First BanCorp - Earnings Call - Q1 2025

Executive Summary

• EPS of $0.47 beat consensus $0.43, driven by a 19 bps net interest margin expansion to 4.52% and lower funding costs; adjusted pre-tax pre-provision income rose 7% sequentially to $125.1M. EPS consensus mean was $0.43; actual $0.47 (beat). Values retrieved from S&P Global.*
• Reported “revenue” versus S&P Global consensus was a miss ($223.3M actual vs $242.8M consensus), despite higher net interest income ($212.4M) and seasonal insurance commissions lifting non-interest income ($35.7M). Revenue consensus mean was $242.8M; actual $223.3M (miss). Values retrieved from S&P Global.*
• Efficiency ratio improved to 49.58% (from 51.57%), reflecting positive operating leverage; ROAA strengthened to 1.64%.
• Capital deployment is a catalyst: $50.6M junior sub debt redeemed, $21.8M repurchased in Q1; management targeted ~$50M buybacks completed by end of April with optionality for ~$100M in 2H 2025, and declared a $0.18 dividend payable June 13, 2025.

What Went Well and What Went Wrong

What Went Well

• Margin expansion and funding cost relief: NIM up 19 bps to 4.52% as deposit costs fell and wholesale borrowings declined; adjusted margin ~4.48% excluding one-offs (prepayment/late fees).
• Positive operating leverage: Efficiency ratio improved to 49.58% on lower card processing and business promotion expenses; adjusted pre-tax, pre-provision income rose to $125.1M (+7%).
• Seasonal revenue tailwind: Non-interest income lifted by $3.3M contingent insurance commissions; management highlighted “another quarter of strong performance” and “encouraging margin expansion”.

What Went Wrong

• Provision and credit optics: Provision increased to $24.8M (from $20.9M), driven by deterioration in forecasted CRE price index and higher qualitative overlays; NPAs rose $11.1M to $129.4M on a $12.6M Florida hospitality nonaccrual inflow.
• Consumer credit normalization: Annualized net charge-offs were 0.68% (vs 0.78% in Q4, but up vs 0.37% in Q1 2024), with consumer portfolios remaining the main driver despite recoveries from a bulk charged-off sale.
• S&P “revenue” miss: S&P Global-defined revenue tracked below consensus despite strong net interest income; this may temper near-term sentiment even with EPS beat. Values retrieved from S&P Global.*

Transcript

Operator (participant)

Hello, everyone, and thank you for joining the First BanCorp first quarter 2025 financial results conference call. My name is Marie, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad, and if you change your mind, please press star followed by two. I will now hand over to your host, Ramón Rodríguez, Investor Relations Officer, to begin. Please go ahead.

Ramón Rodríguez (Investor Relations Officer)

Thank you, Marie. Good morning, everyone, and thank you for joining First BanCorp's conference call and webcast to discuss the company's financial results for the first quarter of 2025. 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 filings. The company assumes no obligation to update any forward-looking statements made during the call.

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

Aurelio Alemán-Bermudez (President and CEO)

Thank you, Ramón, and actually, good afternoon to everyone and thanks for joining our call today. I usually, I will start with, you know, a brief discussion on the financial performance, and then we'll move to some highlight and economic matters. Again, you know, we deliver what I consider very strong quarter for the franchise, driven by the margin expansion and the positive operating leverage, quite strong profitability, ROA and ROE. Return asset was solid at 1.64%, and pre-tax pre-provision income grew by 7%, reaching $125 million during the quarter. The franchise continues to perform quite well as we enter 2025, you know, 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, total loans were slightly down on a quarter basis.

I think I mentioned last quarter that we were expecting, you know, every payment that didn't happen and took place this quarter. On the other hand, you know, renewals were healthy and reached $1.2 billion, in line with usually the first quarter. On the other hand, you know, the pipeline is, 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, in this current operating cycle. You know, as we know, it's difficult to predict closing of, of, of chunky deals usually, but at this time, we continue to sustain our mid-single digit, growth for the year that remains unchanged. Core deposit flows were, were stable. We saw a nice peak of in, in non-interest bearing, which grew $70 million.

When you look at deposits in Puerto Rico, they have a net growth, what we consider core, excluding government, of $75 million. Actually, you know, if we adjust, you know, we actually lose two large chunky deals on the deposit side, on the pricing side of all, $175 million. It was gonna 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. Early delinquencies down when compared to prior quarter. Finally, regarding capital, as we always say, we continue to be opportunistic in our approach how to deploy. We redeemed approximately $15 million in sub-debentures and declared $30 million in common stock dividends.

In addition, we decided to resume our stock purchase program during the quarter, and we repurchased $22 million in the first quarter in addition to the [drops]. We are expecting to complete another $28 million during April, which will reach the goal for the second quarter of $50 million in common stock. Just as a reminder, we still have $100 million left of the prior year approval, which, you know, 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, you know, execution of the teams and a stable economic backdrop, which continues to show, you know, positive metrics. Business activity continues healthy.

Obviously, consumer confidence, you know, is, is, as of today, is about to be determined based on new policies, fiscal policies and tariffs, which are under evaluation. See, everybody's bending to see what the impact is gonna be in that confidence. On the other hand, year-to-date fiscal government tax collections around by 3% unemployment rate. Again, another long-time, another low, low register in the first quarter. And when we look at, you know, quarter-to-date, debit and credit card sales were 3% than the first quarter in 2024. [This version] of federal disaster relief funds, you know, continue, and we continue to participate in affordable housing projects primarily and looking into some infrastructure improvement too. On the digital front, you know, 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 that cloud. Our franchise investment continues in the digital environment, which digital adoption continues to progress in line with our objective. Again, capital utilization, you know, first priority is really trying to grow the balance sheet and obviously improve our products and improve our infrastructure. We still believe it's early to assess the broader economic implications of the changes in monetary policy we'll have in Puerto Rico. Again, we'll keep you updated. I think we all bankers are just, you know, in the same place looking at potential implications to our economies and our customers.

As I mentioned, you know, full year guidance remains unchanged, and I guess we'll provide an update in the next quarter, in July. Despite these concerns, you know, we remain committed to our disciplined approach of delivering consistent results and creating shareholder value. Now, with that, I'll pass it to Orlando to give you, you know, a lot more detail on the financial results. Thanks for joining today.

Orlando Berges-González (Executive VP and CFO)

Thanks, Aurelio. Good afternoon, everyone. Aurelio just mentioned we recorded another strong quarter, highlighted by the net interest income expansion. We earned $77 million in net income, which is $0.47 per share, compared to the $76 million or $0.46 we had last quarter. This translates to return on average assets of 1.64%. The provision for credit losses for the quarter increased $4 million. It is primarily some projected deterioration on the consumer real estate price, the commercial real estate price index, I'm sorry, that affected the allowance for credit losses for commercial and construction loans. Some higher adjustments we did to the qualitative framework, due to the uncertainty of the economic environment, considering all the things that are going on with the tariffs. Net interest income for the quarter was $212 million, which is up $3 million versus the prior quarter.

The income does include a $1.2 million prepayment penalty collected on a prepaid commercial loan, but it's also a net of $2.7 million impact from two less working days in the quarter. Funding cost drives a lot of this. It was down $5.8 million in the quarter, including the days impact, as the cost of the interest-bearing checking and savings accounts decreased seven basis points to 1.45%, with 145 basis points as a cost. The cost of time deposits came down 12 basis points to 3.39%. We also registered reductions in wholesale borrowing cost due to the full quarter effect of the redemption during the fourth quarter of the $50 million 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 were reinvested or kept at the Fed account, which is a higher rate. On the other hand, the loan portfolio yields did decrease 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 for that net effect. The net interest margin dynamics continued 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 eliminated some of these items, was really 448, which is a 15 basis points pickup from last quarter. This increase reflects our plan changing asset mix, as we deploy the cash flow from the lower-yielding investment portfolio to higher-yielding earning assets and also the repayment of the borrowings, the higher-cost borrowings. 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 million in cash flows that were yielding around 1.5%, which obviously repriced at higher rates with benefits coming in the future quarters.

At this point, assuming a normal flow of deposits and stability on the port, on the 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 million with a run-off yield of 1.5%. We also expect approximately $1 billion in additional cash flows during the second half of the year that will also reprice at higher yields.

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 months of this year. In terms of other income items, it was stable, but we did have a $3.45 million increase related to contingent insurance commission that were collected during the quarter that happens in the first quarter of every year. And some additional income we had from purchase tax credits. On the expenses, expenses were $123 million, which is $1.5 million lower than last quarter. Business promotion was $2.1 million lower based on the seasonality of marketing efforts.

We had debit and credit card, lower debit and credit card processing expenses, due to $2.2 million in expense reimbursements we received in the quarter. On the other hand, compensation expense was $2.5 million higher in the quarter, which is related to seasonal payroll taxes and $2.9 million in bonuses and stock-based compensation, usually take place in the first quarter, which offset a reduction of $1.6 million related to two less working days in the quarter. If we were to normalize compensation and card expenses, expenses for the quarter would have been $123.9 million. And if we exclude OREO, they would have been $125.1 million, 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 $125.6 million.

The efficiency ratio for the quarter was 49.6%, which compares with 51.6% in the fourth quarter. If we adjust some of these income and expense items that do not 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 million-$126 million. Our efficiency ratio will be around the 50%-52% range considering the changes in expenses and projected income components. In terms of credit quality, NPAs did increase in the quarter $11 million, which is basically due to an inflow of one non-accrual commercial real estate loan in the Florida region that amounted to $12.6 million.

On the other hand, we had reductions in residential mortgage non-performing and OREO balances, which offset some of this increase. The NPA ratio was 68 basis points to total assets for the quarter. Just to mention this, this non-performing loan that migrated in the Florida region did not impact the allowance for credit losses, because it is collateralized by good value collateral at this point. The inflows to non-performing for the quarter were $43.4 million, which is $6.3 million higher than last quarter, basically related to this one CRE case that went into non-performing. We did have reductions of $6.5 million in consumer loan inflows. In general, I would say credit metrics are holding up well. Loans in early delinquency were down $21.8 million during the quarter.

We have started to see some normalization trends in consumer credit, with consumer loans in early delinquency decreasing by $19.5 million when compared to prior quarter. The allowance for the quarter did increase by $3.4 million to $247.3 million. 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. Net charge-off for the quarter were $21.4 million or 68 basis points of average loans.

It's down $3.2 million from last quarter. This reduction includes a recovery of $2.4 million 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 million in subordinated debentures on top of what we have already redeemed in prior quarters. There is only $11 million left of those debentures. We also declared $29.6 million in dividends and repurchased $21.8 million in common stock.

In terms of 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 million improvement in the fair value of the securities that lowered the amount of adjusted other comprehensive loss. The remaining other comprehensive loss represents $2.91 on tangible book value per share and about 220 basis points in the tangible common equity ratio. As Aurelio just mentioned, we will continue with our strategy of deploying excess capital, thoughtful as possible, to improve franchise and shareholder value. We continue with our execution of our plans. This concludes our prepared remarks. Operator, please, I would like to open the call for questions.

Operator (participant)

Thank you. 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 that your device is unmuted locally. Our first question comes from the line of Frank Schiraldi of Piper Sandler. Please go ahead.

Frank Schiraldi (Managing Director and Senior Research Analyst)

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

Orlando Berges-González (Executive VP and CFO)

The yields on the second half of the year are slightly lower. They're gonna be, talking from the top of my head, but they're gonna be around 135-140, what's on the second half of the year.

Frank Schiraldi (Managing Director and Senior Research Analyst)

Okay. Could you share just a ballpark in terms of that assumption you gave around margin expansion, I think five to seven basis points, what that assumes in terms of pickup, on that, you know, what you expect the new, I do not know if it is 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 (Executive VP and CFO)

We're assuming there are a few things, obviously. We're assuming it's gonna be a pickup of somewhere around 250 basis points-300 basis points, but, you know, remember that that assumption considers that there might be some rate reductions in the year. At this point, it's become a little bit unpredictable. 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. You know, 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, you know, it all depends.

We were able to move funding costs this quarter a little bit more than we had anticipated. That helped the margin pickup of this quarter. You know, the next quarter, you know, assumptions are based on those numbers I just gave you.

Frank Schiraldi (Managing Director and Senior Research Analyst)

Okay. Just one more on that line of questioning in terms of, you know, the 1.5% in the second quarter, back half the year, 1.3%-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? Can you share any, any sort of, you know, detail there?

Orlando Berges-González (Executive VP and CFO)

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. That's the amounts from through March of next year was $1.5 million. That includes that billion, billion five, I'm sorry. That includes that billion I just gave you, and the $260 million. So it's $250 million more in the first quarter of 2026. I don't have the full report with me here to give you some more indications of the full year.

Frank Schiraldi (Managing Director and Senior Research Analyst)

Okay. All right. At least for the first quarter, you said $250 million?

Orlando Berges-González (Executive VP and CFO)

The first quarter, it's about $250, yes.

Frank Schiraldi (Managing Director and Senior Research Analyst)

Okay. I appreciate it. 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 had talked about, I think, and it fell from 4Q to 1Q. 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, where are you seeing the stress? And if you could just talk about that large payoff, you know, is that, I guess that's by design. Just maybe a little more detail there. Thanks.

Aurelio Alemán-Bermudez (President and CEO)

You know, the large payoff was in Puerto Rico. The NPA was in Florida regarding CRE. You know, the large payoff was a refinancing that we did not participate in, and based on terms, expected terms. The one in Florida, you know, I think we put some details in the release. You know, it's a, we believe it's a one-off case. It's on the hospitality sector. Really good loan to value. We actually don't expect any losses in that one.

Frank Schiraldi (Managing Director and Senior Research Analyst)

Okay. All right. I appreciate it.

Aurelio Alemán-Bermudez (President and CEO)

On the CRE front, you know, we continue to originate. We have a good pipeline. Obviously, under our underwriting criteria, we continue to move up the balance sheet. Yeah.

Operator (participant)

Our next question is from Brett Rabatin of Hovde Group. Please go ahead.

Brett Rabatin (Head of Research)

Hey, thanks for the time. Wanted to ask on the loan origination side. You know, I know commercial can be a little lumpy. You know, and obviously, 4Q is really strong. If I heard correct, the guidance for the year is kind of that mid-single digit number. 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 (President and CEO)

Yeah. Actually, you know, we think this year, you know, different to prior, it's different to prior years. Obviously, where we see the opportunities, where we see the performance of the books. And we believe, you know, both construction and commercial will, will grow. We believe the consumer will grow at a slower pace than prior years. And we believe that actually we're gonna 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, over the past year. So, that's, that's the way we see the mid-single digit growth being, being combined. Yeah.

Brett Rabatin (Head of Research)

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

Aurelio Alemán-Bermudez (President and CEO)

Yeah. We have about, you know, I would say a dozen of improvements to the digital functionality that are currently being worked on. We did launch, you know, Samsung Pay and Google Pay, for the Mastercard debit side. We do have, we are, we are dual brand. We do both Visa and Mastercard. The Apple Pay project is ongoing. You know, we have some vendors that are involved in the execution. You know, there's priorities on timing with those. You know, you should see that happening through the, during this year combined with, you know, some of other, other functionalities that we continue to enhance in our, in our digital front.

Brett Rabatin (Head of Research)

Okay. And then Aurelio, would you consider, you know, if you just think about Puerto Rico versus Florida, you know, 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, you know, just in terms of where you see the credit risk, particularly on the commercial side?

Aurelio Alemán-Bermudez (President and CEO)

I think I make comments regarding competitive landscape. Obviously, Florida, it's more competitive on the deposit side. Puerto Rico is competitive, you know, but at a different level. Florida has a multiple number of competitors and very, very large banks also there. In terms of credit, you know, we continue to see a healthy pipeline. You know, we have our underwriting guidelines. The portfolios have performed, you know, if you look at the segregation of the ACL, portfolio have performed really well in Florida. You know, cases that we see, obviously, is a smaller portfolio than Puerto Rico. You have less ground running. At this point, you know, 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. Asset values did not, you know, increase rapidly. Loan to values are quite healthy in the Puerto Rico portfolio. That is why, and yes, you know, there is opportunity for growth, but, you know, we keep ourselves to our underwriting guidelines and try not to deviate from those.

Brett Rabatin (Head of Research)

Okay. Appreciate all the color, guys.

Aurelio Alemán-Bermudez (President and CEO)

Thank you, Brett.

Operator (participant)

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

Steve Moss (Managing Director)

Good morning.

Aurelio Alemán-Bermudez (President and CEO)

Good morning.

Orlando Berges-González (Executive VP and CFO)

Morning, Steve.

Steve Moss (Managing Director)

Maybe just following up on loan growth here. Morning. Maybe following up on loan growth here, just kind of curious, you know, with pipeline building, I hear you guys are a little bit more uncertain in the market, but do you think loan growth will happen, you know, pick up this quarter? It sounds like it'll be a little bit positive. Do you think it'll be more back half-weighted as we think about the mid-single digit growth?

Aurelio Alemán-Bermudez (President and CEO)

In the last call, we actually said that we see loan growth, you know, in the second half of the year. I think if I recall, we did cover that item. You know, to be honest, you know, in today's environment with the conclusion of tariffs is gonna be the answer to your question because, you know, some investors are sitting on the sidelines waiting to see if I close this or I don't close it. That is happening all over the industry, not only in Puerto Rico. I think it is the conclusion which will happen over the next 90 days, will bring conclusion to that. The pipelines continue to build.

If I look at my pipeline today versus the one that I have in January, it's actually better, which is a positive. Obviously, the uncertainty on the market is different. That's just a reality that we have to deal with. You know, obviously, if you go back to the pandemic, same thing happened. All of a sudden, we didn't know how to project. You know, that's what I said in my remarks. You know, we're not, you know, we have a good pipeline. We're not modifying our guidance. You know, only policy's impact will tell how markets will behave. It's not gonna be just a First Bank thing. It's gonna be a market thing.

We're very closely working with our clients to continue moving the needle and supporting them. You know, market could change a perspective of risk and perspective of investors entering into deals or not. That's just a reality that we have to deal with in every cycle.

Steve Moss (Managing Director)

Okay.

Aurelio Alemán-Bermudez (President and CEO)

Yes, for now.

Steve Moss (Managing Director)

Appreciate that color.

Aurelio Alemán-Bermudez (President and CEO)

Our mid-single digit guidance continues.

Steve Moss (Managing Director)

Got you. I appreciate that color. And then in terms of just kind of curious, you know, on the, you know, I think the phrase was some normalization of consumer credit. You know, 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 (President and CEO)

We, you know, we expect an improvement on that metric. Yes. From prior year.

Steve Moss (Managing Director)

Okay.

Aurelio Alemán-Bermudez (President and CEO)

We expected reduction prior year on the charge-off rate.

Orlando Berges-González (Executive VP and CFO)

Remember, remember.

Aurelio Alemán-Bermudez (President and CEO)

On the rate, on the rate itself, obviously, it's, you know, balances could grow and absolute amounts could grow. But charge-off rate should, should improve year-over-year.

Orlando Berges-González (Executive VP and CFO)

Remember, Steve, that we saw a ramp-up of charge-off through 2024 on the consumer side.

Steve Moss (Managing Director)

Yeah.

Orlando Berges-González (Executive VP and CFO)

When you compare to first quarter, we're looking more to prior quarters because that's where we say that, you know, the benefit is gonna start coming as some of these older vintages that started to behave worse are getting run off. We have that, and we remember we also had the sale of charge-off loans that improved the net charge-off on the consumer side.

Steve Moss (Managing Director)

Yes. Okay. Great. I appreciate that color there. Just one last one for me, just for clarification. The five to seven basis points of margin expansion is off the 448 adjusted margin. Correct?

Aurelio Alemán-Bermudez (President and CEO)

That is correct. That is correct.

Steve Moss (Managing Director)

Okay. Perfect. That is all for me. I appreciate all the call here. Thank you very much.

Operator (participant)

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

Kelly Motta (Managing Director)

Hey, good afternoon. Thanks so much for the question. Maybe piggybacking off that, that margin outlook, I really appreciate all the color on, on the securities repricing as well as, you know, your outlook there for five to seven basis points of 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. On that note, what are you seeing on the deposit side? I think one of your competitors said that, you know, there's some, some better deposit trends that, flows have, have been improving. Wondering what you're seeing in your overall outlook here, given, given what you're seeing from your customers so far. Thanks.

Aurelio Alemán-Bermudez (President and CEO)

You know, we're seeing more stability than the two prior years. We're seeing, you know, some more transactional activity, actually some growth in what we consider core transactional and non-interest bearing. Obviously, you know, we have an appetite for government deposits, which we are there, and we continue to support, as long as, you know, they are 100% collateralized, have to be. That is our appetite. If that would change, you know, we'll change our appetite. For now, you know, we see stability. We see the market, you know, fairly stable on that front. When we compare market numbers to 2024, there was a contraction, slight contraction. We had a, we have a slight increase. You know, we continue to monitor. It's really the very critical strategy for all of us, but are definitely, definitely stable.

Kelly Motta (Managing Director)

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 million lower linked quarter. Was there anything, any reversal there? Just wondering if 4Q is a better run rate going forward from here and any dynamics that may have impacted 1Q.

Orlando Berges-González (Executive VP and CFO)

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

Kelly Motta (Managing Director)

Versus December.

Orlando Berges-González (Executive VP and CFO)

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

Kelly Motta (Managing Director)

Okay.

Orlando Berges-González (Executive VP and CFO)

Some more details to.

Kelly Motta (Managing Director)

That's okay.

Orlando Berges-González (Executive VP and CFO)

Provide you.

Kelly Motta (Managing Director)

Got it. Appreciate it. Last, just a point of clarification for me on the buyback. I think you had said you've done $28 million 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? 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 (President and CEO)

Yeah. Our goal for this quarter was $50 million, and we are, we're gonna complete that at the, by the end of April. And, you know, we always keep the optionality. Right now the plan is to deploy that $100 million in the second half. But, you know, it's a consi, it's always a consideration if, you know, if a unique opportunity shows up on the market that we, that we act, we, we have the flexibility. So. But the goal is to complete the $50 million.

Kelly Motta (Managing Director)

Got it.

Aurelio Alemán-Bermudez (President and CEO)

Yeah.

Kelly Motta (Managing Director)

Got it. And last one, that 448 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 (Executive VP and CFO)

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

Kelly Motta (Managing Director)

Awesome. Thank you so much.

Aurelio Alemán-Bermudez (President and CEO)

Thank you. Thank you, Kelly.

Operator (participant)

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

Timur Braziler (Director and Equity Research Analyst)

Hi, good afternoon. I 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. Just talking to maybe more near-term deposit trends, can you just remind us what kind of the seasonal cadence is for First Bank and what the expectation is maybe over these next couple of quarters on the deposit side?

Orlando Berges-González (Executive VP and CFO)

I mean, if you look, we 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, you know, the monies were earmarked for some specific projects, and they would have been moved to, we thought it was gonna be at the end of last year. Did not happen. It happened early this year. That was a chunky component that moved out. There is nothing specifically on what we have in the portfolio today other than there is always gonna be some kind of variability on the deposits on the public fund side, because they have large components that come in and out. On the commercial and retail side, we don't have any, you know, like what we knew from what we had at the end of the year on those two specific customers.

Timur Braziler (Director and Equity Research Analyst)

Okay. To that, maybe just going back to the Florida conversation, you had talked about the $12.6 million hospitality credit. It looks like there was another one that was called out that migrated to classified. Can you just maybe talk through what that loan was? You know, more recently there's some news on just the Florida condo market and how much more expensive that's become. Can you just remind us of what exposure, if any, you have to the condo market in Florida?

Orlando Berges-González (Executive VP and CFO)

To the condo market? 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.

Aurelio Alemán-Bermudez (President and CEO)

It's only that one case of Florida.

Orlando Berges-González (Executive VP and CFO)

Condo market in terms of exposures, we don't have any in Florida.

Aurelio Alemán-Bermudez (President and CEO)

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

Timur Braziler (Director and Equity Research Analyst)

Great. Thank you.

Aurelio Alemán-Bermudez (President and CEO)

Thank you.

Operator (participant)

We currently have no further questions, so I will hand back to Ramón Rodríguez for closing remarks.

Ramón Rodríguez (Investor Relations Officer)

Thanks to everyone for participating in today's call. We will be attending the Wells Fargo financial services conference in Chicago on May 13th. 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 (participant)

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