First BanCorp. Q4 Earnings Call Highlights

First BanCorp. NYSE: FBP management highlighted record revenues, strong profitability and continued capital returns during the company’s fourth-quarter and full-year 2025 earnings call. CEO Aurelio Alemán and CFO Orlando Berges pointed to positive operating leverage, stable credit trends and lower deposit costs as key drivers of performance, while maintaining largely unchanged guidance for 2026.

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Fourth-quarter performance and profitability

Alemán said the fourth quarter capped “a year of outstanding performance and disciplined execution,” citing record revenues and a 49% efficiency ratio for the quarter. The company reported net income of $87 million and earnings per share of $0.85, according to the CEO, along with a return on assets of 1.8%.

Berges provided GAAP quarterly results of $87.1 million, or $0.55 per share, down from $100.5 million, or $0.63 per share, in the third quarter. He attributed the sequential decline primarily to prior-quarter items, including a $16.6 million reversal of a valuation allowance on deferred tax assets related to holding company net operating losses and a $2.3 million employee tax credit. Excluding those items, Berges said earnings per share were 8% higher than the third quarter and adjusted pre-tax, pre-provision income rose to $129.2 million from $121.5 million.

Net interest margin supported by deposit repricing and reinvestment tailwinds

Net interest income increased $4.9 million quarter over quarter to $222.8 million, Berges said. Results included $0.8 million collected on a non-accrual loan payoff and $0.5 million from a prepayment penalty on a Florida loan payoff. Net interest margin was 4.68% (4.65% adjusted), which Berges said was 8 basis points higher than the prior quarter on an adjusted basis.

Management emphasized that lower deposit costs were a key lever. Berges said the bank reduced interest expense on deposits by $2.2 million, driven largely by a 31-basis-point reduction in the cost of government deposits. He added that other interest-bearing checking and savings costs declined 4 basis points and that non-interest-bearing deposits increased by about $170 million, contributing to a 5-basis-point decline in overall funding costs.

On the asset side, Berges said the bank is benefiting from higher reinvestment rates in the securities portfolio, with a $4 million increase in investment income and a 33-basis-point improvement in portfolio yield as lower-yielding securities mature and proceeds are reinvested. That benefit was partially offset by a $2.4 million decrease in income from cash accounts due to lower Fed funds rates and lower average balances.

Loan yields were mixed. Berges said the C&I portfolio yield fell 27 basis points quarter over quarter as floating-rate loans repriced with lower prime and SOFR. Other loan portfolio yields were “very similar,” resulting in an overall loan yield decline of 7 basis points, partially offset by a $155 million increase in average loan balances.

Looking ahead, Berges said the company expects net interest margin to increase 2 to 3 basis points per quarter during 2026 based on projected loan and deposit movements and reinvestment of securities cash flows. He cited approximately $848 million in expected securities cash flows in 2026 with an average yield of 1.65%, including $494 million in the first half of the year. In Q&A, management reiterated that reinvestment and deposit repricing remain key levers, while acknowledging expected pressure from repricing in the floating-rate commercial portfolio.

Expenses, operating leverage and efficiency ratio outlook

Operating expenses were $126.9 million in the fourth quarter, up $2.0 million sequentially, Berges said. He noted employee compensation rose $3.4 million, largely due to the absence of the $2.3 million employee retention credit booked in the third quarter. Excluding that dynamic, he said the increase was $1.1 million, reflecting the full-quarter impact of merit increases granted in the third quarter.

Berges also cited a $2.1 million increase in business promotion related to seasonal marketing. Offsetting items included improved OREO operations compared with the prior quarter’s $2.8 million valuation allowance on a repossessed property and a $1.1 million reversal of an FDIC special assessment accrual.

For 2026, Berges guided to quarterly expenses of $128 million to $130 million, excluding OREO gains or losses, citing ongoing technology investments and certain promotional efforts early in the year. Even with that higher expense base, management said it expects to keep the efficiency ratio in the 50% to 52% range. In response to a question, Berges clarified that the efficiency ratio guidance is provided on a GAAP basis and includes items such as OREO results, even though the expense base guidance excludes OREO due to volatility.

Loan growth, deposits and credit trends

On the balance sheet, Alemán said the bank originated $1.4 billion of loans during the quarter, while total loans grew $80 million, mainly from commercial segments. He noted growth was “slightly impacted” by elevated commercial payoffs and lower consumer loan production. Core customer deposits increased by $267 million, and management said it reduced total deposit costs while government deposits declined as the bank sought “efficiencies in higher cost deposits.” Alemán also highlighted a 3.2% increase in core non-interest-bearing deposits.

During Q&A, management said commercial and residential loan pipelines were “really strong,” while consumer lending was less robust. Alemán also discussed the auto market, noting that Puerto Rico’s retail auto market was down 10% last year, with much of the contraction occurring after tariffs were implemented. He said the second-half decline was over 15% compared with prior years, and management expects continued contraction in the broader market of around 5% this year. First BanCorp. saw a contraction of roughly $6 million to $7 million in its auto portfolio in the quarter and does not expect growth in that segment absent changes to tariffs or excise taxes.

Credit quality remained stable, executives said. Alemán noted the ratio of non-performing assets to total assets fell to an all-time low of 60 basis points. Berges said non-performing assets declined $5.3 million during the quarter, driven by collections on two commercial non-accrual cases totaling $15 million and a $1.8 million reduction in OREO following property sales, offset by two C&I loan cases totaling $12 million that migrated to non-performing status. Non-accrual loans were 70 basis points of total loans, down from 74 basis points in the third quarter.

Net charge-offs were $20.4 million, or 63 basis points of average loans, essentially in line with the prior quarter, Berges said. The allowance for credit losses increased $2 million to $249 million, or 1.9% of loans, reflecting growth in commercial and residential mortgage portfolios.

Capital returns and 2026 priorities

First BanCorp. continued to return capital to shareholders. Alemán said the company repurchased $50 million of common stock in the quarter and declared $28 million in dividends, adding that since the buyback program began in 2021 the company has repurchased over 28% of shares outstanding. Berges said the company repurchased $150 million in common shares and paid $150 million in dividends during 2025, and also redeemed $62 million in subordinated debentures.

Management said the board approved an 11% increase in the quarterly common dividend to $0.20 per share beginning in the first quarter of 2026. Berges added that the bank’s base assumption is to repurchase approximately $50 million in shares per quarter through the end of 2026, while remaining opportunistic based on market circumstances and potential organic or non-organic opportunities.

For full-year 2025, Berges reported net income of $344.9 million, or $2.15 per share, and adjusted pre-tax, pre-provision income of $499.2 million, a 10% increase from 2024. Return on average assets was 1.81% (1.71% on a non-GAAP adjusted basis), marking the fourth consecutive year above the company’s 1.50% ROA target, he said.

Looking to 2026, Alemán said guidance remains largely unchanged, including:

3% to 5% organic loan growth
Efficiency ratio of 52% or better
Return of close to 100% of annual earnings to shareholders
Stable asset quality, with consumer credit gradually returning to pre-pandemic levels

Management also discussed the macro backdrop in Puerto Rico and Florida, noting expectations for moderating consumer confidence amid tariff-related pricing, inflation pressures and geopolitical tensions, alongside supportive trends such as a resilient labor market, strong tourism activity and announced manufacturing investment on the island.

About First BanCorp. NYSE: FBP

First BanCorp NYSE: FBP is a financial holding company headquartered in San Juan, Puerto Rico. Through its principal banking subsidiary, FirstBank Puerto Rico, the company offers a comprehensive range of banking services including commercial and consumer lending, deposit products, cash management solutions and treasury services. It also provides mortgage origination and servicing, equipment leasing, investment management, and insurance agency services.

In its commercial banking segment, First BanCorp serves small and midsize enterprises as well as large corporate clients, delivering tailored credit facilities, letters of credit, and foreign trade financing.

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