First Ban(US:FBP)2025-10-23 15:02Financial 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][11] - Return on average assets for the quarter was 2.1%, significantly higher than the previous quarter [11] - 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 [14][15] Loan and Deposit Growth - Total loans grew by $181 million, or 5.6% annualized, surpassing $13 billion for the first time since 2010 [5] - Core franchise deposits increased by $140 million, with favorable trends in market flows despite higher competition [7] - 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 [6][9] Asset Quality and Credit Trends - Non-performing assets decreased by 7% with a reduction in charge-offs and stable credit trends [7][19] - The allowance for credit losses decreased to 1.89% of loans, reflecting improved loss severities in the residential mortgage portfolio [20][21] - Net charge-offs for the quarter were $19.9 million, representing 0.62% of average loans, slightly up from the previous quarter [20] Strategic Outlook and Market Conditions - The company plans to strategically deploy excess capital to support organic growth, particularly in commercial and residential mortgage lending [9][10] - The operating environment remains stable, with potential impacts from evolving trade dynamics and inflationary pressures being monitored [8] - The company expects loan growth for the year to be in the range of 3% to 4%, down from previous guidance of 5% [10][64] 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 [9] - The company is optimistic about the ongoing expansion of the manufacturing sector and its potential benefits for the franchise [9] - Management noted that competitive pressures in the deposit market are primarily from smaller players, with expectations for some reduction in deposit costs due to rate cuts [38][41] Other Important Information - The board authorized an additional $200 million share buyback program, continuing the strategy of returning 100% of annual earnings to shareholders [8][22] - The effective tax rate for 2025 is estimated to be around 22.2%, reflecting some expected improvements [84] 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 [26] Question: What is the health of the consumer in Puerto Rico? - Management indicated that auto sales are normalizing and credit demand has been lower, but overall consumer credit trends remain stable [30] Question: What are the expectations for deposit costs with upcoming rate cuts? - Management expects some reduction in deposit costs, but noted that the timing of these reductions may lag behind floating asset products [41] Question: What is the outlook for loan growth into Q4? - The company maintains a loan growth guidance of 3% to 4% for the year, with a strong pipeline in commercial lending [64] Question: Can you elaborate on competitive pressures in the deposit market? - Management noted that competitive pressures are primarily from smaller players and that they are managing this by offering additional services beyond just deposit products [39]