First BanCorp. Q2 FY2025 earnings call

• Strong financial results with $80M net income and 1.69% ROA. - Commercial loan origination picked up, indicating stable macro conditions. - Economic conditions in Puerto Rico and Florida trending favorably, with strong labor markets. - Franchise investing in technology to enhance customer experience, with digital active customers up 8% annually. - Capital deployed over 107% of earnings in dividends, buybacks, etc., with $100M left in 2024 buyback authorization.

First BanCorp reported a strong second quarter with net income of $80 million, translating to a return on assets of 1.69%. Net interest income increased to $215.9 million, up $3.5 million from the prior quarter. Commercial loans grew 6% linked quarter annualized, driven by strong production in Puerto Rico and Florida. Customer deposits saw a reduction, mainly from large commercial accounts, while retail deposits remained stable. Asset quality was stable to improving, with nonperforming assets flat at 68 basis points of total assets and net charge-offs down. Capital continued to build, with over 107% of earnings deployed in dividends, buybacks, etc.

• Expect 5-7 basis points margin pickup in the next 2 quarters. - Investment portfolio cash flows expected to exceed $1B in the second half of 2025. - Mid-single-digit loan growth guidance for the full year remains intact. - Continue deploying capital via dividends, buybacks, etc., with $100M left in 2024 buyback authorization.

• Uncertainty around tariffs and U.S. policies affecting retail and commercial customers. - Fluctuations in large commercial deposits due to nonrecurring factors. - Potential impact of tax contingencies and market movements on financial results.

Q: What is the expected tax rate for the full year?

A: The effective tax rate is expected to be around 23% based on the forecasted mix of exempt and taxable income.

Q: Can you provide more color on the deposit decline in large commercial accounts?

A: The decline is due to nonrecurring factors like tax payments, settlements, etc., and retail deposits remain stable.

Q: How will you fund loan growth in the second half?

A: Expect stability in deposits and will use investment portfolio cash flows exceeding $1B in the second half for funding.

Q: What is the composition of loan growth in the second half?

A: A combination of growth in Florida and Puerto Rico commercial sectors.

Q: What about loan yields and funding costs?

A: Loan yields vary by portfolio; funding costs can be reduced by managing Federal Home Loan Bank advances and other funding sources.

Q: Any future technology investments affecting efficiency?

A: Continued investments in technology, including cloud migration, digital tools, and process automation.