FBP

• Core Financial Performance • Delivered strong core performance with 24% year-over-year net income growth, marking the 18th consecutive quarter of return on average assets above 1.5%. • Pre-tax pre-provision income hit an all-time high, driven by accelerating loan growth and expanding net interest margin. • Credit quality remains broadly strong, with net charge-offs declining to 49 basis points of average loans (down from 65 basis points last quarter) and non-performing assets near historical lows.

• Balance Sheet Growth • Loan growth accelerated in the quarter, driven primarily by commercial activity in Puerto Rico, with solid pipeline momentum also in Florida. • Deposit growth was led by government deposits, with slight core customer deposit growth, and overall funding costs were actively managed, with overall deposit costs declining 2 basis points quarter-over-quarter.

• Capital Deployment • Completed $50 million in share buybacks and paid a $0.20 per share dividend in the quarter, maintaining a target of returning ~100% of annual net income to shareholders via buybacks and dividends. • Strong capital position (17% CET1) provides headroom for strategic investments, organic growth, opportunistic M&A, and continued capital return.

• Strategic Initiatives • Continued advancing multi-channel customer engagement: active digital users grew 6% year-over-year, with 95% of deposit transactions now captured via digital channels. • Active investment in technology and AI to improve customer service, streamline processes, and enhance fraud management. • Prioritize disciplined organic growth in core Puerto Rico and Florida markets, while evaluating opportunistic strategic M&A that fits the company's operating model.

• Full-year 2026 loan growth guidance is maintained at 3% to 5%, with management expecting current strong activity levels to continue through the second half of the year to hit this target.
• Excluding any rate cuts in the second half of 2026, management expects net interest margin to expand by 3 to 5 basis points per quarter from the current 480 basis point level (excluding one-time fee impacts), outperforming the prior 2 to 3 basis point quarterly expansion guidance provided at the start of the year.
• Quarterly operating expenses (excluding OREO gains/losses) for the remainder of 2026 are projected to range between $128 million and $130 million, due to scheduled salary increases, higher business promotion activity, and ongoing technology project investment.
• Full-year 2026 efficiency ratio is expected to land near the lower end of the previously guided 52% range.
• The estimated annual effective tax rate for 2026 is now expected to be closer to 21%, down from 21.6% in the prior quarter, driven by a higher proportion of tax-exempt income.

This transcript does not break out financial performance by distinct product segments. Overall firm-wide second quarter 2026 results are as follows: net income was $96.1 million ($0.62 per diluted share), up 24% year-over-year. Pre-tax pre-provision income reached an all-time high of $138 million, up 11% year-over-year and 5% quarter-over-quarter. Return on average assets was 2.02%. Net interest income grew 3.7% quarter-over-quarter to $229.1 million. GAAP net interest margin increased 12 basis points quarter-over-quarter; excluding one-time fee acceleration impacts, it increased 5 basis points. Other income was $35.7 million, down from the prior quarter due to seasonal timing of contingent commissions. Operating expenses (excluding OREO gains/losses) were $128.2 million, at the lower end of prior guidance, leading to an efficiency ratio of 48.1%, down from 49.1% last quarter. Total loans reached $13.3 billion, up 5% linked quarter and 21% year-over-year. Total deposits grew by $274 million, driven primarily by government deposits, with slight growth in core customer deposits. The Common Equity Tier 1 ratio ended the quarter at 17%, with all regulatory capital ratios exceeding required levels.

• Early-stage delinquency rose $32.9 million in the quarter, primarily driven by a $20.7 million increase in the auto/finance portfolio, partially due to seasonal factors after first quarter tax refund-related declines.
• While early delinquency is flat year-over-year and lower than December 2025 levels, management continues to monitor delinquency trends and broader consumer market conditions closely.
• Non-performing assets increased by $5.1 million quarter-over-quarter driven by a single $14.8 million C&I loan inflow in Florida, though this loan is well-collateralized; excluding this inflow, non-performing assets decreased quarter-over-quarter.
• Government deposit balances can experience quarterly volatility due to large, timing-dependent inflows and outflows tied to reconstruction funding and government disbursements.
• Intensified competition for core customer deposits requires proactive pricing to retain large balances, creating some noise in net deposit flows.

Q: What types of loan originations are driving recent strong growth, and how are spreads holding up in the current competitive environment?

A: Most growth is concentrated in middle-market commercial lending, with a diversified mix including C&I, CRE, construction, warehouse development, hotels, healthcare, and large government debt refinancing and infrastructure transactions. Auto and consumer portfolios also saw slight growth rather than the contraction management expected. Management highlighted good risk diversification across these asset classes.

Q: With a 17% CET1 ratio, is the company pursuing M&A to deploy excess capital?

A: Management is actively evaluating opportunistic M&A opportunities that align with the company's existing operating model and can deliver consistent results, but there are no active deals to announce at this time. Organic growth, particularly in the new Florida market, remains the top priority for capital, with ongoing share buybacks and dividends continuing in the interim.

Q: What are the key drivers of better-than-expected net interest margin expansion, and how much securities repricing is coming over the near term?

A: Two core drivers are higher reinvestment yields on the investment portfolio as maturing low-yield securities are replaced with higher-yielding instruments, and the asset-sensitive balance sheet with a large portion of commercial loans floating with market rates. Around $1.2 billion in low-yield securities will mature and reprice over the next 18 months, supporting ongoing margin expansion.

Q: Is there specific stress in the auto portfolio that we should watch after the recent rise in early delinquency?

A: The quarterly increase is primarily seasonal: early delinquency fell sharply in the first quarter due to consumer tax refund liquidity, and the second quarter increase just brings levels back to a normal baseline. Current delinquency is in line with year-ago levels and lower than December 2025, and management does not expect further significant increases from current levels. All other credit metrics remain solid.