First Ban(US:FBP)2025-10-23 15:00Financial Performance - The company reported a net income of $100 million for Q3 2025, a 25% increase from $80 million in Q2 2025, with normalized earnings per share growing 13% year-over-year [4][10] - Return on average assets for the quarter was 2.1%, significantly higher than the previous quarter [10] - Net interest income reached $217.9 million, an 8% increase compared to Q3 2024, with a net interest margin of 4.57%, up 32 basis points over the last four quarters [12][10] Business Line Performance - Total loans grew by $181 million, or 5.6% annualized, surpassing $13 billion for the first time since 2010 [5] - The company experienced a slowdown in consumer credit demand, particularly in the auto industry, which saw a 7% decline in total retail sales year-to-date [5][6] - Commercial and construction lending segments showed growth, while residential mortgage business maintained steady loan production [6] Market Data - The company noted a 7% reduction in non-performing assets and stable credit quality, with consumer charge-offs normalizing [6][18] - The competitive landscape for deposits remains challenging, particularly from smaller players, but the company is optimistic about stabilizing deposit costs amid expected rate cuts [6][36] Strategic Direction - The company plans to continue its strategy of returning 100% of annual earnings to shareholders, with a new $200 million share buyback program authorized [7][21] - The management emphasized the importance of organic growth and potential M&A opportunities in the Florida market, focusing on franchises that complement existing operations [21][44] Management Commentary - Management expressed confidence in the resilience of the labor market in Puerto Rico and the positive impact of federal disaster funds on local economies [8] - The outlook for loan growth is projected to be between 3% and 4% for the year, influenced by the slowdown in auto lending but supported by strong pipelines in commercial lending [9][61] Other Important Information - The effective tax rate is expected to stabilize around 22.2% for 2025, reflecting improvements from recent legislative changes [10][78] - The company has seen a shift in deposit mix, with time deposits increasing while lower-cost non-maturity deposits decreased [13] Q&A Session Summary Question: Is the tax situation a one-time benefit? - Management confirmed that while there will be no further reversals of deferred tax assets at the same level, there will be ongoing benefits from normal operating losses [25] Question: What is the outlook for consumer health in Puerto Rico? - Management noted that while auto sales are normalizing, credit demand has been lower, but overall consumer credit trends remain stable [26][28] Question: What are the expectations for deposit costs with upcoming rate cuts? - Management expects some reduction in deposit costs due to rate cuts, but the timing of these reductions may lag behind asset repricing [40] Question: How does credit performance at other banks influence reserving? - Management stated that they maintain a firm risk appetite and focus on their portfolio's performance, without seeing systemic impacts from competitors [41] Question: What are the capital deployment priorities? - The company prioritizes organic growth and is open to M&A opportunities that enhance their franchise, particularly in Florida [44]