First Ban(FBP) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $87 million for Q4 2025, translating to $0.85 per share, with a return on assets of 1.8% and an efficiency ratio of 49% [4][5] - For the full year 2025, net income reached $345 million, representing a 90% increase in earnings per share to $2.15, with a return on average assets of 1.81% [8][14] - The company achieved a record total revenue of over $1 billion for the year, with adjusted pre-tax, pre-provision income at an all-time high of $499.2 million, a 10% increase from 2024 [8][14] Business Line Data and Key Metrics Changes - Total loans grew by $80 million, primarily driven by growth in commercial segments, despite some impact from elevated commercial loan payoffs and lower consumer loan production [4][5] - Core customer deposits increased by $267 million, with a notable 3.2% rise in core non-interest-bearing deposits during the quarter [5][6] - The company repurchased $50 million in shares and declared $28 million in dividends, with a total of over 28% of shares outstanding repurchased since the buyback program began in 2021 [6][7] Market Data and Key Metrics Changes - The unemployment rate in Puerto Rico is approximately 5.7%, with strong tourism activity reflected in an 8% increase in passenger traffic, reaching a record high of 13.6 million [10] - The company anticipates a stable economic environment in 2026, with expectations of 3%-5% organic loan growth and a sustained efficiency ratio of 52% or better [11][12] Company Strategy and Development Direction - The company is focused on enhancing its omnichannel strategy to improve customer interactions across digital and branch channels, with active retail digital users up 5% year-over-year [8][9] - The board approved an 11% increase in the quarterly common stock dividend to $0.20 per share, effective Q1 2026, reflecting the company's commitment to returning capital to shareholders [7][28] - The company is exploring both organic and non-organic growth opportunities, including the opening of a new branch in Boca Raton, Florida [55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about underlying economic trends for 2026, despite potential challenges from inflationary pressures and geopolitical tensions [9][10] - The company expects asset quality to remain stable, with consumer credit quality gradually returning to pre-pandemic levels [12] - Management is committed to maintaining strong profitability metrics and returning close to 100% of annual earnings to shareholders [11][12] Other Important Information - The efficiency ratio for the quarter was reported at 49%, with expectations for ongoing technology investments to maintain this level [23] - The company recorded a 4% increase in tangible book value per share to $12.29, with regulatory capital ratios continuing to build up [27] Q&A Session Summary Question: Any more mix shift change with lower liquidity and levers that might aid NIM going forward? - Management indicated that cash flows from the investment portfolio and repricing of deposit components would be key drivers for net interest margin improvement [31][32] Question: What are the competitive dynamics regarding cost of funds? - Management noted that wholesale funding through brokered CDs is repricing with the market, and time deposits are expected to decrease as rates come down [33][34] Question: Comments on credit quality stability? - Management affirmed stability in credit quality, with no significant disruptions anticipated, although some consumer delinquencies have normalized [35] Question: Insights on auto loan market? - Management observed a contraction in the auto loan portfolio but expects stabilization without significant growth unless pricing adjustments occur [41][42] Question: Thoughts on reinvestment of securities cash flows? - Management expects a 2-3 basis points pick up on reinvestment of cash flows from maturing securities, focusing on agency investments [47][50] Question: Clarification on efficiency ratio calculation? - The efficiency ratio is calculated on a GAAP basis, including all components, and has been improving due to the sale of OREO properties [62][64] Question: Insights on non-interest-bearing deposit flows? - Management emphasized the importance of building core relationships and expanding branches to grow non-interest-bearing deposits [66][67]