First BanCorp (FBP) Q4 2025 earnings review
Record Profits Driven by Margin Expansion, Despite Loan Growth Miss
First BanCorp delivered a record year with FY25 Net Income reaching $345M (+15% YoY). The standout driver was Net Interest Margin (NIM) expansion, which accelerated to 4.68% in Q4 from 4.33% a year prior, defying the typical pressure seen in the sector. However, the 'higher-for-longer' rate environment has bitten into demand; loan growth of 3% missed the company's own mid-single-digit targets, primarily due to deceleration in consumer lending. While headline Net Income fell sequentially ($87.1M vs $100.5M in Q3), this was optical, caused by a large one-time tax benefit in Q3; Pre-tax income actually grew.
🐂 Bull Case
FBP is demonstrating exceptional asset sensitivity. Net Interest Margin expanded 35bps YoY to 4.68% as cash flows from lower-yielding securities were redeployed into higher-yielding assets, while deposit costs in key segments stabilized or decreased.
The efficiency ratio improved to 49.33% in Q4 (from 51.57% a year ago). Revenue growth is significantly outpacing expense growth—classic positive operating leverage.
🐻 Bear Case
Net charge-offs in the Consumer portfolio remain elevated at 2.20% annualized. Provision for credit losses jumped to $23.0M in Q4 (vs $17.6M in Q3), driven by loan growth and 'updates in historical loss experience,' signaling caution.
Total loan growth came in at 3%, missing original mid-single-digit expectations. High rates are curbing borrower appetite, specifically in consumer segments, forcing the bank to rely heavily on Commercial & Industrial (C&I) for volume.
⚖️ Verdict: 🟢
Bullish. First BanCorp is over-earning on margins and effectively managing expenses. The miss on loan volume is a valid concern, but with Tangible Book Value up 24% YoY and NIM expanding, the profitability engine is powerful enough to offset slower balance sheet expansion.
Key Themes
Relentless NIM Expansion
Accelerating. Net Interest Margin reached 4.68% in Q4, up from 4.57% in Q3 and 4.33% in 24Q4. This was driven by yield improvements on interest-earning assets (5.98% vs 5.79% YoY) and a reduction in the cost of interest-bearing non-maturity government deposits. The bank is successfully rotating low-yield investment cash flows into higher-yielding loans.
Consumer Lending Headwinds
Decelerating. Consumer loan balances decreased by $27.3M sequentially in Q4. More concerning is the credit performance: Consumer NCOs were 2.20% (annualized), far outpacing the total portfolio NCO of 0.63%. With provisions rising to $23M primarily due to this segment, it remains the primary risk to earnings quality.
Tangible Book Value Compounding
Accelerating. Tangible Book Value (TBV) per share surged to $12.29, up 24% from $9.91 a year ago. This was driven by strong earnings retention and a $38.3M positive fair value adjustment in the debt securities portfolio as rates stabilized. This gives the bank significant flexibility for future capital returns.
Deposit Mix Shift
Stable. Total deposits decreased by $191M sequentially, but the mix improved. Government deposits (highly volatile) dropped $422M, while Core Deposits (excluding brokered and government) increased by $266.5M. This shift reduces reliance on public funds and improves franchise value, even if headline deposit numbers look soft.
Expense Creep
Accelerating. Non-interest expenses rose to $126.9M in Q4 vs $124.9M in Q3 and $124.5M in 24Q4. Increases were noted in business promotion ($2.1M increase) and professional services. While the efficiency ratio is excellent, absolute costs are trending up.
Other KPIs
Accelerating. Up 6.4% sequentially from $121.5M in Q3 and up 10.5% YoY from $116.9M. This is the cleanest measure of the bank's operating power, stripping out the noise of tax benefits and provision volatility.
Stable. Virtually flat vs 0.62% in Q3, though down from 0.78% in 24Q4. The stability masks a divergence: strong commercial credit performance offsetting weaker consumer credit.
Stable. Repurchased $50M in stock and paid $28.3M in dividends. The bank continues to execute on its promise to return capital, supported by CET1 ratios of 16.76%, well above regulatory requirements.
Guidance
Management provided qualitative guidance characterizing the 2026 economic backdrop as constructive. While specific numeric guidance for FY26 was not provided in the release text, the commentary suggests a continuation of current capital deployment priorities and targets. (Note: Specific numeric targets were referenced as '2026 targets' but not explicitly tabulated in the provided text).
Key Questions
Consumer Credit Floor
Consumer NCOs remain high at 2.20%. With provisions rising this quarter due to 'updates in historical loss experience,' have we reached peak loss rates in the auto/consumer unsecured book, or should we model this elevated level through 2026?
NIM Sustainability
NIM expanded significantly to 4.68%. As you continue to reprice assets, how much sensitivity do you have to potential rate cuts in 2026? At what point does deposit repricing catch up to asset yield improvements?
Deposit Outflows vs Loan Growth
Total deposits fell nearly $200M this quarter while you aim for loan growth. With government deposits shrinking, how aggressively will you need to price core deposits to fund future commercial loan growth without hurting NIM?
Expense Run Rate
Non-interest expenses hit almost $127M this quarter. Is this the new quarterly run rate for 2026, or were there specific Q4 seasonalities (like the $2.1M business promotion bump) that will recede?