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FIRST BANCORP /PR/ (FBP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered EPS of $0.50, up sequentially and year/year; EPS beat Wall Street ($0.457) while “revenue” (net interest income after provision + non-interest income) of $226.2M missed consensus ($251.7M). Bold: EPS beat; revenue miss. Drivers: margin expansion (+4 bps to 4.56%), lower provision, but non-interest income normalization after seasonal insurance commissions in Q1 . Values retrieved from S&P Global.*
  • Net interest income reached a record $215.9M; ROAA improved to 1.69% and efficiency ratio held ~50%, underscoring disciplined expense control and asset mix benefits .
  • Core loan growth accelerated (+$189.7M QoQ to $12.87B), led by C&I in Puerto Rico and Florida; non-interest-bearing deposits fell $262.7M driven by a handful of large commercial accounts (five customers = ~$120M) .
  • Management reaffirmed margin expansion guidance of 5–7 bps per quarter for the next two quarters and guided base OpEx to $125–$126M (ex-OREO) in H2; effective tax rate ~23% for FY25 .
  • Capital deployment remains aggressive: $28.2M buybacks, $11.1M TruPS redemption, and a $0.18 quarterly dividend declared on common stock for payment on Sept 12, 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Record net interest income and NIM expansion to 4.56% on lower funding costs and redeployment into higher-yield assets; ROAA rose to 1.69% and efficiency remained ~50% .
    • Strong core loan growth (+$189.7M), with $156.1M increase in C&I (PR + FL), and total originations of $1.3B; pipelines “continue to be strong” for H2 .
    • Management quote: “We posted another strong return on average assets of 1.69% driven by record net interest income, solid loan production, stable credit trends, and disciplined expense management” — Aurelio Alemán (CEO) .

  • What Went Wrong

    • Non-interest income fell $4.8M QoQ to $30.9M due to absence of seasonal insurance commissions and lower realized gains from purchased tax credits, pressuring “revenue” vs consensus .
    • Deposit outflows concentrated in large commercial accounts drove a $268.5M total deposit decline QoQ; non-interest-bearing deposits down $262.7M (PR: -$212.0M; FL: -$48.8M) .
    • Revenue consensus miss; while provision fell, “revenue” measure incorporates provision and normalized fees; consensus likely overestimated non-interest income or lower provisions. Bold: Revenue miss. Values retrieved from S&P Global.*

Financial Results

MetricQ4 2024Q1 2025Q2 2025
EPS (Diluted, $)$0.46 $0.47 $0.50
Net Interest Income ($MM)$209.3 $212.4 $215.9
Provision for Credit Losses ($MM)$20.9 $24.8 $20.6
Net Interest Income after Provision ($MM)$188.4 $187.6 $195.3
Non-Interest Income ($MM)$32.2 $35.7 $30.95
Net Revenues ($MM) (NII after provision + Non-Interest)$220.6 $223.3 $226.2
Net Interest Margin (GAAP, %)4.33% 4.52% 4.56%
Efficiency Ratio (%)51.57% 49.58% 49.97%
ROAA (%)1.56% 1.64% 1.69%

Consensus vs Actual (Q2 2025):

MetricConsensusActual
Primary EPS ($)0.4570.500
Revenue ($MM)251.7226.2
Values retrieved from S&P Global.*

Balance sheet highlights:

MetricQ4 2024Q1 2025Q2 2025
Loans Held for Investment ($MM)$12,746.6 $12,675.4 $12,870.0
Total Deposits ($MM)$16,871.3 $16,822.5 $16,554.0
Core Deposits ex. Brokered & Gov ($MM)$12,867.8 $12,896.8 $12,655.9
Brokered CDs ($MM)$478.1 $482.5 $526.5
Basic Liquidity Ratio (%)17.27% 18.76% 17.58%
CET1 (%) (Holding Co.)16.32% 16.62% 16.61%
Tangible Book Value per Share ($)$9.91 $10.64 $11.16

Credit metrics:

MetricQ4 2024Q1 2025Q2 2025
ACL / Loans (%)1.91% 1.95% 1.93%
NPA / Assets (%)0.61% 0.68% 0.68%
Net Charge-Offs (Annualized, %)0.78% 0.68% 0.60%

Segment/regional loan growth (Q2 vs Q1):

RegionChange ($MM)Notes
Puerto Rico+$77.3Includes $50.0M C&I term loan; refinancings totaling $78.4M
Florida+$99.1Three C&I loans >$10M totaling $57.1M; residential originations up $14.1M
Virgin Islands+$13.3Lower originations vs Q1; modest growth

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin expansion (bps/quarter)Q3–Q4 20255–7 bps per quarter (from Q1 call) 5–7 bps per quarter reiterated Maintained
Base Operating Expenses (ex-OREO)Q3–Q4 2025~$125–$126M (from prior call) ~$125–$126M (ex-OREO) Maintained
Effective Tax RateFY 2025~23.7% (Q1 est.) ~23% FY25 Lowered
Investment Portfolio Cash FlowsH2 2025n/a~$1.06B total ($460M in Q3; $600M in Q4), redeploy to loans/securities New detail
Capital Return TargetFY 2025Deploy ~100% of earnings (ongoing) ~100% of earnings via buybacks/dividends Maintained
DividendQ3 2025 (pay)$0.18/qtr (ongoing post-Jan increase) $0.18/qtr declared; payable Sept 12, 2025 Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Previous Mentions)Q1 2025 (Previous Mentions)Q2 2025 (Current Period)Trend
Digital/technology & AI/process automationAdvanced IT/digital capabilities (nCino/Salesforce; cloud migration) Digital adoption highlighted; strong digital user growth Continued cloud migration and elimination of mainframe; investments in self-service tools with AI components Ongoing investment; steady progress
Macro/tariffs & policyPositive backdrop; but noted policy uncertainty into 2025 Steady business activity despite U.S. macro uncertainty Notes uncertainty around tariffs/U.S. policy; markets remain resilient Mixed: resilient activity with policy overhang
Margin trajectoryNIM up 8 bps; asset mix/pricing tailwinds NIM up 19 bps; redeployment benefits NIM up 4 bps; guidance 5–7 bps per quarter next two quarters Sustained expansion, moderating pace
DepositsCore deposits grew; NIB up $296.8M Core up $29M; NIB up $69.8M Outflows concentrated in large commercial accounts; five customers ~$120M Volatile large-client flows; retail stable
Credit/consumerNCOs flat; consumer charge-offs elevated Early delinquency decreased $21.8M; consumer vintages improving NCOs down to 0.60%; consumer vintages improving; early delinquency +$2.8M (auto) Gradual improvement; monitor auto

Management Commentary

  • CEO: “We grew total loans by 6% in the quarter annualized, mostly driven by strong commercial loan production in Puerto Rico and Florida… Retail deposit accounts remain fairly stable” .
  • CFO: “Net interest margin… 4 bps higher… normalized margin for the first quarter was really 4.48%, thus resulting in an 8 bps increase in margin this quarter” .
  • CFO: “Investment portfolio cash flows are expected to reach just over $1 billion in the second half of 2025… $460 million in the third quarter and $600 million in the fourth quarter” .
  • CEO: “We remain confident that we can achieve our mid-single-digit loan growth guidance for the full year” .

Q&A Highlights

  • Tax rate: FY25 effective tax rate guided to ~23%; benefit partly tied to redemption of debentures at holding company .
  • Deposits: Outflows were concentrated (“five customers represented $120M”) and viewed largely non-recurring; retail stable; willingness to compete up to certain parameters .
  • Funding costs/FHLB: Expect to pay down $30M maturing in 3 months; assess $90M in 6–12 months; aim to lower funding costs as market allows .
  • Loan growth: Confidence in pipelines; growth expected in PR and FL commercial; stability in consumer; modest mortgage growth .
  • Technology spend: Continued cloud migration, self-service tools, process automation with emerging AI components; no step-up peak expected .

Estimates Context

  • Q2 2025 EPS beat: $0.50 vs $0.457 consensus. Bold: Beat. Values retrieved from S&P Global.*
  • Q2 2025 “Revenue” miss: $226.2M vs $251.7M consensus. Bold: Miss. Values retrieved from S&P Global.*
  • Consensus likely overestimated non-interest income (seasonal insurance commissions absent in Q2) and/or lower provision; management cited $4.8M QoQ decline in non-interest income and provision of $20.6M .

Key Takeaways for Investors

  • Margin expansion remains intact with explicit guidance of 5–7 bps per quarter for Q3–Q4, supported by ~$1.06B H2 investment cash flows to redeploy into higher-yielding assets .
  • Loan growth momentum is strong and broad-based, particularly in C&I across Puerto Rico and Florida; management reaffirmed mid-single-digit FY loan growth .
  • Deposit volatility is concentrated in large commercial accounts; retail is stable, and core liquidity remains ample (basic liquidity 17.58%; ~$6.0B available capacity ≈133% of uninsured deposits) .
  • Credit trends are stable-to-improving: NCOs down to 0.60%; ACL/loans at 1.93%; NPAs steady at 0.68% of assets; consumer vintages improving .
  • Capital deployment continues to support shareholder returns (buybacks, debenture redemption) alongside a $0.18 quarterly dividend; tangible book per share up 4.9% QoQ to $11.16 .
  • Watch non-interest income normalization: seasonal insurance commissions in Q1 lifted fees; Q2 decline impacted headline “revenue” vs consensus; fee trajectory is a swing factor .
  • Near-term trading: EPS beat and reinforced NIM guidance are positive; offset by consensus “revenue” miss and deposit outflows optics. Medium-term thesis centers on NIM delivery, disciplined OpEx, and loan growth execution .

Notes: Revenue denotes net interest income after provision plus non-interest income, consistent with the company’s reported components . Values retrieved from S&P Global.*