First BanCorp. (FBP) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company demonstrated strong financial performance with record revenues and net income, a significant share repurchase program, and stable asset quality. The Q&A section highlighted stable credit quality and potential margin improvement. However, the management's vague responses on certain issues like telecom NPL and competition impact were noted. Given the market cap, the positive financial metrics and shareholder returns are likely to result in a stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Net Income (4Q 2025) $87 million or $0.55 per share, representing a top quartile return on assets of 1.8%. This was achieved through disciplined expense management, resulting in a 49% efficiency ratio for the quarter.
Loan Origination (4Q 2025) $1.4 billion, with total loans growing by $80 million. Growth was mainly in commercial segments but was slightly offset by elevated commercial loan payoffs and lower consumer loan production.
Core Customer Deposits (4Q 2025) Increased by $267 million, with a 3.2% increase in core noninterest-bearing deposits. Government deposits decreased as part of a strategy to reduce higher-cost deposits.
Nonperforming Assets to Total Assets Ratio (4Q 2025) Decreased to an all-time low of 60 basis points, reflecting stable consumer credit and net charge-offs to average loans at 63 basis points, which was flat compared to the prior quarter.
Share Repurchase and Dividends (4Q 2025) $50 million in shares repurchased and $28 million in dividends declared. Since 2021, over 28% of shares outstanding have been repurchased.
Total Revenues (Full Year 2025) Crossed $1 billion, with record net income of $345 million and a 19% increase in earnings per share. Return on assets for the year was 1.8%, and tangible book value per share increased by 24%.
Adjusted Pretax Preprovision Income (Full Year 2025) Reached $499.2 million, a 10% increase from 2024. On a non-GAAP basis, net income was $325.3 million, or $2.02 per share, an 8.6% increase from 2024.
Net Interest Income (4Q 2025) Increased by $4.9 million to $222.8 million, driven by reductions in deposit costs and higher yields on investments. Net interest margin was 4.68%, or 4.65% when adjusted for one-time items.
Operating Expenses (4Q 2025) $126.9 million, $2 million higher than the prior quarter due to seasonal marketing and merit increases. Efficiency ratio remained strong at 49%.
Asset Quality (4Q 2025) Nonperforming assets decreased by $5.3 million, with nonaccrual loans at 70 basis points of total loans. Net charge-offs were $20.4 million, or 63 basis points of average loans, consistent with the prior quarter.
Capital Actions (Full Year 2025) $150 million in share repurchases, $150 million in dividends paid, and $62 million in subordinated debentures redeemed. Tangible book value per share grew by 24%.
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Operating Highlights
Omnichannel Strategy: Investments in omnichannel strategy showed results with a 5% increase in active retail digital users, 95% of deposit transactions captured through self-service channels, and improved branch sales and service delivery.
Market Expansion in Puerto Rico and Florida: Positive economic indicators in Puerto Rico and Florida, including a resilient labor market, record tourism activity, and significant investments in manufacturing capacity and infrastructure development, are expected to drive stability and growth.
Loan Origination and Deposit Growth: $1.4 billion in loan origination during the quarter, with total loans growing by $80 million. Core customer deposits increased by $267 million, while government deposits decreased to optimize costs.
Asset Quality: Nonperforming assets ratio decreased to an all-time low of 0.60%. Consumer credit stabilized with net charge-offs at 0.63% of average loans.
Efficiency and Profitability: Achieved a 49% efficiency ratio for the quarter and a return on assets of 1.8%. Full-year net income reached $345 million, with a 19% growth in earnings per share.
Capital Deployment and Shareholder Returns: Repurchased $50 million in shares and declared $28 million in dividends during the quarter. Since 2021, over 28% of shares outstanding have been repurchased. The Board approved an 11% increase in quarterly dividends for 2026.
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Risk or Challenges
Market Conditions: The second half of the year showed a slightly lower economy in the main market, with expectations of moderated consumer confidence due to tariff-related pricing, inflationary pressures, and geopolitical tensions.
Loan Portfolio: Elevated commercial loan payoffs and slightly lower consumer loan production impacted loan growth.
Consumer Credit Quality: Consumer credit quality is expected to gradually return to pandemic levels, driven by inflationary pressures on consumers despite stable unemployment and better compensation.
Interest Rate Environment: The floating rate portion of the C&I portfolio experienced a reduction in yields due to the repricing tied to reductions in prime rate and SOFR.
Delinquency and Nonperforming Assets: Loans in early delinquency increased, particularly in the auto portfolio, and two C&I loan cases amounting to $12 million migrated to nonperforming status.
Regulatory and Geopolitical Risks: Geopolitical tensions and tariff-related pricing are expected to continue impacting the business environment.
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Guidance & Outlook
Loan Growth: The company aims to achieve 3% to 5% organic loan growth in 2026.
Efficiency Ratio: The company plans to sustain an efficiency ratio of 52% or better in 2026.
Profitability Metrics: The company expects to maintain strong profitability metrics and return close to 100% of annual earnings to shareholders in 2026.
Asset Quality: Asset quality is expected to remain stable, with consumer credit quality gradually returning to pre-pandemic levels due to inflationary pressures.
Net Interest Margin: The company projects net interest margin to grow by 2 to 3 basis points per quarter during 2026.
Capital Deployment: The company plans to repurchase approximately $50 million in shares per quarter through the end of 2026, while continuing to return close to 100% of earnings to shareholders.
Macroeconomic Outlook: The company remains constructive on the underlying economic trends for 2026, despite expected moderation in consumer confidence and inflationary pressures. Key drivers include a resilient labor market, strong tourism activity, and significant federal disaster relief funds supporting infrastructure development.
Technology Investments: The company will continue investments in technology to modernize operations and drive growth and efficiencies in 2026.
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Shareholder Return Plan
Dividends Declared in Q4 2025: $28 million in dividends were declared.
Dividend Increase for 2026: The Board approved an 11% increase to the quarterly common stock dividend, raising it to $0.20 per share starting in Q1 2026.
Dividend Payout Ratio: Approximately 95% of earnings were returned to shareholders in 2025 through dividends and share repurchases.
Share Repurchase in Q4 2025: $50 million in shares of common stock were repurchased.
Cumulative Share Repurchase Since 2021: Over 28% of shares outstanding have been repurchased since the buyback program began in 2021.
Planned Share Repurchase for 2026: The company plans to repurchase approximately $50 million in shares per quarter through the end of 2026, subject to market conditions.
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Key Q&A
Q:Do you feel there's any more mix shift change with lower liquidity? And any other levers that might aid the NIM going forward?
A:The levers would be similar, coming from cash flows on the investment portfolio and repricing deposit components as rates come down. The loan pipeline on the commercial and residential side is strong, while the consumer side is weaker. A mix of these factors, along with expected rate cuts, will drive improvement in margin.
Q:What are you seeing as far as competition and the potential for lowering the cost of funds with lower rates?
A:The cost of funds could lower due to repricing of wholesale funding and time deposits at lower rates. Government deposit accounts tied to market indexes may also reprice. Regular transaction accounts are expected to remain stable due to their low beta.
Q:Can you expand on credit quality and whether there are any potential changes for better or worse?
A:Credit quality is stable with no specific noise. There is some normalization in consumer delinquencies and charge-offs, but the asset mix remains strong with mortgages and commercial assets at low levels of risk.
Q:What are your updated thoughts on the auto loan market?
A:The retail auto market contracted by 10% last year, with a 15% reduction in the second half due to tariffs. Stabilization is expected with a potential 5% contraction this year. Growth in the segment is not expected unless there are adjustments in tariffs or excise taxes.
Q:How are you thinking about reinvestment of securities cash flows?
A:Reinvestment will focus on agency investments, CMO investments, and agency pass-throughs. A 2-3 basis point yield pickup is expected, with no significant rate changes anticipated in the first half of the year.
Q:Can you provide details on the telecom NPL and its resolution?
A:There is no new information. Banks are working with the lead bank on resolution, and there is value behind the NPL. It is a small issue for the company and is being managed towards resolution.
Q:What are your thoughts on capital allocation and potential returns to shareholders?
A:Priorities include organic growth, expansion in Florida, and opportunistic non-organic opportunities. If no suitable opportunities arise, capital will be returned to shareholders through share buybacks.
Q:How is the efficiency ratio calculated, and does it include OREO gains?
A:The efficiency ratio is calculated on a GAAP basis, including OREO gains. The guidance of 50-52% includes movements in expenses and revenues.
Q:What drove the strong noninterest-bearing deposit flows this quarter?
A:The growth is part of a core strategy to build relationships and expand in regions with limited competition. Initiatives include opening new branches and focusing on small business lending and loan origination.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the telecom NPL resolution, using vague language about working with the lead bank and the value behind the NPL. Additionally, no specific numbers were given for competition's impact on cost of funds, and the response on capital allocation lacked detailed plans for shareholder returns.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Asset quality
Bancorp Full
Bancorp President
Bancorp conference
Consumer credit
Executive
Florida labor
Full Financial
Officer Vice
Orlando
President Chief
Relations Bancorp
Rico market
capital position
channel branch
client
deposit
development
economy
efficiency ratio
effort
fund
future
income share
loan
macro
passenger
pickup
pressure
profitability
program
record
return asset
revenue
service
stock dividend
unemployment
FBP Transcript
First BanCorp. (FBP) Q4 2025 Earnings Call Transcript
Positive1-27
The company demonstrated strong financial performance with record revenues and net income, a significant share repurchase program, and stable asset quality. The Q&A section highlighted stable credit quality and potential margin improvement. However, the management's vague responses on certain issues like telecom NPL and competition impact were noted. Given the market cap, the positive financial metrics and shareholder returns are likely to result in a stock price increase of 2% to 8% over the next two weeks.
First BanCorp. (FBP) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call summary shows strong financial metrics, with expected increases in net interest margin, stable asset quality, and favorable economic conditions. Shareholder returns are prioritized with a planned buyback. The Q&A reveals stable consumer credit and strong commercial and residential loan growth. The management's optimistic guidance and strategic capital deployment further support a positive outlook. Given the small-cap nature of the company, these factors suggest a positive stock price movement of 2% to 8% over the next two weeks.
Calix, Inc. (CALX) Q2 2025 Earnings Call Transcript
Positive7-22
The company reported a 10% sequential revenue growth and record free cash flow, signaling strong financial health. The share repurchase program and record high RPOs further support a positive outlook. Although concerns were raised about AI adoption and customer capacity constraints, management's optimistic guidance and strategic investments in AI and digital infrastructure are likely to drive future growth. The market cap suggests moderate sensitivity to these positive developments, leading to a predicted stock price increase of 2% to 8% over the next two weeks.
First BanCorp. (FBP) Q2 2025 Earnings Call Transcript
Positive7-22
The earnings call summary suggests positive sentiment with strong financial performance, improved credit metrics, and strategic investments. The Q&A section highlighted non-recurring deposit declines and sustainable charge-offs, which are not alarming. The stock repurchase and dividend plans further support a positive outlook. However, management's unclear responses on some metrics and the deposit outflows are minor concerns. Given the market cap, the stock is likely to see a moderate positive reaction, potentially in the 2% to 8% range, as the positives outweigh the negatives.
FBP Slides
FBP Report
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