First BanCorp. Q4 2024 Earnings Call Transcript

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January 23, 2025

Key Takeaways

  • FirstBank earned $76 million in Q4 net income, drove pretax pre-provision income up 5%, expanded net interest margin by 8 bps to 4.33%, and maintained an efficiency ratio near 52% with a 1.56% return on average assets.
  • Total loans grew by $330 million (9.7% annualized) across consumer, commercial and mortgage segments, while core deposits rose 2% sequentially and nonperforming assets hit a record low of 61 bps of total assets.
  • The company redeemed $50 million of junior debentures, paid $26.3 million in dividends, and still has $200 million of capital plan authorization remaining—all while regulatory capital ratios remain well above “well-capitalized” thresholds.
  • For full year 2024, FirstBank reported record revenue, a 6% increase in earnings per share, 4.7% loan growth ($569 million), $267 million in core deposit additions, and distributed 100% of earnings to shareholders.
  • Looking ahead to 2025, management guides to mid single-digit loan growth, a 100% net payout including the remaining debenture redemptions and share repurchases, a 13% hike in the quarterly dividend to $0.18 per share, and expects net interest margin to expand by around 20 bps.
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Earnings Conference Call
First BanCorp. Q4 2024
00:00 / 00:00

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Operator

Hello everyone, and thank you for joining the First BanCorp fourth quarter 2024 and full year financial results. My name is Becky, and I'll be your operator today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Ramon Rodríguez, Investor Relations Officer, to begin. Please go ahead.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Thank you, Becky. Good morning everyone, and thank you for joining First BanCorp's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2024. Joining you today from First BanCorp are Aurelio Alemán, President and Chief Executive Officer, and Orlando Berges, 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 filing. The company assumes no obligation to update any forward-looking statements made during the call.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

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

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

Thank you, Ramon. Good morning to everyone, and thanks for joining our earnings call today. I will begin by briefly discussing the business performance for the fourth quarter. Then we'll move on to provide some high-level highlights of how we performed during the full year. We're quite excited how we closed 2024, and with another quarter of consistent execution and strong financial performance. We earned $76 million in net income and grew pre-tax pre-provision income by 5% to $117 million, primarily driven by net interest margin income expansion and our disciplined expense management process. Return on average assets was again strong at 1.56%, and the organization continued to operate at an efficiency ratio close to 52%, which is in line with our guidance. Turning to the balance sheet, the quarter was strong.

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

Total loans grew by $310 million, up 9.7% mid-quarter annualized, driven by growth actually across all business segments: consumer, commercial, and mortgage, and between Puerto Rico and the Florida region primarily, particularly within the commercial and construction lending segments. However, we saw we were expecting some portfolio repayments in the quarter, which came a little bit lower. We anticipate that some of that will come in between the first and second quarter of this year in the range of probably $50 to $100 million. In terms of deposits, core deposit trends were also very encouraging, with total deposits other than broker and government up 2% sequentially from prior quarter and 4% when we include government deposits.

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

As we have seen in prior quarters, we did see some seasonality in deposit inflows during the quarter that they are temporary in nature or they have to do with the variability of the government sector funding of reconstruction activity. Credit performance was relatively stable during the quarter, with non-performing assets hitting another record low of 61 basis points of total assets. On the capital front and liquidity, our liquidity and capital position remains very strong. We sustain our commitment to deliver over 100% of earnings in the form of capital actions by redeeming $50 million of our outstanding junior debentures and paying $26.3 million in common dividends. Even when accounting for these actions, our regulatory capital ratios increased during the quarter and remained significantly above well-capitalized.

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

We still have $200 million left in our capital plan authorization, which we expect to continue deploying through 2025 in a manner that best suits the long-term interest of the franchise. Please let's turn to slide five to provide some highlights of the year. The solid performance of the quarter gave a year of record results for the franchise in the back of a positive economic backdrop of our operating markets. Total we raised that actually total record revenue, 6% increase in earnings per share and reached a multi-year low in non-performing assets. The portfolio expanded by 4.7% of $569 million. We added $267 million in core customer deposit and distributed 100% of earnings to shareholders. Loan growth was actually quite in line with our guidance of mid-single digit growth.

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

Consistent with our strategy, our well-positioned balance sheet allows us to capitalize on bond book and non-repricing opportunities under the current rate environment while proactively managing funding costs that actually will continue through 2025. We're considering stable deposits going forward. Our asset mix will continue to skew towards higher yielding assets, which coupled with gradually declining funding costs should drive additional net interest income expansion in 2025. Over the course of 2024, our franchise made great progress advancing technology initiatives to improve our interaction with customers through both the convenience of digital channels and service-focused relationship officers. We are achieving the targets we set to measure our strategic success, and we're seeing the benefit of the investment we made in technology to accelerate our growth and improve how we serve our communities and customers.

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

As we look ahead, the operating environment for 2025 actually seems conducive of another year of positive performance and organic capital generation. If we look at the key economic metrics in the environment during the fourth quarter, payroll employment continued to improve. Tourism metrics and passenger activity at our main airport reached record levels again, and disaster relief fund disbursement rate registered another year of sequential increments in 2024, and we do expect this trend to continue as the Puerto Rico Planning Board is forecasting another year of economic growth in 2025, so given this backdrop for 2025, we're sustaining our mid-single digit loan growth guidance. We're sustaining our 100% net payout ratio of our capital. That includes redeeming the remaining $61 million of junior subordinated debentures and executing recent oversubscribed repurchase opportunities and definitely maintaining a sustainable dividend payout policy.

Aurelio Alemán
Aurelio Alemán
CEO at First BanCorp

In line with this guidance, we were very pleased to announce earlier this week that our board approved a 13% increase in our quarterly common stock dividend that was raised to $0.18 per share. Again, we will continue to monitor general macro, how things develop, political changes as we execute our strategy, as we execute our capital deployment plan and to close, I have to say that I'm really, really proud of what our teams have accomplished so far. We are very positive and look forward to a very positive 2025 with optimism and excitement of what lies ahead of us. Now I will turn the call over to Orlando to go over some more detail, and we will be back for questions. Thanks to all.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Good morning, everyone, so Aurelio mentioned we recorded very strong results during the quarter, earning $75.7 million in net income or $0.46 a share, which compares with $0.45 a share in the third quarter. We saw the results for the quarter saw improvements in net interest income, which were partially offset by a higher provision for credit losses. The provision for the fourth quarter was $5.7 million higher than last quarter, but this was mostly related to a $5.5 million release we had in the allowance for residential mortgage loans during the third quarter based on the consistent positive outlook on macroeconomic variables, but also this quarter, we provided for the higher loan portfolios that we achieved at the end of the quarter. In general, the economic outlook remained fairly consistent going forward from what we had in the third quarter in terms of estimating the allowance.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Income tax expense for the quarter was $20.3 million, which is $2.3 million lower than last quarter. At the end, we ended up with a higher proportion of exempt income for the year, which resulted in a slightly lower effective tax rate. The effective tax rate was just under 24% for the year 2024, and we're expecting that tax rate for 2025 will be in that same range from 24%-24.5%. For the full year 2024, net income was $299 million, very similar to the $303 million we achieved in 2023, but earnings per share were $1.81 for this year, which is $0.10 higher than we had in 2023, which is the benefit of the share count reduction based on the buybacks we have done over the last few years. Return on average assets for the year was 1.58%, and return on equity was 19.1% on a GAAP basis.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

If we were to eliminate the other comprehensive loss impact from the capital on a non-GAAP basis, the adjusted return on equity would be 13.6%. As I mentioned, net interest income for the quarter was $7.2 million higher than last quarter, reaching $209.3 million. You might recall from last quarter's earnings call, we had mentioned that we were expecting that the net interest margin for the fourth quarter would be similar to the third quarter. However, we were able to achieve an eight basis points improvement in margin from 425 to 433 in this fourth quarter. At that time, we were expecting loan repricing impact would offset some other improvements.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Even though we did see that repricing impact on the floating rate commercial loans, the commercial portfolio grew on average $192 million, which more than compensated for this pricing reduction, while we achieved $37 million in growth in the residential and consumer portfolios. Also, growth in deposits for the quarter allowed us to reinvest about $220 million of maturing investment securities at a rate of 5.40%. We look at cash flows. During the quarter, cash flows for the investment portfolio were $470 million, and that includes $367 million in securities that mature with an average yield of 65 basis points. So the pickup in margin in yield was quite significant as compared to those 65 basis points. Deposits on interest rate retail and commercial transaction accounts grew $348 million on average for the quarter. These deposits have an average cost of 1.52%.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

On the other hand, higher cost time deposits and broker CDs decreased by $130 million. Also, during the quarter, junior subordinated debentures with a cost of $78 million with a cost of 7.78%. I'm sorry, decreased $50 million on average. We did redeem an additional $50 million at the end of the fourth quarter. The impact would be seen now in 2025. The reduction in borrowings and broker CDs resulted in an interest expense reduction of $2.8 million for the fourth quarter. As we look ahead into 2025, we still see opportunities for both net interest income and margin expansion as we redeploy what we estimate to be somewhere between $1.5-$1.6 billion of investment portfolio cash flows in 2025 that are currently yielding about 1.25% to our other either loans or higher yielding securities or paying down some of the higher cost borrowings.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

If we were to assume normal flow of deposits, we expect that margin could improve around 20 basis points by the end of 2025. In terms of other income, it was fairly in line. It was down a bit mostly from a decrease in insurance income due to lower production. On the expense side, expenses were $124.5 million, a $1.6 million increase from the third quarter. OREO gains this quarter were $1 million or $300,000 less than last quarter. Excluding OREO, expenses for the quarter were $125.6 million, which is $1.3 million higher than last quarter and higher than the top range guidance we had provided. The increase was in part related to business promotion initiatives that took place at the end of the year and were a bit higher than we had originally anticipated.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

However, we did register operating leverage as an increase in the net interest income was enough to offset increase in expenses, resulting in a lower efficiency ratio of 51.6% for the quarter. Based on the current stage of several ongoing technology projects and branch network expansions planned for 2025, we estimate that our expense base for the next couple of quarters would be in the range of $125-$126 million, excluding any OREO gains. We continue to estimate that our efficiency ratio will be around 52%, considering the changes in expenses and income components. In terms of asset quality, NPAs decreased $800,000 that now represents 61 basis points of assets. Most of the reduction was due to a repayment of a $1.8 million non-accrual commercial loan. Inflows for the quarter were $1.6 million lower than last quarter, mostly consumer, even though we have seen some early delinquency increases.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

The macro is fairly stable, and the labor market is healthy, but consumer credit continues to show weaknesses. Overall, loans in early delinquency increased $9.6 million from last quarter, with consumer loans increasing $14 million, obviously offset by a decrease of $5.4 million in commercial loans. We continue to proactively manage this great cycle on the consumer side and the advantages that had impacts. We're estimating somewhere in the middle part of the year towards the end of the year to achieve the stability we had anticipated on the consumer. The allowance for credit losses decreased $3.1 million to $244 million during the quarter, mostly from a $4 million reduction in the allowance for commercial loans. Based on the improvements we have seen on both the financial condition of borrowers and obviously the macroeconomic forecast, particularly on the consumer real estate indexes, which have continued to show improvement.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

The allowance for the consumer portfolios did increase $1 million due to the recent loss trends. Overall, the allowance came down to 1.91% of loans from 1.98% as we continue to see these good credit trends in the commercial and residential mortgage portfolio. However, the allowance on consumer loans has gone up to 3.85% of loans based on loss trends that we have had in the portfolio. Net charge-offs for the quarter were $24.6 million or 78 basis points of average loans, pretty much in line with the prior quarter. Consumer charge-offs increased $1.3 million, but we had a $1.2 million decrease in commercial charge-offs. On the capital front, regulatory ratios increased during the quarter, and we continue to operate significantly above the regulatory well-capitalized levels.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

We deployed, as Aurelio mentioned, 100% of our quarterly earnings for the redemption of $50 million in junior subordinated debentures and $26 million payment of common dividends, consistent with the guidance we have provided. The tangible book value per share did decrease to $9.91, and TCE decreased to 8.4%, but it was mostly due to an $82 million decrease in the fair value of available for sale investment portfolio. The remaining adjusted other comprehensive loss that we have on the books still represents $3.41 in tangible book value per share and over 258 basis points in tangible common equity ratio. As Aurelio mentioned, we will continue to deploy excess capital in a thoughtful manner, always looking for the long-term best interest of our franchise and our shareholders. This concludes our remarks. Operator, please open the call for questions.

Operator

Thank you. As reminded, to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Frank Schiraldi from Piper Sandler. Frank, your line is now open. Please go ahead.

Frank Schiraldi
Frank Schiraldi
Analyst at Piper Sandler

Thanks. Good morning.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Good morning, Frank.

Frank Schiraldi
Frank Schiraldi
Analyst at Piper Sandler

On the 52% efficiency ratio for 2025, I guess that's just sustaining where you are, right? I mean, I believe that's a non-FTE NII is in that calculation. But then can you just remind us, are OREO gains, is there some level of that assumed in 2025 that's also in that calc, or could OREO gains kind of move that even lower?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

No, it's included in that. The numbers have been coming down, as we have mentioned. We do expect to still achieve probably OREO gains on the first half of the year, but that's significantly going to go down by the second half of 2025. So it's mostly the other expense components and obviously the income side, as you mentioned.

Frank Schiraldi
Frank Schiraldi
Analyst at Piper Sandler

Okay. And you've been pretty consistent there around that 52% level. How focused are you, I guess, in 2025 on that? Do you see opportunities to ramp up or delay investments depending upon the revenue outlook to kind of really hone in on that 52%?

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

In reality, we see the consistent revenue side, and we're counting on some of the opportunities that we're executing. As Fernando mentioned, we expect some margin improvement. You have the reinvestment of the portfolio, of the cash flows, and then we have a mid-single-digit target of growing the portfolio again. Those components, we bring some revenue. We're not really stopping on investments. We are including significant investment in technology to continue, which is bringing other benefits, which some of them will be more long-term, but they are. We also have some branch openings that are part of that number that will start happening during the year. We're moving branches into areas that we don't have a presence, where there is a deposit opportunity and a commercial bank opportunity on the small and medium market side. We're not really halting on those investments.

Frank Schiraldi
Frank Schiraldi
Analyst at Piper Sandler

Okay. And then just a point of clarification. Orlando, I heard you mention the NIM. I think you said NIM could be up 20 basis points year over year. Is that the number you gave?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

20 basis points is based on the quarterly pickup we expect. It would be like the margin at the end of the fourth quarter of the year as compared to the fourth quarter of 2024. That's what we're talking. It's like with the reinvestment of the portfolio and obviously considering expected deposit flows and expected new loan productions, we believe margin will continue to pick up based on that. As I mentioned, the cash flows that are coming due from the investment portfolio or estimated cash flows that are going to be around $1.5-$1.6 billion in 2025, on average yield of 125 basis points, it's not equally distributed. The ones that mature in the first half of the year are like 150 basis points, and then the other half, it's smaller. It's a lower amount of yield.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

But still, you're going to get a good takeoff on the reinvestment or the amounts that could be channeled to loan portfolios. Obviously, we're still dealing with what's the expectation on rates. We had a 100 basis points assumption originally like three months ago that would happen in 2025, but now we feel it's probably going to be 25 or 50 basis points. So we will see that part. But still, assuming these rates and the pickup on those components, we'll have a good push on the margin.

Frank Schiraldi
Frank Schiraldi
Analyst at Piper Sandler

Okay. And then just lastly, I think there's about $60 million, I think you said, in redemption left. So is it a pretty fair expectation or assessment that stock buybacks is probably another quarter to go before you get back into the market there, and repurchases will be sort of the return to capital story more for the last three quarters of the year?

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Yeah. I think your assessment is the most probable scenario right now as we speak.

Frank Schiraldi
Frank Schiraldi
Analyst at Piper Sandler

Okay. All right. Great. Thank you.

Operator

Thank you. Our next question is from Timur Braziler from Wells Fargo. Your line is now open. Please go ahead.

Timur Braziler
Timur Braziler
Analyst at Wells Fargo

Hi. Good morning.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Good morning, Timur.

Timur Braziler
Timur Braziler
Analyst at Wells Fargo

Looking at the linked quarter deposit growth, particularly on the public funds side, I guess what was the dynamic this quarter that drove balances higher in a period that maybe typically sees some seasonal outflows? Was that market share gain? Is that a little bit transitory in nature? Maybe just give us a dynamic to some of the deposit growth seen in the portfolio.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

I would say there's a combination. Obviously, we have a very strong strategy that we're executing on cash management payment services to government entities and municipalities, and that is coupled with the parallel strategy that we have with some of the large participants in the reconstruction area. So there was inflow of funds from both sides. Obviously, on the infrastructure side, there's always some chunkiness of funds that come in and out. So the growth wasn't necessarily. The growth is really the net of what came in and out. So it was a significant quarter of projects and funds moving from FEMA or CDBG into these entities for completing projects. So it's a combination. We have a core strategy on services to municipalities and other entities, and we have a strategy to support the entities that are actively in the reconstruction phases.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Yes, there's always some seasonality in the later part of the year. Yeah. Yeah.

Timur Braziler
Timur Braziler
Analyst at Wells Fargo

Okay. For the loan growth, the US mainland loan growth was strong in Q4. It looked like CNI on the Virgin Islands was also pretty strong in Q4. Can you just maybe give us a little bit of color of where you're seeing the growth on the mainland? And is that primarily where you were expecting maybe some elevated payoff activity that didn't come to bear in the fourth quarter?

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Yeah. I think when you look at the core strategy of Florida, again, it's commercial in all the segments, small, medium, and large, with the balance sheet of the larger corporation, which is part of the region, is part of the larger bank. So if you look through the year, there was also good quarters and active quarters. Obviously, it happened last year too that we had a quarter that some of the cases that closed that were pending to close finally concluded in the year. So there's some and then in Puerto Rico, there is some large deal and construction noise that happened also in the quarter. Some of them moved ahead or completed. So again, it's very difficult to predict at the pace. That's why we focus on the mid-single-digit when we add and subtract. So we do expect more growth in the commercial this year.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

We expect some growth in the mortgage, which we didn't have in the plans before, and then continue to have growth in the consumer, even though we acknowledge it's at a lower growth rate than we had achieved over the last five years. It's just the different cycles of each of the business and portfolios. And then we have booked construction loans that will continue to fund until completion, which was probably one of the highlights of 2024, the volume of construction activity that was booked that is there and will continue to. It doesn't need to close a loan for this person to continue to move ahead. So it's a mix that predicting quarter by quarter, it's almost impossible for this commercial activity. Yeah.

Timur Braziler
Timur Braziler
Analyst at Wells Fargo

Okay. Makes sense. And then just last for me, looking at the allowance, looking at the performance of the consumer, I guess, A, what gives you greater confidence that consumer credit begins to stabilize middle of 2025? And then B, as we look at all the different components of the allowance, it's come down now for six straight quarters, it looks like. Are we nearing a plateau there for allowance, or do you foresee continued drawdown and continued ability to maybe continue releasing some reserves here throughout the course of the year?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

We have to divide it by portfolio. We feel that the residential mortgage portfolio has continued to behave extremely well. That's what ended up resulting in some releases. Home price index has been very strong, and home sale prices that we see on, even on, the OREOs we sell are definitely strong. So that helps that I think that probably there's a little bit in there, not necessarily a lot based on the size of the portfolio. The portfolio has been growing a little bit as compared to what we had before that we were coming down. On the commercial side, probably we're there. I mean, it's been quite good for quite a long time. On the consumer side, we still, as I mentioned, feel there is some volatility.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

The allowance on the consumer side has gone up like 20 basis points from the end of 2023 to the end of 2024, something like that, and obviously, the growth has mostly been on the auto portfolios that entail lower losses, but there is still going to be a little bit of noise, I would say, on the allowance, so in general, we would be sort of at this level, this is my expectation for the next couple of quarters.

Timur Braziler
Timur Braziler
Analyst at Wells Fargo

Great. Thank you.

Operator

Thank you. Our next question is from Kelly Motta from KBW. Your line is now open. Please go ahead.

Kelly Motta
Kelly Motta
Analyst at KBW

Hey, good morning. Thanks for the question. I was hoping to dig in a bit more on expenses. I appreciate the, I think you said $125 million-$126 million per quarter outlook. But looking at fourth quarter, can you remind us? It looks like you've had a larger tick up in business promotion expenses in the fourth quarter these past two years. Could you remind us of the seasonality of that and kind of if that had any relation to the meaningful increase in deposits you saw this quarter?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

The end of the year typically has a combination of things. It's events we do for customers as part of the year-end kind of Christmas celebrations and recognition of us recognizing our customer loyalty. That's one thing. There are trends on campaigns that we would like to start early in 2025 that we start towards the end of the year to start moving some things. Those are mostly on the lending side, not so much on the deposit side. Obviously, things on the digital front on the deposits are big, and we try to push for that and participation in activities that happen towards the end of the year. It's a combination. Is it directly completely related to the deposit growth? I wouldn't say that.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

But clearly, our marketing people are going to say yes, that it has to do with all the different efforts they put out there.

Kelly Motta
Kelly Motta
Analyst at KBW

I appreciate that. And I mean, the deposit growth is obviously very nice, and I understand partly seasonal and partly unique to flows that's happening with government deposits. But I'm hoping just on the core Puerto Rico deposit base, I was hoping you could provide an update on just the competitive environment there, if you're seeing any ability to lower those core deposit costs, which are already pretty low when compared to mainland banks and rationally priced.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

To be honest, if rates don't move lower than they are today, we don't see a lot of opportunities in what is in the fourth quarter. I think competition is reasonable, but obviously, the movement in rates is not supporting at this stage that any other competitor see behaving like in that scenario of lowering rates. So I think we have to see what happened with the Fed and the potential additional moves. On the other hand, there is a lot of funding that is maturing and is already being either eliminated or out of the cost or it's being renewed at a lower rate. So.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Yeah. There are opportunities on the broker CDs, whatever we renew. If we renew anything, rates are lower than what they're coming due. Same thing, we see some opportunities in some of the advances we take from the FHLB. Some government deposits have been repriced as treasuries rates have come down. But some of the core accounts, I still feel like I would tell you that they are not necessarily going to come down a lot assuming rates are at these levels.

Kelly Motta
Kelly Motta
Analyst at KBW

Got it. Maybe last question for me is just on balance sheet size. I think you already hit on this pretty well, but just as a point of clarification, earning assets for the quarter were about just over $19 billion. It sounds like based on the cadence of investment portfolio maturities like $1.5 billion to $1.6 billion coupled with your mid-single-digit loan growth guidance, it seems like the balance sheet is probably flat to slightly down over 2025. Is that the right way to think about it as we look ahead with the positive growth in NII just driven off of the remix into higher-yielding assets?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Yeah. The way I see it, Kelly, it's the cash flows from the investment portfolio are not necessarily going to reduce the size of the balance sheet because we'll end up mostly with other investments or with loans. There is a level of investment that we need to keep on the books for collateral for public funds and some of the other things that we do. So we have taken down that portfolio significantly on all the excess that we had, but it's now reaching a level that we're probably going to be either going to loans or going to securities. So that would keep the balance sheet sort of where we are. We grow the investment, the loan portfolio as expected. It's going to push that a little bit up. Obviously, deposits have a lot to do with this.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

So the assumption that it's sort of flat to, I would say, flat to slightly higher other than some of the seasonality Aurelio mentioned on the deposits. So that range of $18B to $19.3 or 4B, it's probably going to be a reasonable range of the balance sheet size.

Kelly Motta
Kelly Motta
Analyst at KBW

Awesome. Thank you so much for all the color. I'll step back.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Thank you, Kelly.

Operator

Thank you. Our next question is from Steve Moss from Raymond James. Your line is now open. Please go ahead.

Steve Moss
Steve Moss
Analyst at Raymond James

Good morning.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Good morning, Steve.

Steve Moss
Steve Moss
Analyst at Raymond James

Maybe just on margin, just on loan pricing here, I apologize if I missed it, but just kind of curious, given the rate volatility we've seen here over the last couple of months, what you guys are seeing for loans these days?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

Loan pricing, you mean?

Steve Moss
Steve Moss
Analyst at Raymond James

Yeah.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

I mean, it hasn't changed much in terms of what you would call the spreads. Obviously, pricing has come down a bit because most of the pricing, it's either LIBOR-based or SOFR-based. SOFR is down and prime is down. So that means that pricing on some of the portfolios have been down. It doesn't necessarily mean that the spread, it's down from what it used to be. I'm talking commercial at this point. On the consumer side, it has changed a bit, but the credit cards, we do adjust based on prime, but some of the other portfolios have remained fairly consistent. So if you think about yields, the loan yields are down like 20 basis points or 10 basis points compared to last quarter.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Actually, 12. If you look at the loan portfolio yield on page eight of the presentation, the overall loan portfolio.

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

So that's been a function of the 52%-53% floating components that we have on the commercial side more than anything that repriced with prime and SOFR mostly, a little bit with treasury. But other than that, I would say it's similar kind of a pricing strategy.

Steve Moss
Steve Moss
Analyst at Raymond James

Okay. Great. Appreciate that. And then in terms of just the $1.5 billion in cash flows, it sounds like it's fairly just equally distributed over the four quarters. Is that a fair assumption?

Orlando Berges
Orlando Berges
EVP and CFO at First BanCorp

No. Let me give you some color on that. It's not equally. Hold on one second. So it's going to be about first quarter; it's maybe somewhere between 325 and 375. It's a range we estimate. Second quarter, it's going to be around 240 to 260. Third quarter, I'm sorry, it's somewhere around 400, and the last quarter, it's going to be about 525 to 550.

Steve Moss
Steve Moss
Analyst at Raymond James

Okay. Great. Appreciate all that. Most of my questions, all my questions are asked and answered at this point. So thank you very much.

Steve Moss
Steve Moss
Analyst at Raymond James

Thank you, Steve.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Thank you. We currently have no further questions, so I'll hand back to Ramon for closing remarks.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Thanks to everyone for participating in today's call. We will be attending BOA's conference in Miami on February 11, KBW's conference in Boca on February 13, and Raymond James' conference in Orlando on March 4. We look forward to seeing a number of you at these events, and we greatly appreciate your continued support. Have a great day. Thank you.

Ramón Rodríguez
Ramón Rodríguez
FVP of Corporate Strategy and Investor Relations at First BanCorp

Thank you all.

Operator

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Analysts
    • Ramón Rodríguez
      FVP of Corporate Strategy and Investor Relations at First BanCorp
    • Aurelio Alemán
      CEO at First BanCorp
    • Orlando Berges
      EVP and CFO at First BanCorp
    • Frank Schiraldi
      Analyst at Piper Sandler
    • Timur Braziler
      Analyst at Wells Fargo
    • Kelly Motta
      Analyst at KBW
    • Steve Moss
      Analyst at Raymond James
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