First BanCorp. Q1 2025 Earnings Call Transcript

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April 24, 2025
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Operator

Hello, everyone, and thank you for joining the First Bancorp First Quarter twenty twenty five Financial Results Conference Call. My name is Marie, and I will be coordinating your call today.

Operator

I will now hand over to your host, Ramon Rodriguez, Investor Relations Officer, to begin. Please go ahead.

Ramón Rodríguez
Ramón Rodríguez
SVP - Corporate Strategy & IR at First BanCorp

Thank you, Mary. Good morning, everyone, and thank you for joining First Bank Corp's conference call and webcast to discuss the company's financial results for the first quarter of twenty twenty five. Joining you today from First Bank Corp are: Aurelio Aleman, President and Chief Executive Officer and Orlando Verejes, 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.

Ramón Rodríguez
Ramón Rodríguez
SVP - Corporate Strategy & IR at First BanCorp

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 fppinvestor.com. At this time, I'd like to turn the call over to our CEO, Aurelio Arimano.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Thank you, Ramon, and actually good afternoon to everyone and thanks for joining our call today. I usually I will start with a brief discussion on the financial performance and then we'll move on to some highlights and economic matters.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Again, we delivered what I consider a

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

very strong quarter for the franchise, driven by the margin expansion and the positive operating leverage, quite strong profitability ROA and ROE. Return on asset was solid at 164 and pretax pre provision income grew by 7%, reaching $125,000,000 during the quarter. The project continues to perform quite well as we enter 2025 with strength, the strength of the balance sheet, the strength of capital and obviously a proven track record to successfully navigate unforeseen conditions while supporting our clients. That's really the main goal. Turning to the balance sheet.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Total loans were slightly down on a linked quarter basis. I think I mentioned last quarter that we were expecting a repayment that didn't happen and took place this quarter. On the other hand, originations were healthy and reached 1,200,000,000.0 in line with usually the first quarter. On the other hand, the pipeline is we have a healthy pipeline in place and it actually continues to build as we continue to work with our clients supporting them in this current operating cycle. As we know, it's difficult to predict closing of chunky deals usually.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

But at this time, we continue to sustain our mid single digit growth for the year. That remains unchanged. Core deposit flows were stable. We saw a nice pickup in non interest bearing, which grew $70,000,000 And when you look at deposits in Puerto Rico, they have an end growth, what we consider core excluding government of $75,000,000 And actually, if we adjust actually we actually lose two large chunky deals on the deposit side, on the pricing side of about $125,000,000 So it was going to be much better, but I think we're very pleased that the granularity continues to improve. Credit performance was stable and we continue to see the normalization that we talk about in the consumer credit trends.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Early delinquency is down when compared to prior quarter. And finally, regarding capital, as we always say, we continue to be opportunistic in our approach how to deploy. We redeemed approximately $50,000,000 in some debentures and declared $30,000,000

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

in common stock dividends. In addition,

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

we decided to resume our stock purchase program during the quarter and we repurchased $22,000,000 in the first quarter in addition to the drops. And we expect to complete another $28,000,000 during April, which will reach the goal for the second quarter of $50,000,000 in common stock. Just as a reminder, we still have $100,000,000 left of the prior year approval, which obviously, as we continue to be opportunistic, we're looking to deploy in the second half of this year. Please let's turn to Slide five. Again, the financial results are a product of execution of the teams and a stable economic backdrop, which continues to show positive metrics.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Business activity continued healthy. Obviously, consumer confidence is as of today, is about to be determined based on new policies, fiscal policies and tariff, which are under evaluation, see everybody pending to see what the impact is going to be in that confidence. On the other hand, year to date fiscal government tax collection are up by 3%, unemployment rate, again another low register in the first quarter. And when we look at quarter to date, debit and credit card sales were 3% than the first quarter in twenty twenty four. Disbursement of a lease up to relief fund continue, and we continue to participate in affordable housing projects primarily and looking into some infrastructure improvement too.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

On the digital front, we have continued to invest. This quarter, we achieved the very important step in converting to the centralized FIS cloud, Our core system now all our core systems are in the cloud. And then our franchise investment continue in the digital environment, which digital adoption continue to progress in line with our objective. And then capital utilization, first priority is really try to grow the balance sheet and obviously improve our products, improve our infrastructure. We still believe it's early to assess the broader economic implication of the changes in your policy we'll have in Puerto Rico.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

But again, we'll keep you updated. I think we all bankers are just in the same place looking at potential implications to our economies and our core customers. So as I mentioned, full year guidance remain unchanged. And I guess we'll provide an update in the next call in July. So despite this concern, we remain committed to our disciplined approach of delivering consistent results and creating shareholder value.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Now with that, I'll pass it to Orlando to give you a little more detail on the financial results. Thanks for joining today.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Thanks, Aurelio. Good afternoon, everyone. So Aurelio just mentioned, we recorded another strong quarter highlighted by the net interest income expansion. We are now $77,000,000 in net income, which is $0.47 per share compared to the $76,000,000 or $0.46 we had last quarter. This translate to return on average assets of $1.64 The provision for credit losses for the quarter increased $4,000,000 It is primarily some projected deterioration on the consumer real estate the commercial real estate price index, I'm sorry, that affected the allowance for credit losses for commercial and construction loans.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

And some higher adjustments we did to the qualitative framework due to the uncertainty of the economic environment under considering all the things that are going on with the tariffs. Net interest income for the quarter was $212,000,000 which is up $3,000,000 versus the prior quarter. The income does include a $1,200,000 prepayment penalty collected on a prepaid commercial loan, but it's also net of $2,700,000 impact from two less working days in the quarter. Funding cost drive a lot of this. It was down $5,800,000 in the quarter, including days impact as the cost of the interest bearing checking and savings accounts decreased seven basis points to 145 basis points as a cost.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

And the cost of time deposits came down 12 basis points to 3.39. We also raised our reductions in wholesale borrowing cost due to the full quarter effect of the redemption during the fourth quarter of the 50,000,000 in subordinated debentures and a decrease in the average balance of Federal Home Loan Bank advances. We had some maturities due during the month of March that were repaid this quarter. In addition, we had in the quarter an improvement of 11 basis points in the yield of cash and investment securities. Some of the lower yielding cash flows from the investment portfolio where we invested or kept at the Fed account, which is a higher rate.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

On the other hand, the loan portfolio deals, they decreased two basis points, mostly on the commercial, which decreased nine basis points due to the repricing of the floating rate component of the portfolio, which was compensated by increases in the yield of the consumer portfolios or that net effect. The net interest margin dynamics continue to play out well. Margin expanded 19 basis points in the quarter to 4.52 However, this expansion did include an increase of four basis points, which was related to the prepayment penalty I just mentioned and some higher income on late fees in the consumer portfolios. The adjusted margin eliminating some of these items was really 4.48%, which is a 15 basis points pickup from last quarter. This increase reflects our plan change in asset mix as we deploy the cash flow from the investment lower yielding investment portfolio to higher yielding earning assets and also the repayment of the borrowings, the higher cost borrowings.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

We also had the benefit of the additional reductions in funding costs that we achieved as I just mentioned. This quarter we received approximately $352,000,000 in cash flows that were yielding around 1.5%, which obviously we priced at higher rates with benefits coming in the future quarters. At this point, assuming that our normal flow of deposits and stability on lending side on the loan portfolio, we believe that NIM should continue expanding over the next few quarters as we benefit from additional repricing opportunities on the investment portfolio cash flows either through lending, higher yielding securities or even the cash at the Fed as well as the cancellation of some of the higher cost funding. The projected investment portfolio cash flows for the second quarter amount to approximately $260,000,000 with a runoff yield of 1.5%. And we also expect approximately $1,000,000,000 in additional cash flows during the second half of the year that will also be priced at higher yields.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Depending on the timing and amount of rate cuts in the second half of the year, we estimate that margin should improve approximately five to seven basis points per quarter for the remaining of months of this year. In terms of other income items, it was stable, but we did have a $3,450,000 increase related to contingent insurance commission that were collected during the quarter that happens in the first quarter of every year and some income some additional income we had from purchase tax credits. On the expenses, expenses were 123,000,000 which is $1,500,000 lower than last quarter. Business promotion was $2,100,000 lower based on the seasonality of marketing efforts. But also we had debit and credit card lower credit card processing expenses due to $2,200,000 in expense reimbursements we received in the quarter.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

On the other hand, compensation expense was $2,500,000 higher in the quarter, which it's related to seasonal payroll taxes and $2,900,000 in bonuses and stock based compensation usually take place in the first quarter, which offset a reduction of $1,600,000 related to two less working days in the quarter. If

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

we

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

were to normalize compensation and card expenses, expenses for the quarter would have been $123,900,000 And if we exclude OREO, they would have been $125,100,000 which are within the guidance range we had provided in the last call. Last quarter, just to remind you last quarter expenses including OREO were $125,600,000 The efficiency ratio for the quarter was 49.6%, which compares with 51.6% in the fourth quarter. But if we adjust some of these income and expense items that don't happen every quarter, the efficiency ratio would have been approximately 51.3%, roughly in line with our targets. Based on our estimates, we expect that our expense base for the next couple of quarters excluding the OREOs will continue to be in the range of 125, one hundred 20 six And our efficiency ratio will be around the 50% to 52% considering the changes in expenses and projected income components. In terms of credit quality, net NPAs did increase in the quarter $11,000,000 which is basically due to an inflow of one nonaccrual commercial real estate loan in the Florida region that amounted to $12,600,000 On the other hand, we had a residential reductions in residential mortgage non performing and OREO balances, which offset some of this increase.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

The NPA ratio was 68 basis points to total assets for the quarter. Just to mention this non performing loan that migrated in the Florida region did not impact the allowance for credit losses because it's collateralized by a good value collateral at this point. The inflows to non performing for the quarter were 43,400,000 which is $6,300,000 higher than last quarter, basically related to this one CRE case that went into nonperforming. But we did have reductions of $6,500,000 in consumer loan inflows. In general, I would say credit metrics are holding up well.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Loans in early delinquency were down $21,800,000 during the quarter. We have started to see some normalization trends in consumer credit with consumer loans in early delinquency decreasing by $19,500,000 when compared to prior quarter. The allowance for the quarter did increase by $3,400,000 to $247,300,000 And this reflects the higher qualitative adjustments that we incorporated to consider the uncertainty in the economic environment. The ratio of the allowance grew four basis points allowance to loans grew four basis points to 1.95%, mostly in the commercial side, driven by the forecasted deterioration on the commercial real estate price indexes. However, we did see some improvements in the unemployment rate projections on the shorter term, which led to five basis points reduction in the allowance for consumer loans, which ended up at 3.78% of loans.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Net charge offs for the quarter were $21,400,000 or 68 basis points of average loans, it's down $3,200,000 from last quarter. But this reduction includes a recovery of $2,400,000 we recognized related to a bulk sale of consumer charge off loans we had in the quarter. Excluding this recovery, net charge off to average loans would have been 76 basis points, which is slightly lower than the 78 basis points charge off rate we had in the fourth quarter. On the capital front, as Aurelio mentioned, we executed on our capital deployment priorities during the quarter. We redeemed approximately $50,000,000 in subordinated debentures on top of the of what we have already redeemed in prior quarters.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

We it's only $11,000,000 left of those debentures. We also declared $29,600,000 in dividends and repurchased $21,800,000 in common stock. In terms of our capital impact, these actions were offset by the earnings obviously, which at the end resulted in higher regulatory capital ratios when we compare them to last quarter. During the quarter, we also registered a 7% increase in tangible book value per share to $10.64 and the tangible common equity ratio expanded to 9.1% mostly due to an $84,000,000 improvement in the fair value of the securities that lower the amount of adjusted other comprehensive loss. The remaining other comprehensive loss represents $2.91 on tangible book value per share and about two twenty basis points in the tangible common equity ratio.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

As Aurelio just mentioned, we will continue with our strategy of deploying excess capital thoughtful as possible to improve franchise and shareholder value and we continue with our execution of our plans. This concludes our prepared remarks. Operator, please we'd like to open the call for questions.

Operator

Thank you. Our first question comes from the line of Frank Schiraldi of Piper Sandler. Please go ahead.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Hey, good afternoon. Orlando, I think you mentioned some numbers around securities book in terms of yields, in terms of cash flowing. And I think you said 1.5% for the second quarter. Did you share what those yields are coming off in the back half of the year?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

The yields on the second half of the year, it's slightly lower. They're gonna be talking from the top of my head, but they're gonna be around $1.35 to $1.40, what's on the, second half of the year.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Yeah. And then could you share just a ballpark in terms of that assumption you gave around margin expansion, I think, five to seven bps of what that assumes in terms of pickup on that? What do you expect the new I don't know if it's a mix of loans and securities you assume this is going at these cash flows are going into, but what kind of pickup do you anticipate? What sort of blended rate are you looking for on the new origination to get to that sort of margin expansion?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

We're assuming there are a few things, obviously. We're assuming it's going to be a pick couple of somewhere around 150 basis to 300 basis points. But remember that assumption considers that there might be some rate reductions in the year. At this point, it's become a little bit unpredictable. But when we had done our original estimates for 2025, we were assuming two cuts in the second half of the year, maybe we're looking at three now.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

So that reflects what would be what we can keep on the investment portfolio cash and obviously depending on what's the growth on the loan portfolio, it could move a little bit higher than that. But also it all depends. We were able to move funding cost this quarter a little bit more than we had anticipated that helped the margin pick up this quarter. So depending on that, the next quarter assumptions are based on those numbers I just gave you.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. And just one more on that line of questioning. In terms of the 1.5% in the second quarter, back half of the year, 1.3 to 1.4% in terms of the cash flows. Just looking out beyond 2025, is it similar levels of cash flowing out of that book and at sort of similar yield coming off? Is there any sort of detail there?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

I don't have with me the additional, Frank. I need to get that the future years. Remember that duration in the portfolio is not high. So that's the amounts from March of next year was $1,000,000 that includes that $1.5 I'm sorry, that includes that $1,000,000,000 I just gave you and the $2,600,000 So it's $250,000,000 more in the first quarter of twenty twenty six. But I don't have the full report with me here to give you some more indications of the full year.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. All right. So at least for the first quarter, you said $250,000,000

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

In the first quarter, it's about $250,000,000 yes.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

Okay. I appreciate. And then just lastly, if I could just sneak in one more. In terms of the commercial mortgage loan or even just commercial mortgage in general in Florida, I think you had the one large payoff. And you talked about, I think, it fell from 4Q to 1Q.

Frank Schiraldi
Frank Schiraldi
Managing Director at Piper Sandler Companies

But just in terms of the general thoughts around CRE, your CRE in Florida, something that you guys are looking to continue to grow? And then kind of where are you seeing the stress? And if you could just talk about that large payoff of is that I guess that's by design, so maybe a little more detail there.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

The large payer was in Puerto Rico and the NPA was in Florida regarding CRE. The large payer was a refinancing that we did not participate in based on terms expected terms. And the one in Florida, I think we put some details in the release. It's a we believe it's a one off case. It's on the hospitality sector, really good loan to value.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We actually don't expect any losses in that one.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

All right. Appreciate it. And

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

on the CRE front, continue to originate. We have a good pipeline and obviously under our underwriting criteria, we continue to move up the balance sheet.

Operator

Next question is from Brett Gerbatten of Hovde Group. Please go ahead.

Brett Rabatin
Managing Director & Head of Equity Research at Hovde Group

Hey, thanks for the time. Wanted to ask on the loan origination side. I know commercial can be a little lumpy and obviously 4Q is really strong. But if I heard correct, the guidance for the year is kind of that mid single digit number. And just wanted to see if you think that the commercial side that's on Slide 13, if that grows from here or if you'll see more on the consumer side, just looking for some color on where you guys see the originations coming from?

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Yes. Actually, we think this year different to it's different to prior years. Obviously, where we see the opportunities, where we see the performance of the books and we believe both construction and commercial will grow. We believe the consumer will grow at a slower pace than prior years. And we believe that actually we're going to see some growth in residential, which we already actually experienced this quarter, which was not the case if you look back very slight growth over the past year.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

That's the way we see them in single digit growth being combined.

Brett Rabatin
Managing Director & Head of Equity Research at Hovde Group

And then I noticed you guys were didn't roll out the Apple Pay. Any color on that was, know, by choice or what was the function there? And then if you guys might be looking to do that going forward?

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Yeah. We have about, I will say, dolphin of improvement to the data functionality that are currently being worked on. We did launch Samsung Pay and Google Pay for the Mastercard debit side. We do have we are dual brand. We do both Visa and Mastercard.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

The Apple Pay project is ongoing. We have some vendors that are involved in the execution and there's priorities and timing of those, but you should see that happening during this year. Combined with some of other other functionalities that we continue to enhance in our digital front.

Brett Rabatin
Managing Director & Head of Equity Research at Hovde Group

Okay. And then Aurelio, would you consider if you just think about Puerto Rico versus Florida, I know sometimes you've said you think there's probably more risk credit wise in Florida than there is in Puerto Rico. What do you think today just in terms of where you see the credit risk particularly on the commercial side?

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Well, think I make comments regarding competitive landscape. And obviously Florida, it's more competitive on the deposit side. Puerto Rico is competitive, but at a different level. Florida has a multiple number of competitors have very, very large banks also there. In terms of credit, we continue to see a healthy pipeline.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We have our underwriting guidelines. The portfolios have performed. If you look at the segregation of the ACL, portfolio has performed really well in Florida. Cases that we see obviously is a smaller portfolio than Puerto Rico. So you have less ground running.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

But at this point, we continue to see Florida as a healthy portfolio. We have very limited office there, small and it's a well diversified book. Puerto Rico, when we say slower rates on the CRE, remember there was no construction built for many years in Puerto Rico and asset values didn't increase rapidly. So loan to values are quite healthy in the Puerto Rico portfolio. So that's why and yes, there's opportunity for growth, but we keep ourselves to our underwriting guidelines and try not to deviate from those.

Brett Rabatin
Managing Director & Head of Equity Research at Hovde Group

Okay. Appreciate all the color guys.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Thank you, Brett.

Operator

Our next question comes from the line of Steve Moss of Raymond James. Please go ahead.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Hi, good morning.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Good morning.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Morning.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Maybe just following up on loan growth here.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Just

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

kind of curious with pipeline building, I hear you guys are a little bit more uncertain in the market, but do you think loan growth will happen pick up this quarter? It sounds like it will be a little bit positive, but do you think it will be

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

more back half weighted as we think about the mid single digit growth?

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Well, in the last call, we actually said that we see loan growth in the second half of the year. If I recall, did cover that item. To be honest, we in today's environment with the conclusion of tariff is going to be the answer to your question because some investors are sitting on the sidelines waiting to see if I close this or I don't close it. So that's happening all over the industry, not only Puerto Rico. So I think it's the conclusion which will happen over the next ninety days will bring conclusion to that.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

The pipelines continue to build. So if I look at my pipeline today versus the one that I have in January, it's actually better, which is a positive. But obviously, the uncertainty on the market is different. That's just a reality that we have to deal with. Obviously, if you go back to the pandemic, same thing happened.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

All of a sudden, we didn't know how to project. That's what I said in my remarks. We're not we have a good pipeline. We're not modifying our guidance, but only policies impact will tell how markets would behave. And it's not going to be just a first bank thing.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

It's going to be a market thing. So we're very closely with our working with our clients to continue moving the needle and supporting them. But market could change perspective of risk and perspective of investors entering into deals or not. So that's just a reality that we have to deal with in a recycle. Yes, for now, our mid single digit guidance continues.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Got it. I appreciate that color. And then in terms of just kind of curious on the I think the phrase was some normalization of consumer credit. I see like the consumer charge offs were up year over year. Just kind of curious how you guys are thinking about consumer charge offs for the full year?

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We expect an improvement on that metric, yes, from prior year. We expect a reduction prior year on the charge off. On the rate itself, obviously, a balance that could grow and absolute amounts could grow, but charge off rate should improve year over year.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Remember, Steve, that we saw a ramp up of charge off through 2024 on the consumer side. So when you compare to first quarter, it's we're looking more to prior quarters because that's where we say that the the the benefit is going to start coming at some of these older vintages that that started be that behave worse are getting run off. So we have that And remember, we also had the sale of charge off loans that improved the net charge off on the consumer side.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Yes. Okay. Great. I appreciate that color there. And just one last one for me just for clarification.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

The five to seven basis points of margin expansion is off the four forty eight adjusted margin, correct?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

That is correct. That is correct.

Steve Moss
Steve Moss
Director - Banking & Arlington at Raymond James Financial

Okay, perfect. Well, that's all for me. I appreciate all the color here. Thank you very much.

Operator

Our next question comes from the line of Kelly Motta of KBW. Please go ahead.

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Hey, good afternoon. Thanks so much for the question. Maybe piggybacking off that margin outlook, I really appreciate all the color on the securities repricing as well as your outlook there for five to seven basis points expansion during the quarter. Just turning to the other side of the balance sheet, I would imagine given your securities flows that the overall size is going to be dictated by what you're seeing on the deposit side. So on that note, what are you seeing on the deposit side?

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

I think one of your competitors said that there's some better deposit trends that flows have been improving. Wondering what you're seeing in your overall outlook here given what you're seeing from your customers so far? Thanks.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We're seeing more stability than the two prior years. We're seeing from our transactional activity, actually some growth in what we consider core transaction and non interest bearing. Obviously, we have an appetite for government deposits, which we are there and we continue to support as long as they are 100% collateralized have to be that is our appetite. If that would change, we'll change our appetite. But for now, we see stability.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We see the market fairly stable on that front. When we compare market numbers to 2024, there was a contraction slight contraction. We have a slight increase. And we continue to monitor. It's really the very critical strategy for all of us, but are definitely stable.

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Got it. That's really helpful. And then maybe just a small modeling question on the expense side. I appreciate the outlook on a quarterly basis ahead. It looks like insurance and supervisory fees were about $2,000,000 lower linked quarter.

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Was there anything any reversal there? Wondering if 4Q is a better run rate going forward from here and any dynamics that may have impact one q?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

I'm thinking here there was nothing are you looking versus last year or you're looking versus December?

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Versus December.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Because remember that last year last year, we had a special assessment from the FDIC. Let me see. I don't remember anything specific, Kelly. I would have to look look for for

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Okay.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Some some more details to provide you. Got

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

it. Appreciate it. Last just a a point of clarification for me on on the buyback. I think you had said you've done 28,000,000 in April. Based on your commentary, would you expect to still continue to be active in the shares here opportunistic for the rest of the quarter?

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Or I need to go back and look at the transcript. I thought you may have implied you might be out for the quarter. Just wanted to clarify that point.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Yes. Our goal for this quarter was $50,000,000 and we are we're going to complete that by the April. And we always keep the optionality. Right now, the plan is to deploy that $100,000,000 in the second half. But it's always a consideration if a unique opportunity shows up on the market that we act.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We have the flexibility.

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

Got to

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

be the 50,000,000 Got

Kelly Motta
MD - Equity Research at Keefe, Bruyette & Woods (KBW)

it. And last one that four forty eight adjusted margin that's on a GAAP basis, right? Not an FTE. I believe you said the interest recovery was four basis points.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

That's right. It's on a GAAP basis, not a full taxable equivalent.

Operator

Awesome. Thank you so much.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

Thank you. Thank you, Kelly.

Operator

Our next question comes from the line of Timur Braziler of Wells Fargo. Please go ahead.

Timur Braziler
Timur Braziler
Director - Mid-Cap Bank Equity Research at Wells Fargo

Hi, good afternoon. Want to first follow-up on the deposit line of questioning. I think if I heard correctly, there was some chunkiness in deposit flows 1Q. I'm just wondering if you look at that portfolio, if there's anything that's expected to exit the bank here in the near term. And just talking to maybe more near term deposit trends, can you just remind us what kind of the seasonal cadence is for FirstBank and what the expectation is maybe over these next couple of quarters on the deposit side?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

I mean, if you look, had a couple of cases that were deposited at the deposits we got at the end of the year, meaning at the end of the year, meaning in the last quarter of the year. One Florida customer, one Puerto Rico customer that they mentioned that they were the monies were earmarked for some specific projects and they would have been moved. We thought it was going be at the end of last year, did not happen. It happened early this year. So that was chunky component that moved out.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

But there's nothing specifically on what we have in the portfolio today other than there is always going to be some kind of variability on the deposits on the public fund side because they have large components that come in and out. But on commercial and retail side, we don't have any like what we knew from what we had at the end of the year on those two specific customers.

Timur Braziler
Timur Braziler
Director - Mid-Cap Bank Equity Research at Wells Fargo

Okay. And then to that, maybe just going back to the Florida conversation, you had talked about the $12,600,000 hospitality credit. It looks like there was another one that called out that migrated to classified. Can you just maybe talk through what that loan was? And more recently, there's some news on just the Florida condo market and how much more expensive that's become.

Timur Braziler
Timur Braziler
Director - Mid-Cap Bank Equity Research at Wells Fargo

Can you just remind us of what exposure, if any, you have to the condo market in Florida?

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

To the condo market? Well, this one in hospitality was not condo. I'm trying to remember which one was moved to classified because that was the one that was moved. There's nothing significant that I remember. Let me take a look at here other than this.

Orlando Berges-González
Orlando Berges-González
Executive VP & CFO at First BanCorp

It's only that one case of Florida. But condo market in terms of exposures, don't have any in Florida.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

We don't have any on the construction. We do have some in the mortgage portfolio, but it's very small.

Ramón Rodríguez
Ramón Rodríguez
SVP - Corporate Strategy & IR at First BanCorp

Great. Thank you.

Aurelio Alemán-Bermudez
Aurelio Alemán-Bermudez
President & CEO at First BanCorp

Thank you.

Operator

We currently have no further questions. So I will hand back to Ramon Rodriguez for closing remarks.

Ramón Rodríguez
Ramón Rodríguez
SVP - Corporate Strategy & IR at First BanCorp

Thanks to everyone for participating in today's call. We will be attending Wells Fargo Financial Services Conference in Chicago on May 13. 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.

Operator

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

Analysts
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Key Takeaways

  • First Bancorp delivered a strong quarter with net income of $77 million (earnings of $0.47 per share), a return on average assets of 1.64%, and net interest margin expanding 19 basis points to 4.52%.
  • Total loans were slightly down sequentially, but $1.2 billion in originations and a growing pipeline underpin unchanged guidance for mid‐single‐digit loan growth in 2025.
  • Core deposits held steady, with non‐interest‐bearing balances up $70 million and granular core growth in Puerto Rico offsetting the scheduled exit of two large $125 million accounts.
  • Credit quality remained stable as early delinquencies fell, net charge‐offs moderated to 68 basis points of average loans, and the allowance for credit losses rose to 1.95% of loans to reflect economic uncertainty.
  • Management deployed capital opportunistically by redeeming $50 million of subordinated debt, declaring $30 million in dividends, and repurchasing $22 million of common stock in Q1 (with $28 million more planned), leaving $100 million of buyback capacity for H2.
AI Generated. May Contain Errors.
Earnings Conference Call
First BanCorp. Q1 2025
00:00 / 00:00

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