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FIRST BANCORP /PR/ (FBP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered solid performance: net income $75.7m ($0.46 diluted EPS), net interest income rose to $209.3m and net interest margin expanded 8 bps to 4.33% vs Q3; efficiency ratio improved to 51.6% .
  • Loans grew $303m LQ to $12.8B, with broad-based growth across commercial, consumer, and mortgage; core (non-broker/government) deposits +$198m and fully collateralized government deposits +$368m, while brokered CDs fell $42m .
  • Capital actions: redeemed $50m junior subordinated debentures; Board raised quarterly dividend 13% to $0.18 per share, supporting a continued ~100% net payout approach into 2025 .
  • 2025 set-up: management guides mid-single-digit loan growth, expense run-rate of $125–$126m per quarter near term, efficiency ~52%, and NIM up ~20 bps by year-end 2025 given $1.5–$1.6B investment cash flows redeployed to higher-yield assets .

What Went Well and What Went Wrong

What Went Well

  • Net interest income and margin expansion: NII +$7.2m Q/Q to $209.3m, NIM +8 bps to 4.33%, aided by redeployment from low-yield securities, deposit mix, and reduced higher-cost funding; “grew pre-tax pre-provision income by 5%” .
  • Broad-based loan and deposit growth: total loans +$303m with strength across regions and segments; core deposits +$197.9m and government deposits +$367.9m, reinforcing liquidity and funding stability .
  • Capital returns and dividend increase: redeemed $50m junior debentures and boosted dividend to $0.18 per share; CEO: “we are pleased to announce that our Board approved a 13% increase” .

What Went Wrong

  • Higher credit provisioning: provision for credit losses rose to $20.9m (+$5.7m Q/Q), driven by consumer loss trends and loan growth; net charge-offs held at 0.78% annualized .
  • Consumer credit weakness: early delinquency increased $9.6m (mostly consumer), and allowance on consumer loans rose; management noted ongoing volatility in consumer credit .
  • Tangible book value pressure from AOCI: TBV/share declined to $9.91 and TCE to 8.44% due to an ~$82m decline in AFS fair value amid rate moves .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Interest Income ($mm)$199.6 $202.1 $209.3
Non-Interest Income ($mm)$32.0 $32.5 $32.2
Provision for Credit Losses ($mm)$11.6 $15.2 $20.9
Non-Interest Expenses ($mm)$118.7 $122.9 $124.5
Net Income ($mm)$75.8 $73.7 $75.7
Diluted EPS ($)$0.46 $0.45 $0.46
Profitability & MarginsQ2 2024Q3 2024Q4 2024
Net Interest Margin (%)4.22 4.25 4.33
Efficiency Ratio (%)51.23 52.41 51.57
ROAA (%)1.61 1.55 1.56
ROAE (%)20.80 18.31 17.77
Adjusted PTPP Income ($mm, non-GAAP)$110.5 $111.6 $116.9
Asset Quality KPIsQ2 2024Q3 2024Q4 2024
ACL on Loans / Loans (%)2.06 1.98 1.91
NPAs / Assets (%)0.67 0.63 0.61
Nonaccrual Loans / Loans (%)0.78 0.72 0.69
Net Charge-Offs (annualized, %)0.69 0.78 0.78

Segment breakdown – Loans held for investment by geography (period-end):

Geography ($mm)Jun 30, 2024Sep 30, 2024Dec 31, 2024
Puerto Rico$9,833.2 $9,896.2 $10,022.1
Virgin Islands$431.6 $381.6 $429.5
United States$2,120.8 $2,168.3 $2,294.9
Consolidated$12,385.5 $12,446.0 $12,746.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin trajectory2024 exit/2025Q4’24 NIM “similar to Q3”; improvement into 2025 ~20 bps higher NIM by end-2025, driven by $1.5–$1.6B cash flows redeployed to higher yields Raised specificity
Loan Growth2024/20252024 ~4% given prepayments; 2025 mid-single digit Sustain mid-single-digit for 2025 Maintained
Efficiency Ratio2024/2025~52% incl. OREO; near-term stable ~52%; Q4 efficiency 51.6% achieved Maintained
Expense Base (ex-OREO)Near-term$123–$124m per quarter next couple of quarters $125–$126m per quarter next couple of quarters Raised
Capital Actions2024/2025Focus on redeeming TruPS; buybacks optional later Redeem remaining ~$61m junior debentures; target ~100% net payout in 2025 Clarified/timed
Dividend2025$0.16 prior run rate Increased to $0.18 per share (13% increase) Raised

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Margin/NIINIM inflection; +6 bps Q/Q with higher loan yields, redeploy from low-yield securities NIM +3 bps; expected flat in Q4 then improvement in 2025 NIM +8 bps to 4.33; ~20 bps uplift targeted by end-2025 on $1.5–$1.6B cash flows Improving
DepositsCore deposits +$132m; NIB share at 34% Mixed; modest movements, brokered run-off, gov’t seasonality Core +$198m; gov’t +$368m; brokered CDs −$41.9m Improving mix
Consumer creditEarly delinquency +$13.7m; allowance up in consumer Consumer inflows to nonaccrual +$10.5m; stabilization expected in 2025 Early delinquency +$9.6m; consumer allowance 3.85%; management still cautious Mixed/volatile
Technology & branchesPlatform upgrades (nCino/Salesforce), digital push Continued tech investment; guidance anchored at ~52% efficiency Ongoing tech projects; branch expansions planned in 2025 Ongoing investment
Capital returns100% payout via buybacks/dividends; new $250m authorization 100% deployed via TruPS redemption & dividends; buybacks optionality Redeemed $50m; dividend +13%; ~100% net payout sustained Continued

Management Commentary

  • “We are very pleased to conclude the year with strong fourth quarter results underscored by solid loan growth… encouraging core customer deposit trends, and solid profitability metrics.”
  • “We earned $76 million in net income and grew pre-tax pre-provision income by 5%… driven by net interest income expansion and our disciplined expense management.”
  • “We’re sustaining our mid-single-digit loan growth guidance… sustaining our 100% net payout ratio… redeeming the remaining $61 million… and maintaining a sustainable dividend payout policy.”
  • “Margin could improve around 20 basis points by the end of 2025” given $1.5–$1.6B portfolio cash flows redeployed to higher-yield assets .
  • “Our Board approved a 13% increase in our quarterly common stock dividend… to $0.18 per share.”

Q&A Highlights

  • Efficiency and expenses: Management reiterated ~52% efficiency target; OREO gains included, but expected to taper in 2H25; near-term expense run-rate $125–$126m per quarter .
  • NIM trajectory: CFO quantified ~20 bps margin uplift by Q4’25, contingent on redeployment of maturing low-yield securities and deposit flows; rate-cut assumptions moderated to 25–50 bps in 2025 .
  • Capital deployment: ~$60m of TruPS redemptions remaining; buybacks likely after completing redemptions, skewed to latter three quarters of 2025 .
  • Deposits dynamics: Public funds inflows linked to government payments and reconstruction flows; strategy in cash management/payment services; seasonal variability acknowledged .
  • Loan pricing & yields: Commercial floating-rate exposure (SOFR/Prime) led to loan yields down ~10–20 bps vs Q3; spreads stable .
  • Investment cash flows cadence: ~$325–375m (Q1’25), ~$240–260m (Q2), ~$400m (Q3), ~$525–550m (Q4) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Efficiency Ratio2024/2025~52% including OREO ~52% near term; Q4 at 51.6% Maintained
Expense Run-Rate (ex-OREO)Next 2 quarters$123–$124m per quarter $125–$126m per quarter Raised
NIM2025Improvement from 2024 base ~+20 bps by Q4’25 More specific
Loan Growth2025Mid-single digit Mid-single digit Maintained
Capital Return2025100% net payout, focus on TruPS 100% net payout; redeem ~$61m; buybacks later Clarified timing
Dividend2025$0.16 (Oct’24) $0.18 (from Mar’25 payable) Raised

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at the time of this report due to data access limits; therefore, a beat/miss assessment versus Street consensus cannot be provided (S&P Global values unavailable).
  • Actual results: diluted EPS $0.46 and net income $75.7m; NII $209.3m; non-interest income $32.2m; efficiency 51.6%; NIM 4.33% .

Key Takeaways for Investors

  • Margin momentum is intact with a clearer 2025 path (+~20 bps NIM by Q4’25) driven by redeploying $1.5–$1.6B of low-yielding securities into higher-yield assets/loans and lower funding costs; a medium-term NII tailwind .
  • Loan growth is broad-based and durable, with mid-single-digit guidance sustained for 2025; Q4 growth (+$303m) validates pipeline and regional diversification (PR, FL, VI) .
  • Consumer credit remains the main watch item: early delinquency and charge-offs are elevated, and allowance on consumer rose; monitor normalization trajectory through mid/late 2025 .
  • Capital strength enables continued 100% net payout, TruPS redemption ($61m remaining), and higher dividend ($0.18); buybacks likely after debt redemption—supportive for total return .
  • Tangible equity metrics are sensitive to AFS marks; TBV and TCE fell on Q4 rate moves (AOCI) despite strong core earnings—rates path is a swing factor for book value .
  • Deposit franchise showed positive mix shifts (core and government inflows, brokered CDs down), supporting liquidity and margin resilience into 2025 .
  • Near-term expense step-up to $125–$126m reflects growth investments (technology, branch expansion) yet efficiency remains ~52%; operating leverage stems from NII expansion .