First BanCorp. Q1 Earnings Call Highlights
by Michael Walen · The Markets DailyFirst BanCorp. (NYSE:FBP) reported first-quarter 2026 net income of $89 million, or $0.57 per share, as management pointed to continued strength in profitability, stable credit trends, and ongoing capital returns through dividends and share repurchases.
Quarterly results and profitability
President and CEO Aurelio Alemán said the company “started 2026 with very strong momentum,” with net income up 21% compared to the year-ago quarter. He also highlighted core operating performance, noting that pre-tax, pre-provision income reached an “all-time high of $131 million,” up 5% from a year earlier.
Chief Financial Officer Orlando Berges said net income totaled $88.8 million, up from $87.1 million in the fourth quarter of 2025. Return on average assets was 1.89%, compared with 1.81% in the prior quarter. Alemán said the quarter marked the company’s 17th consecutive ROA above 1.5%.
Berges said the provision expense was lower, citing improved macroeconomic indicators including the unemployment rate and a commercial real estate price index, as well as lower delinquency and smaller consumer portfolio balances. He added that the company increased qualitative reserves to reflect “current geopolitical uncertainty in the Middle East.”
Income tax expense was $25 million, $5 million higher than the prior quarter, which Berges attributed mostly to higher pre-tax income. He said the estimated effective tax rate is 21.9%, compared with 21.6% for 2025.
Net interest income and margin trends
Net interest income totaled $221 million, down $1.8 million from the prior quarter, which Berges said included a $2.7 million impact from having two fewer days in the quarter. On a year-over-year basis, net interest income was 4% higher.
Interest income on loans declined $6.5 million from the fourth quarter, which Berges attributed to both the shorter quarter and market rate reductions that affected commercial portfolio pricing, particularly floating-rate components. He said commercial portfolio yields declined 18 basis points. At the same time, interest income on investment securities increased $2.8 million, driven by a 22-basis-point improvement in yields as the bank reinvested cash flows from maturing securities into higher-yielding instruments.
Funding costs declined $3.5 million, including $1.3 million from the shorter quarter and $1.2 million tied to rate reductions. Berges said the cost of interest-bearing checking and savings accounts fell four basis points to 1.21%, “mostly driven by government deposit cost reductions.” He also said the cost of time deposits decreased five basis points and broker deposit costs fell seven basis points, while the broker deposit portfolio size declined during the quarter.
Net interest margin expanded seven basis points to 4.75%, which Berges said exceeded the company’s “2-3 basis points per quarter” regional guidance. He said the balance sheet remains positioned for additional NIM expansion in line with that guidance, while acknowledging uncertainty around the timing and magnitude of future rate changes.
In response to analyst questions, Berges discussed securities portfolio reinvestment opportunities, saying the bank has about $600 million in cash flows from maturities of lower-yielding securities averaging 1.65% in yield, with about $250 million in the second quarter and $350 million in the second half of the year. He also noted that roughly half of the commercial portfolio has floating-rate exposure, and said the bank’s 2–3 basis point quarterly NIM expansion assumption includes some rate cuts later in 2026.
Loans, deposits, and business activity
Total loans declined slightly to $13.1 billion, which Alemán described as consistent with seasonality and “the expected softening in credit demand within the consumer lending segment.” He added that consumer demand remained better than pre-pandemic levels.
Alemán said total loan originations were up 6% compared to the prior year on a seasonally adjusted basis and that commercial loan pipelines remained healthy. He said the bank maintained its loan growth guidance of 3% to 5%.
Addressing questions about achieving that guidance amid softer auto trends, Alemán said consumer payoffs and originations “will settle” by year-end, and that additional contraction in the consumer portfolio is “a reality.” He said the bank expects added commercial growth in Puerto Rico and Florida based on current pipelines and also expects additional mortgage portfolio growth, citing continued strong demand.
On deposits, Alemán said core deposits were strong, noting that deposits excluding broker and public funds increased at a 4.9% linked-quarter annualized rate. He framed core deposit growth as a key priority and said management was encouraged by execution in new clients and accounts. Later, in response to questions about deposit initiatives, Alemán cited “coordination, sales efforts, products, marketing across both retails,” and emphasized small business as a focus area. He also referenced planned branch expansions on Puerto Rico’s west coast opening mid-year and said the bank added 4,000 new clients across retail and small business.
On the operating environment, Alemán said economic conditions across the bank’s markets remained stable, with a resilient labor market and indicators suggesting consumer stability. He cited reconstruction activity, reshoring activity, and an expanded U.S. military presence in Puerto Rico as supportive factors. He also said industry auto sales in Puerto Rico declined 19% year-over-year in the first quarter, but remained 6.5% above the pre-pandemic 10-year average. He said the bank was monitoring potential impacts from oil costs and inflation.
Credit quality and reserves
Management characterized credit performance as a continuing strength. Alemán pointed to stable charge-offs, “record low levels of non-performing assets,” and a 24% decline in early-stage delinquencies from the prior quarter.
Berges said non-performing assets declined $5.3 million, including a $4.8 million reduction in non-accrual loans across all business lines. OREO balances fell $1.2 million, though repossessed autos increased by $700,000. He said inflows to non-accrual loans were $34.3 million, down $12 million from the prior quarter, largely because the fourth quarter included a $10 million commercial loan inflow.
Early delinquency decreased by $34.5 million, or 24%, driven primarily by a $31 million decline in consumer loan delinquencies, “specifically auto loans.” Berges said the bank was monitoring behavior across loan vintages issued in recent years.
The allowance for credit losses fell $3.9 million to $245 million, representing 1.87% of loans, down from 1.9% at quarter-end. Berges attributed the decline to improvements in projected macro variables, lower delinquencies, and smaller consumer portfolios, while reiterating that qualitative reserves were increased due to uncertainty tied to unrest in the Middle East.
Net charge-offs were $21.1 million, or 65 basis points of average loans, slightly above 63 basis points in the prior quarter. Berges said the increase was largely tied to a $600,000 charge-off on a commercial non-performing loan after a reduced appraisal value of collateral.
Asked about the outlook for credit, Alemán said the company expects “stability,” noting typical first-quarter benefits from tax refunds and improved vintage performance following credit policy adjustments in 2023 and 2024.
Expenses, technology investments, and capital return
Non-interest income was $37.7 million, up $3.3 million from the prior quarter, driven mostly by $3.6 million in seasonal contingent commissions typically collected in the first quarter, according to Berges.
Operating expenses were $127.1 million, roughly flat compared with the prior quarter. Excluding OREO gains, expenses were $128 million. Payroll expense rose $2.1 million due to seasonal payroll taxes and higher share-based compensation tied to stock grants, with the increase offset by lower business promotion expense. The efficiency ratio was 49.1%, slightly improved from 49.3% in the fourth quarter.
Berges reiterated expense expectations, saying the bank is maintaining a quarterly expense base of $128 million to $130 million for 2026, excluding OREO gains and losses, with an efficiency ratio expected in the 50% to 52% range as technology projects and business promotion pick up later in the year.
On technology spending, Berges described ongoing investments tied to migrating data centers and applications to a service provider structure, including cloud-based platforms. Alemán said the bank is working with vendors on AI-related capabilities rather than building in-house applications, emphasizing governance and oversight. He added that the company expects elevated tech spending to “sustain for probably another 18-24 months and then should decline.”
On capital, Alemán said the company’s approach resulted in a 92% net payout during the quarter through buybacks and dividends, while ending with a 16.9% CET1 ratio. Berges said the bank repurchased $50 million in shares and declared $31.5 million in dividends. Tangible book value per share increased to $12.45, and the tangible common equity ratio rose to 10.11%.
In response to questions on capital deployment and potential M&A, Alemán said management and the board continually evaluate buybacks, dividends, macro uncertainties, and potential opportunities. Regarding acquisitions, he said it remains “part of the optionality” but would need to meet return thresholds, adding the bank is “not aggressive” and would take a “balanced and realistic” approach.
Ramon Rodriguez, SVP of Corporate Strategy and Investor Relations, closed by noting First BanCorp. plans to attend the Wells Fargo Financial Services Investor Conference on May 13 in Chicago and the Truist Securities Financial Services Conference on May 19 in New York.
About First BanCorp. (NYSE:FBP)
First BanCorp (NYSE: FBP) is a financial holding company headquartered in San Juan, Puerto Rico. Through its principal banking subsidiary, FirstBank Puerto Rico, the company offers a comprehensive range of banking services including commercial and consumer lending, deposit products, cash management solutions and treasury services. It also provides mortgage origination and servicing, equipment leasing, investment management, and insurance agency services.
In its commercial banking segment, First BanCorp serves small and midsize enterprises as well as large corporate clients, delivering tailored credit facilities, letters of credit, and foreign trade financing.