First BanCorp. Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 23, 2024

There are 8 speakers on the call.

Operator

I would like to welcome everyone to the First BanCorp 2Q 2024 Financial Results. I will now hand you over to your host, Ramon Rodriguez, Corporate Strategy and Investor Relations for First Bancorp to begin. Ramon, please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining FirstBank Corp's conference call and webcast to discuss the company's financial results for the Q2 of 2024. Joining you today from First Bancorp are Auberio Aleman, President and Chief Executive Officer and Orlando Verjes, 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.

Speaker 1

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 Aleman.

Speaker 2

Thank you, Ramon. Good morning to everyone and thank you for joining today. Let's turn to page 4 to go over the highlights of the quarter. We posted another solid quarter for the franchise of strong profitability and positive operating leverage, earning $76,000,000 in net income and delivering a strong return on assets of 1.61%. Adjusted refaxed provision income moved upward reaching $113,000,000 up 2.4% versus the prior quarter, mostly driven by net interest income and lower expenses.

Speaker 2

In terms of the balance sheet, total loans grew by 2.4% in quarter, annualized driven by growth actually across all business segments. We've seen a slight delay in some of the construction funding during the year, in the first half of the year, and we do expect to close this gap during the back end of the year. Long pipeline remains healthy and are mostly supported by the stable environment that we continue to experience in our operating regions. And we do continue to sustain our mid single digit loan growth guidance for the year, primarily due to the commercial construction on auto loan activity that we continue to experience. In terms of deposit franchise, we had a positive quarter.

Speaker 2

We were very pleased to see improvement in the core deposit flow during the quarter, particularly in the non interest bearing account, which now represent 34% of our total deposits. Core deposit orders and broker and government deposits were up $132,000,000 raised during growth across all the 3 regions. We are highly encouraged by the accretive nature of our balance sheet position for the remainder of the year, as definitely it will benefit from the sizable bond book repricing opportunities, coupled with the expected gradual easing in deposit costs. The credit environment continued to play out as expected, even though NPA decreased to $127,000,000 we continue to see early delinquency and charge off trends within our consumer book returning to historical levels consistently with our expectations actually. On the capital front, we sustain our commitment to preserve our value during the quarter by returning 100 percent of earnings in the form of buybacks and dividends, while continue to executing our organic loan growth strategy, we did maintain a very strong CET1 ratio of 15.8%.

Speaker 2

Once again, really great quarter, another great quarter of strong financial results. We thank our teams for making this possible. They are the backbone of the organization and we're extremely proud of what we have accomplished over the past few years. Let's go to Slide 5 to some additional highlights of the macro. Definitely, our team has a proven track record on delivering consistent performance and adapting to changing market conditions, particularly in our main market.

Speaker 2

In Puerto Rico, the macro backdrop continued to reflect stabilization across most economic fronts with labor market trend sustaining the overall trajectory, passenger activity in the main airport reaching record levels and a strong consumer confidence evidenced by year to date sales collection, sales tax collections actually. As we say in the past, the unprecedented level of federal support continued to drive economic activity in the island. This year, close to EUR 2,500,000,000 of these asset relief funds have been distributed actually during the 1st 5 months. And this represents a 35% increase compared to prior year. In terms of our franchise build, our teams continue to manage multiple capital projects aimed at advancing the evolution of the IT infrastructure and additional enhancement of digital capabilities.

Speaker 2

In particular, we're excited to deploy our new commercial lending platform in the coming months, which will provide a more seamless interaction with commercial clients and will support additional growth in the business. Finally, important, I want to provide an update on the capital strategy. Our approach to manage capital has been always thoughtful and center our making capital decision that will serve the long term interest of the franchise and shareholders. With this in mind and given our strong capital position, as we announced yesterday, our board approved a new authorization of up to $250,000,000 in capital that can be used either to repurchase our common stock or redeem existing loan securities. This is in addition to the $50,000,000 remaining from the prior approval.

Speaker 2

Over the next few quarters, we will focus our efforts on redeeming our outstanding trust preferred debentures, which at this moment that will represent an immediate EPS accretion opportunity and will result in a simplified capital structure, our 100% capital return goal remain intact for 2024. Really the strategy has not changed. We will continue to capitalize as a priority in organic growth opportunities in our markets and deploy excess capital into the opportunistic buybacks or in this case, we're going to focus initially on the redeeming our outstanding trust preferreds. Now I would turn over to Hernando to go over more detail of the financial results. Thanks very much.

Speaker 3

Good morning to everyone. As Aurelio mentioned, we reported net income of $75,800,000 for the 2nd quarter. That's $0.46 a share, which compares with $73,500,000 last quarter or $0.44 per share. We are extremely pleased with the results as we have continued to generate strong return on assets, which reached 1.61% this quarter. The result for this quarter have been very consistent with the discussions with many of the discussions we've had with the market.

Speaker 3

NIM for the quarter expanded 6 basis points and net interest income grew $3,000,000 and expenses have been within the guidelines that we have provided. Provision for the quarter was similar to last quarter was $11,600,000 which compares to $12,200,000 The provision for this quarter reflects benefits from the lower recent historical loss levels on the residential mortgage portfolio as well as lower projected loss on the commercial real estate portfolios. These ones have been driven by macroeconomic variables being actual macroeconomic variables being better than they have been previously forecasted. The 2 combined have offset the impact of the level of the higher level of charge offs we've had on the consumer portfolio, which have affected the provision for those portfolios. Effective tax rate for the quarter was 24.1%, very similar to last quarter and we have continued to work on the tax positioning.

Speaker 3

As I mentioned, net interest income for the quarter improved $3,000,000 was 199.6 $1,000,000 for the quarter. Total interest income grew $3,700,000 which includes 2,800,000 dollars interest income growth in the loan portfolios, while interest expense only grew $600,000 The yield on total earning assets grew 7 basis points in the quarter, which is a combination of a 5 basis points growth in the loan portfolio yields and higher level of interest bearing cash balances at the Fed when combined with the investment portfolio, the higher cash balances resulted in approximately 7 basis points higher yields on the portfolio. Funding costs increased only 1 basis points for the quarter as we continue to see more stability on deposit pricing. The increase in interest expense was mostly on time deposits where average balances grew $110,000,000 and we saw a 16 basis points increase in the average cost of these deposits. During the quarter, overall deposits grew in the quarter and we were able to replace some of our higher cost broker deposits.

Speaker 3

The average balance of broker deposits increased 73,000,000 decrease I'm sorry, dollars 73,000,000 for the quarter. Quarter end to quarter end, it's about $100,000,000 and the average cost of these deposits is down 9 basis points. As we have mentioned in prior quarters, assuming current interest rates, the net interest margin reached the inflection point in the Q1 and we saw an expansion of 6 basis points this quarter reaching 4.22. Again, now the composition of our earning assets continue to shift towards higher yielding assets, which more than offset any increase in the cost of deposits. Similar to what we said before, we continue to benefit from repricing opportunities on the investment portfolio either into loans or ultimately into higher yielding securities.

Speaker 3

Our most recent estimates of cash flow, it's about $720,000,000 to $730,000,000 for the last 6 months, dollars 250,000,000 of that in the 3rd quarter and then about $470,000,000 to $480,000,000 in the 4th quarter, which over the 2 quarters, the combined cash flows coming from agency and treasury papers that have contractual maturities would be about 500,000,000 dollars So the full impact of this repricing will be seen in the Q1 of 2025. The other income components, non interest income components were fairly consistent. We did have a reduction of $2,000,000 which is basically due to the $3,200,000 in seasonal contingent insurance commissions that we collected in the Q1. On the other hand, we had some pickup on mortgage banking activity income for the quarter. In terms of expenses, expenses were $118,700,000 which is $2,200,000 lower than last quarter.

Speaker 3

This reduction includes $2,300,000 gain we realized on the disposition of a large commercial OREO. We also saw a $2,100,000 decrease in compensation expenses, mostly payroll taxes and stock based compensation we had in the Q1. And we had a $700,000 reduction in the accruals for the FDIC special assessment in the quarter. However, we did have an increase of $1,800,000 in credit and debit card processing expenses. Reality last quarter we received $1,300,000 expense reimbursement incentives from the networks which lower our expense base in the Q1.

Speaker 3

If we exclude OREO and the FDIC expenses, expenses for the quarter were $122,300,000 which compares to $121,500,000 last quarter, which is very much in line with the $120,000,000 to $122,000,000 expense range that we have been guiding excluding OREO benefits. And we continue to maintain this guidance for the next couple of quarters. The efficiency ratio for the quarter was 51.2%, which is also in line with our 52% guidance. And we should continue to see the efficiency ratio at this level based on current interest rates and margins. In terms of asset quality, non performing assets decreased $2,700,000 in the quarter to $126,900,000 which is 69 basis points of total assets.

Speaker 3

Most of the reduction was in the other real state owned decreased $7,200,000 due to the sale of the $5,300,000 commercial real estate owned in Puerto Rico. Non performing loans, however, did increase $3,200,000 basically commercial and construction during the quarter, a commercial relationship in Puerto Rico with a total exposure of $16,500,000 migrated to non performing. However, we did remember that $10,500,000 Florida case that went into non performing last quarter that was restored to accrual status based on the payment status of the case and restructuring. Loans in early delinquency did raise an increase of 13.7 $1,000,000 all of it was in consumer. We continue to see some trends broadly moving towards our historical levels.

Speaker 3

The allowance for credit losses was $254,500,000 at the end of the quarter, which is $9,100,000 lower than prior quarter. Basically, the reduction came from the mortgage and CRE portfolios, as I mentioned before, while the consumer reserves show an increase. The coverage, the allowance coverage on loans decreased to 206 from 214, still healthy And the allowance including unfunded loan commitments and debt securities was 261,000,000 dollars versus the $270,000,000 we had last quarter. Net charge offs for the quarter were 21,100,000 dollars or 69 basis points of average loans as compares to 37 basis points we had last quarter. If you remember last quarter we included a $9,500,000 recovery from the sale of previously charge off loans.

Speaker 3

Excluding this recovery, net charge offs in the Q1 were 68 basis points, which is very much in line with this quarter. On the capital front, Rejio made reference to it, but our ratios continue to remain very strong and significantly above well capitalized levels. We continue to deploy capital through share repurchases and dividend payments. Repurchases and dividends for the quarter amounted to $76,000,000 which is essentially 100% of the earnings we had in the quarter. The tangible book value per share and the tangible common equity ratio increased to $8.81 7.7 percent each respectively.

Speaker 3

Basically, we had an improvement in the fair value of the investment portfolio and that improved the ratios since earnings basically were offset by the capital actions. The adjusted or the comprehensive loss represents now over $3.89 intangible book value and over 300 basis points on the TCE ratio. And assuming the stable rates that we are seeing in the market and we expect we will continue to recover the adjusted or comprehensive loss based on the short duration of the portfolio. This concludes our remarks. Operator, we would like to now open the call for questions.

Operator

Thank We have now received the question from Brett Rabatin from Hovde Group. Brett, your line is now open. Please go ahead.

Speaker 4

Hey, good morning, everyone.

Speaker 5

Good morning, Brett. Wanted to start

Speaker 4

with just the macro in Puerto Rico. And it sounded to me like you were kind of intimating that it's kind of steady state was what you were seeing most recently. But you mentioned the $2,500,000,000 distribution and then I saw Core 3 had actually distributed a $1,000,000,000 here so far this year. And when I look at the GDBAI index, it's down actually in April a little under 124, but that looks to be mostly concrete and gasoline. As you guys think about the back half of the year from an economic perspective, is there anything that you would point out as drivers for either growth or maybe some atrophy in the economy?

Speaker 2

Well, we continue to see I think the €2,500,000,000 is the 5 months, the beginning of the year, and that is actually higher than last year. And you can see in that the bulk part of that is actually CDBG construction elements, which it's primarily there's significant projects in the what they call the light deck line, low income housing. We have some of those in the books. Obviously, they're being approved and initial disbursement, but we expect that to show in the second half of the year as we originally have planned. We continue to see foreign investors bringing capital to Puerto Rico, buying corporations, more and more deals with those.

Speaker 2

Some of them are being published in the newspapers. Some of them have required financing. There are more projects in the pipeline regarding the IPG funds. They include additional hotels. They include additional housing, which when you look at the middle income segment, there is still high demand for that.

Speaker 2

Unemployment continues stable and labor participation better. So we do not expect any decrease. We actually see more opportunities for improvement. Obviously, take into consideration that the excess liquidity that was brought by the pandemic was already utilized. And obviously, there is an impact.

Speaker 2

But when you look at sales tax, it's not really shown there. It's probably in some other type of consumption. So we do expect when you look at the fiscal plan that was recently published, there is positive GDP growth in the scenarios. So I think when we add all that, actually Ramon, you could comment on the specific analysis of the indicator of the economic activity indicator, which is volatile and has some quarterly variances historically.

Speaker 1

Yes, Brett. Most of the reduction that you mentioned with regards to the economic activity index is related to gas consumption, which has been trending down over the last few quarters. But when you look at the other three components, payroll employment in particularly, it's reaching decade highs in April, up I believe 2% up year over year. So when you look at the other components, we remain pretty encouraged with the economic activity index going forward.

Speaker 4

Okay. That's great color on that. And then maybe Orlando on the margin, it would seem like with what you have coming with securities portfolio and kind of your stabilization of funding costs in the second quarter that the margin should continue to move higher, it's of magnitude. Any thoughts on the pace of the margin from here and just how you see that playing out?

Speaker 3

Well, we I mean, we haven't provided any a very specific margin number, but clearly, we have said that our margin will continue to go up. Again, if you only think about the $700,000,000 or so or some or $720,000,000 of cash flows that are now yielding 1.5% on a GAAP basis, that number would be replaced with something would be close to loan yields, average loan yields or at worst of the investment portfolio yield. So we would be picking up 4 to 5 basis points easily on that portfolio. So that should start to translate into a higher margin coming next year. The funding cost side has seen the stability.

Speaker 3

We're starting to see the stability. The increase, as I mentioned, on the time deposits has a lot to do with all the things maturing and being renewed at current rates. But the Puerto Rico market is not as high as the U. S. Market.

Speaker 3

We still continue to see some pressure in Florida. We are seeing less pressure in Puerto Rico and exception pricing would be low force. But in reality, most of the time deposit numbers are not generated at those rates in Puerto Rico. So that's going to slowly start to pick up. And again, some of the loan portfolios as we originate new things are also coming in at current rates, which are slightly higher.

Speaker 3

That's why we ended up with that 5 basis points pickup on the yields on the loan portfolios on average. So the expectation in our numbers is continue trend increases on time deposits I'm sorry, on net interest margin for the next few quarters.

Speaker 6

Okay.

Speaker 4

Fair enough. And then if I could sneak in one last one, just on the reduction of the commercial real estate reserve due to macro factors, Would that be mostly or entirely just the term structure of interest rates or would there be other factors that would have reduced your commercial real estate or improved your commercial real estate outlook?

Speaker 3

It's a bit up. I mean, the CRE price index deterioration that we to some extent, our modeling is based on national information and the reality is Puerto Rico is behaving significantly better. So what we are seeing as we adjust for the market on those numbers, the CRE price index, it's not suffering the impact that some markets in the States have suffered. And that has been adjusting the projection going forward for the Puerto Rico market. So that's part of the reason we're seeing those improvements on the macro on the CRE side.

Speaker 4

Okay, great. Very helpful. Thanks for all the color. Thank you.

Speaker 3

Thanks, Brett.

Operator

The next question we've got is Steve Mott from Raymond James. Steve, your line is now open. Please go ahead.

Speaker 4

Hi, good morning.

Speaker 2

Good morning, Steve, and welcome to the call.

Speaker 6

Maybe just start thank you, Antonio. Appreciate it. Maybe just starting with the or continuing with the loan loss reserve, I was just curious here with regard to the decline in the residential mortgage reserve quarter over quarter, was that just kind of a component of historical charge offs have declined with the primary driver? And could we see a further maybe reduction in that reserve here over time?

Speaker 3

It is driven by the updated information on charge offs on that portfolio. We've seen significantly low trends. The mortgage portfolio is longer lived portfolio. Therefore, we use longer lives in estimating some of the factors. And as you have seen, the loss ratios on the recent years have been very low and that has continued to replace all their information on charge off ratios.

Speaker 3

So we have continued to see some improvements and assuming we see we stay where we are now, I do expect that eventually we'll see some additional improvements in that reserve assuming that the current size of the portfolio. Obviously, we the portfolio for quite a while also was coming down. It's been more stable recently as the mix of conforming and nonconforming has changed a bit based on market rates. But clearly, the losses on the portfolio has been much lower. We've seen values significantly more consistent in the market.

Speaker 3

They have stayed high and that helps in any kind of disposition of property. So that's why we have seen this trend of reduced losses, which is translating into lower reserve requirements.

Speaker 6

Okay. Appreciate that. And then just with regard to the loan growth this quarter, I saw in the text that floor plan growth was one of the drivers. Just curious if that's if there's a seasonal dynamic or just any reasons for that growth? And how to think about do we continue to see this pace of CRE growth as well?

Speaker 2

Well, there's a couple of considerations. We did sign new relationships on the floor plan. So the most part of the increase came from a large new relationship that was acquired by First Bank. There's also some seasonality, I will say. Auto sales have contracted from prior year as expected, but they are actually they're a little better than we actually forecasted.

Speaker 2

So market continues very active in that sense, yes.

Speaker 6

Okay. And then on the commercial real estate side, you guys had another good quarter of growth here. Just kind of curious, do we expect that cadence to continue? I know you guys are on construction, but that would likely pick up in the second half. Just curious on CRE.

Speaker 2

Yes. Actually, on the CRE, some of the increase was conversion from construction. So that's why the timing of reduction in construction is shown this quarter because some of the cases were compared to permanent loans. Yes, we and yes, we do have any sort of conversions coming through the end of the year, but we also have expected disbursements on the construction loan to pick up with the projects normal cycle of the construction project showing some delays is not a surprise.

Speaker 6

Okay. Appreciate that. And one last one for me. Just on the non forming commercial loan here in the restaurant or food sector, Just curious, any color you could give around that credit, whether it's a shared national credit or things along those lines?

Speaker 2

No, no. It's a relationship that we have. We do expect resolution of that relationship. Some initiatives in the development of relationships have delayed, but we do expect that to recover sometime in the future.

Speaker 3

And that has 2 components, 1 in construction and the other in the commercial side. Yes.

Speaker 6

Okay. Great. Appreciate all the color and a nice quarter. Thank you.

Speaker 2

Thank you.

Operator

Thank you. The next question we've got from Timur Braziler from Wells Fargo. Timur, your line is now open. Please go ahead.

Speaker 5

Hi, good morning.

Speaker 3

Hi, good morning,

Speaker 5

Kumar. I'm just wondering on the securities cash flows, flows, it looks like it's accelerating in the back end of the year. Just your appetite for either putting that right back into the bond book, waiting to invest that into loans. I guess, how quickly are you anticipating those bonds to be reinvested or those bond cash flows to be reinvested?

Speaker 4

Well,

Speaker 3

reinvestment can be different ways. Obviously, we based on the pipelines on the lending portfolio and the liquidity composition of the institution, that's what drives the decisions. Based on pipelines, we do see some amounts of the Fed account, which obviously at this point, it's yielding $540,000,000 which is still significantly higher than the portfolio. If we don't foresee that to be the case, we do 2 things, either we let some wholesale funding that mature go or we go back to the investment portfolio. That would be the order.

Speaker 3

First, the lending and the lending, it's going to be the key factor here. And if we see it's longer term, we'll just move back to the market. So it's a mix, Timur. It's going to be based on how we see the different components, mainly pipelines and liquidity that we decide where to move the money to.

Speaker 2

Okay. I guess the

Speaker 5

cash where it is today

Speaker 3

The effect would be immediate. As it comes in, obviously, you're just leaving it for a while at the Fed account or you're eliminating some wholesale funding while the loans come in. So that's some of that pickup won't go immediately to loan yields, but clearly would go to kind of a market investment or cash yields.

Speaker 2

Yes. Okay.

Speaker 5

That makes sense. And then just looking at the incremental Board authorization at 250 for the reduction of some of the prefs. I guess, what does that portend to future buybacks? Is that a hindrance maybe? Or do you kind of use the capital for the redemption and then that puts buybacks on hold?

Speaker 5

Or can those go on kind of in line with one another?

Speaker 2

Well, right now, this quarter, we will focus on exclusively on the debt securities, redeeming the debt security this quarter. Starting with that, we again, we have the same number in mind in terms of the plan achieving 100% capital return, which it would be probably $50,000,000 per quarter similar to what we did in the first half of the year. So and obviously that gave us that is an immediate accretion and immediate improvement on revenues, no EPS dilution. So we're going to prioritize that activity in this half of the year, but we always have the optionality. We're not we're keeping the optionality and I think that is the important thing to do Como store buyback anytime too.

Speaker 2

We're just sharing what is our priority right now.

Speaker 5

Got it. So priority near term is on the redemption and then buybacks are still potentially on the table. Is that fair?

Speaker 2

Yes, that's correct.

Speaker 5

Okay, great. Thanks for the questions.

Speaker 6

Thanks, Timur.

Operator

We've now got a question from Kelly Motta from KBW. Kelly, your line is now open. Please go ahead.

Speaker 7

Hi, good morning. Thanks for the question. Good morning, Kelly. You've continued to have like a pipeline of OREO gains here that's really to the benefit of expenses. I think you reiterated your guide of $120,000,000 to $122,000,000 ex these gains.

Speaker 7

But just wondering, based on the activity we've seen so far, what are you seeing in the pipeline in terms of the potential for further OREO gains to reduce that overall expense number?

Speaker 3

This quarter, we had a large case that is commercial OREO that we had that was we don't have too many of those. That was sold at a good profit for the quarter. But we on the commercial side, there is not that many. However, we continue to see residential mortgages being disposed. But market prices have been steady and that has allowed pricing on these OREOs on the residential side to continue to be there.

Speaker 3

At this point, it's I think we have mentioned this before, it's been longer than we expected, but we'll take it. And our group continues to see better offers regarding as compared to appraisals based on what's out there. Again, some of the things we think it's a higher employment levels in the island, need for properties. And so for a long time, we didn't have much in terms of construction, residential construction in Puerto Rico. So all of that, that combined.

Speaker 3

In the near term, we still feel that the numbers won't be as large as what we saw this quarter definitely. But we do expect that operating costs would be definitely offset by the sales at least for the next couple of quarters. But it's very difficult to say, Kelly, how long it's going to be. I don't think it's going to last forever, definitely.

Speaker 7

Got it. I keep putting in 0 there, and you guys keep beating me. On the deposit side, it was really encouraging to see non interest bearing stabilize that actually up slightly this quarter. Just wondering, provided we're obviously done with rate hikes, like what you guys are seeing on the deposit side and the pipeline for deposits, especially with the release money picking up year to date, fair to say that continued modest growth off this number? Or how are you guys thinking of that?

Speaker 7

What are you guys seeing?

Speaker 2

Well, it's the number one priority of the franchise to continue growing the core deposits. So it's a combination of products, digital functionality and I will say commercial activity and the commercial products that we have focused on and made investments over the past year. So it's really our main priority to continue growing that. It's very difficult to predict the trends in the market. Market data is flat in terms of the overall market data trends.

Speaker 2

Obviously, there's a lot of analytics behind how to execute, but our goal is really to continue to improve that number. Sustaining the 34% is a challenge on non interest bearing, but continue to be the focus also. Government deposit is a different strategy. It's more opportunistic and transactional, but we do have a core business, which is providing all type of transaction banking services to the government entities, not only the large corporations, but municipalities. So with those two stayed at similar levels, we don't expect growth in that area.

Speaker 2

We do expect to continue making progress on the commercial and retail side.

Speaker 7

Got it. That's helpful. Maybe last one for me. Given your outlook for expenses to hold into this level and margin expansion, you've been on the efficiency ratio consistently in the low 50s and kind of below longer term mid

Operator

I think 50 range.

Speaker 7

Given that you expect margin expansion, would it be fair to expect that efficiency could continue to run potentially lower here at least in the near term based on kind of your outlook for investment in the franchise and kind of NII growth outstripping that? Just or could you potentially up your expenses and reinvest some of those gains as you think about it? I realize it's a little early to start talking about 2025, but just from a high level, how you guys are viewing that would be really helpful.

Speaker 2

Yes. Investments will continue. Technologies is a key component of the investment priorities. Also, facilities has been a key component that we continue to invest. So it really I think we guided the 52% for 2024 And I think we should stay we're going to stay around that.

Speaker 2

Very difficult, sometimes to go lower, sometimes a little bit like these past two quarters. There's opportunities among timers that go into the equation. But when you look at the overall, I think 52% is probably the best number we can provide at this stage.

Speaker 3

Obviously, the margin expansion could help in terms of that relationship and offset any additional investments we might make clearly. But the 52% is where we feel it's going to stand at a based on the level of investments we're currently doing.

Operator

Great. Thank you.

Speaker 2

Thank you, Kelly.

Operator

Thank you. We currently have no further questions. So this concludes today's conference call. You may now disconnect your lines. Thank you.

Speaker 2

Thank you very much, Dror. Thank you.

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Key Takeaways

  • First Bancorp reported $76 million in net income and a 1.61% return on assets in 2Q24, with adjusted pre-tax income rising 2.4% sequentially driven by net interest income growth and lower expenses.
  • Total loans grew an annualized 2.4% during the quarter across all business segments, and management reaffirmed its mid-single-digit loan growth guidance as construction funding is expected to accelerate in H2.
  • Core deposits strengthened, with non-interest bearing balances rising to 34% of total deposits and $132 million of inflows across all regions, while overall deposit costs showed signs of gradual easing.
  • The bank returned 100% of earnings via share buybacks and dividends, maintained a strong CET1 ratio of 15.8%, and secured board approval for an additional $250 million of capital to be used for common stock repurchases or trust preferred debt redemptions for immediate EPS accretion.
  • Net interest margin expanded by 6 basis points to 4.22%, with net interest income up $3 million, benefiting from higher-yielding assets and stable funding costs, and management expects further margin uplift as maturing securities are reinvested.
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