefits of being able to reprice those with some of these rate cuts? Lastly, you said that you were optimistic that some of these competitive pressures might abate here. Maybe just give us some color as to what gives you that confidence.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: I think it’s cycle matters. Some of these are contracted deposits that are indexed, so they are already contracted, and they’re not necessarily up for bid. They would, if the rates move, move with them, either monthly or quarterly. Some of them are, in our case, probably 40% of the government book is in that bucket. I think the others, on the CD, whatever matures, obviously, you move down with rates. I think competitive pressures are really coming from the smaller players, not from the large players. The way we manage that is we go after operational accounts plus what additional services the government entities need. We compete in pricing where we have other types of relationships, not just to get a CD. It really has to add something else to the mix of the products that we sell and the franchise services.

Municipalities and other government have a lot of payment services, deposits, payments. To complement that, we compete on CDs when they come to the market.

Timur Braziler, Analyst, Wells Fargo: Okay. I guess maybe tying that into kind of 4Q, 1Q, is the expectation that deposit costs drop with these subsequent rate cuts, or do some of these, I guess, how much of an offset could some of these competitive pressures be to the planned drop in deposit costs?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: We do expect some reduction in deposit costs coming down as a result of the reduction in rates. The main point is that, you know, typically, we have seen the betas on some of these deposit products move at a lag as compared to some of the floating asset products. There is a timing issue in terms of when we see that on the asset side versus the deposit side. We do expect reductions. It’s just the pace at which all of them will come down.

Timur Braziler, Analyst, Wells Fargo: Okay. Just on credit, credit results at First BanCorp in 3Q are really strong. There was a couple, let’s say, in-migration inbounds on the MPL side for your competitor banks on the island, including some degradation maybe on Puerto Rico itself. I guess, to what extent does credit at the other banks influence your own level of reserving in the way that you’re thinking about your own portfolio, if at all?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: We have been telling for some time that we have a firm risk appetite, and we have policies that we follow, and we have the deal-size tickets that we cap. It’s really our methodology. It’s really the performance of our portfolio. Obviously, if there are things that could impact an industry, we take that into consideration. From what we have seen so far, we don’t see any systemic or industry-wide impactful.

Timur Braziler, Analyst, Wells Fargo: Yeah.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Other than, you know, we tend to look at each of our cases individually. As Aurelio Alemán mentioned, unless we see something in industry, it would be more of what we’re seeing on our own customer base and what are the results and the lines of business they have.

Timur Braziler, Analyst, Wells Fargo: Okay. Great. Just last for me, I think more recently, First BanCorp has been open to doing maybe M&A on the mainland. Can you just remind us of what you would be considering in terms of size, location, assets, deposits, and kind of just your updated view on capital deployment here?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Capital deployment priorities are obviously number one. Organic growth. A fit in the Florida market could be an alternative. A fit for us is a franchise that enhances our current franchise. It’s very easy to originate loans in Florida if you have the right teams, and they move from one bank to the other. As long as you have a good discipline of credit, you will perform well. I think we have a history of that. It will definitely have to be complementary to our deposit franchise. That will be the profile. We have the capital, so size will depend.

Timur Braziler, Analyst, Wells Fargo: Okay, thank you for the call.

Carla, Call Coordinator, First BanCorp: Thank you. Our next question comes from Kelly Motta with KBW.

Kelly Motta, Analyst, KBW: Hey, good morning. Thanks for the question.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Good morning, Kevin.

Kelly Motta, Analyst, KBW: I wanted to circle back to the competitive landscape in Puerto Rico. I appreciate the color around the government deposits. I’m wondering if there’s been any competitor competition from outside the Puerto Rico banks, if you’ve seen any new entrants into the market, and just opine on the competitive landscape. Thank you.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Not on the deposits. It’s really what we see, it’s more aggressive now on the smaller players, as I mentioned. Obviously, in the credit card business, there’s always been a lot of entrants, and they dominate. U.S. banks dominate the card issuance, including the larger brands, the larger banks. Nothing new on that front. It’s also the credit unions that play in the market, but they’re not coming from the outside. It’s entities that have operations in Puerto Rico.

Kelly Motta, Analyst, KBW: Okay, got it. That’s helpful. There’s not.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: I’m sorry. The only caveat, Kelly, I’m sorry. The only caveat is that there is one player, big player, which is called the U.S. Treasury. You face that with some of the high-end customers, that they could move monies into treasuries.

Kelly Motta, Analyst, KBW: Yeah. Got it. That’s helpful. There’s been a lot of news on onshoring, you know, early glimmers of that picking up and helping Puerto Rico. Have you seen any notable impacts? How should we be thinking about that, more from a high level in terms of the potential?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Yeah. I think, in the short term, they have announced a few deals, and we will try to put some more detail on that in our investor deck. More granular things that have been already approved or negotiated. We’re trying to get more data on that. In addition, we don’t see that it’s really in the short term. It’s probably, we continue to sustain and improve the construction sector, and whatever is related to materials and the labor-related benefit of that, but not necessarily we see anything that must flow through the economy other than that impact in the short term. As we see these expansions become operational, then we’ll probably see more employment, better compensation, and expansion of the workforce. We don’t expect that until probably second half 2026 or further.

The good thing is it’s a long-term benefit to sustain the economy of the island rather than having a long-term risk by not having this commitment. Yeah.

Kelly Motta, Analyst, KBW: Got it. That’s really helpful. I guess circling back to the margin, I know you guys have had, we saw a nice uplift from, on the securities book. Can you remind us about the cash flows on that, one, and then two, what the new loan yield originations look like just so we can kind of get a sense of the potential offset to some of the floating rate dynamics that you already articulated?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: We have about $600 million of cash flows coming in this fourth quarter. The yields on that are around 1.5% on average. That would be some of the cash flows that would immediately reprice. We also have about $1 billion more in the first half of 2026 that also, you know, on average are yielding that 1.5% that also come due. Obviously, with rates coming down, the reinvestment component is a bit lower than what we were, you know, we’re seeing rates somewhere between 50 to 100 basis points lower already in some of the reinvestment options within our policy guides. Some of it, obviously, could go into lending, but as Aurelio Alemán made reference to, it would be more on the commercial and residential side.

Kelly Motta, Analyst, KBW: If your loan book right now is $777 million, what does new loan origination yields look like, I guess, in Q3?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: You’re talking about the overall or you’re talking about just the other, that’s the average yield? That average, those are average yields including consumer. If you take a look at the commercial side, mortgages, we’re talking about sort of 6%, 6.25% kind of rates. Right? It’s market. Whatever you see in the market, the commercial portfolio yields are right now, overall commercial portfolios, including everything, it’s about 6.70% on average. That’s a combination of what goes into construction or CRE and CNI, obviously. We are not seeing big changes on spreads. It’s a function of the base. The base meaning the base rate, which we either, so far or prime, which are the main ones. That would be the ones the adjustments we’ll see, but not necessarily on the spreads. It’s more. Consumer yields are going to be similar to what we have now.

It’s only an issue of what’s the level. Consumer on average are about 10.5%, that’s what we have in the blended, in the whole portfolio of consumer portfolio. That should stay sort of around those levels, but it’s a function of volume more than anything on the consumer.

Kelly Motta, Analyst, KBW: Okay, thank you.

Carla, Call Coordinator, First BanCorp: Thank you. Just as a reminder, if you’d like to ask a question, you press 1 on your telephone keypad. The next question comes from Aaron Sigunovic with Truist Securities.

Thanks. I’m sorry if you mentioned this, but what’s your outlook for loan growth into the fourth quarter? I think you said that NII is expected to be higher despite the kind of flatish NIM. Just thinking about what you’re thinking there on loan growth.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Yeah. I did mention that, you know, we have the guidance that we have for the full year is between 3% and 4%. I think the original guidance was 5%, mid-single digit. You know, this is actually considering what happened in the auto lending side over the third quarter and actually part of the second quarter. It’s a primary driver. You know, some offset has been provided by mortgage, and we do have a fairly strong pipeline in the commercial. Obviously, there’s always timing issues on those, but the pipelines continue healthy.

Okay. You announced a new share repurchase program, and there’s still some remaining authorization from the prior plan. Can you talk about the cadence you’re expecting in terms of share repurchases over the next several quarters?

You know, we always been opportunistic in the market, and we still have $38 million from this year authorization. We can move back and forth and increase or decrease as we believe is prudent. Again, open market is our approach. No ASRs are on schedule or as part of the strategy. We’ll continue monitoring. As I mentioned, our base assumption continues to be around $50 million a quarter, obviously with the flexibility or the optionality of saying a little bit more, a little bit less, depending on what are the circumstances on the market.

Perfect. All right. Lastly, just to follow up on the mainland M&A question, it seems like a lot of other mainland banks are also looking to expand in that geography. Would you say that the environment currently would be somewhat challenging to get a deal done around that area?

Opportunities come and go. We’ll see. We’ll continue to monitor and see what could happen. I think if you see some of the bank reports, obviously, there’s a credit cycle being more reflected in the U.S. That could bring opportunities.

Got it. Okay. Thank you.

Deals are always, you know, deals have always the timing opportunity. Thank you.

Right.

Carla, Call Coordinator, First BanCorp: The next question comes from Steve Moss with Raymond James.

Orlando Berges-González, Executive Vice President and Chief Financial Officer, First BanCorp: Good morning.

Morning, Steve.

Orlando, just following up. Morning. Maybe just following up, Orlando, on the margin here in terms of the timing of the cash flows from the securities portfolio. Is that throughout the quarter or is that kind of late in the quarter to impact the margin?

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: You saw it’s not really equally spread, but you can assume it’s on average. November and December tend to be the highest in terms of the cash flow coming in. You saw that last quarter we had that 16 basis points pickup. We had about $500 million for the third quarter. Those were the cash flows, more or less, that were having the big repricing impact. All of it did not benefit the third quarter. Some of it we’ll see in the fourth quarter. It averaged out a bit. We should see a pickup, obviously, with the only difference being what I mentioned, that we are seeing rates, the options that we have in rates being between 50 to 100 basis points lower based on our policy guidelines of what we put in the portfolio. As you know, we don’t put much of credit risk in the portfolio.

It’s more of an interest rate, yeah, more than anything.

Orlando Berges-González, Executive Vice President and Chief Financial Officer, First BanCorp: Right. Okay. Appreciate that color. On the loan loss reserve here, you guys have made a number of qualitative adjustments over probably the last 12 or maybe 18 months. Curious, as you think about credits performing quite well on the island for an extended period, your consumer credit charge-offs are lower year over year. Curious as to where you think that reserve ratio could shake out over the next 6 to 12 months.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: We don’t talk about specific guidance like that is specific, but what I can tell you is that on the mortgage side, we have seen the trends with the lower charge-offs that our methodology uses historical loss information that is updated all the time. Obviously, as you get more history with better numbers in terms of losses, that improves the ratio. The residential reserves should come down. There is always an uncertainty on the forecast, the macroeconomic forecast projections. We’ve seen the stability on the unemployment sector, the unemployment ratios in Puerto Rico reflect on the way the trends are expected on some of the portfolio, especially when you look at the downside scenarios we do include in our reserves calculations. For mortgage, I do expect, with credit expectations we have, that it would come down, continue to come down a bit.

Consumer, we’re still seeing, obviously, we had, as you mentioned, during 2023 and 2024, we saw increases related to those vintages of the older vintages, the 2022 and 2023 vintage. We’ve seen more stability now on the charge-offs, and that includes, that affects calculations. For now, that will be sort of stable, I would say, in the meantime. Commercial has been pretty good. I don’t see major changes in commercial.

Orlando Berges-González, Executive Vice President and Chief Financial Officer, First BanCorp: Okay. Great. I appreciate all the color. Thank you. Thank you.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Thank you, Steve.

Orlando Berges-González, Executive Vice President and Chief Financial Officer, First BanCorp: Thanks, Steve.

Carla, Call Coordinator, First BanCorp: Thanks, Steve. Just as another reminder, if you’d like to ask a question, you star 1 on your telephone keypad. We have a follow-up from Kelly with KBW.

Kelly Motta, Analyst, KBW: Thank you for letting me jump back on. I just wanted to close the loop on the tax rate, just given it looks like the FTE adjustment is up a bit and there was some noise in the quarter. Do you have a good approximation of what the go-forward tax rate looks like here? Is it any materially different after adjusting for some of these one-time things you had in the quarter? Any help would be appreciated.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: The number that we put on the press of effective tax rate of about 22.2%, which is the estimated for the full 2025, already reflects some of this expected improvement. I would say that’s a good number to use as a guidance. Remember that a few things here and there, as we reinvest on the investment portfolio, a large chunk of that would have tax benefits. Since we are reinvested at better yields that reflect on the rates, you have other components of the operations on some of the growth on the commercial lending side. That’s on a taxable side. The 22.2%, I think, reflects fairly good, a number that we should be between that 22% to 22.5% range. It’s what I’m expecting now.

Kelly Motta, Analyst, KBW: Got it. I apologize. I missed that in the release. Thank you.

Aurelio Alemán, President and Chief Executive Officer, First BanCorp: Yeah.

Carla, Call Coordinator, First BanCorp: Thank you. Just as a final reminder, you start 1 on your telephone keypad to ask a question. As we have no further questions in the queue, I will hand back over to Ramon Rodríguez for any final comments.

Ramon Rodríguez, Investor Relations Officer, First BanCorp: Thanks to everyone for participating in today’s call. We will be attending Hovde Group Financial Services Conference in Naples on November 4. We look forward to seeing a number of you at this event, and we greatly appreciate your continued support. Have a great day. Thank you.

Carla, Call Coordinator, First BanCorp: Thank you, everyone, for joining today’s call. Please conclude the call. You may now disconnect. Have a great day.

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