First BanCorp Delivers Strong Q1 Earnings Amid Shifting Economic Tides

First BanCorp’s first-quarter 2025 earnings report underscores its ability to navigate a challenging economic landscape, with robust profitability metrics and strategic asset management driving results. Net income rose to $77.1 million, or $0.47 per diluted share, marking sequential and year-over-year growth. The Corporation’s focus on margin expansion, cost discipline, and capital preservation positioned it to outperform expectations, even as macroeconomic uncertainties loom.

Profitability Gains: Margin Expansion and Cost Control

The net interest margin (NIM) surged to 4.52%, a 36-basis-point improvement from Q1 2024, reflecting a strategic shift in asset allocation. By redeploying cash flows from lower-yielding securities into higher-yielding loans, First BanCorp optimized its balance sheet. Additionally, deposit cost management played a critical role, with the average cost of checking/savings accounts falling to 1.45% and non-brokered time deposits declining to 3.39%.

The efficiency ratio dropped to 49.58%, a 2.88-point improvement from Q1 2024, signaling enhanced operational efficiency. This was bolstered by a $3.1 million rise in net interest income and a $3.5 million increase in non-interest income, driven by seasonal contingent insurance commissions and tax credit gains.

Balance Sheet Resilience: Deposit Growth vs. Loan Declines

While total loans fell by $71.7 million to $12.7 billion due to a large commercial mortgage payoff, core deposits grew by $29 million to $12.9 billion. Notably, non-interest-bearing deposits surged by $69.8 million, a sign of sticky customer relationships. Puerto Rico and the U.S. Virgin Islands offset Florida’s deposit declines, highlighting geographic diversification.

Liquidity remained robust at 18.76% of total assets, with $1.3 billion in cash and $1.4 billion in liquid securities. However, commercial/construction loan originations dropped by $463.1 million, reflecting cautious lending amid CRE market softness.

Asset Quality: Mixed Signals

Non-performing assets (NPAs) rose by $11.1 million to $129.4 million, driven by a single Florida commercial mortgage moving to nonaccrual status. Yet, early delinquency trends improved, with consumer loans in early delinquency falling by $19.5 million. The allowance for credit losses (ACL) increased to $247.3 million (1.95% of total loans), a proactive measure against CRE sector risks.

Capital Strength and Shareholder Returns

First BanCorp’s capital ratios remained fortress-like, with a CET1 ratio of 16.62% and a tangible common equity ratio of 9.10%, up from 8.44% in Q4 2024. The Corporation returned $51.4 million to shareholders through dividends and share repurchases while retiring $50.6 million in junior subordinated debentures.

Challenges and Outlook

The Corporation faces headwinds, including elevated provision expenses for commercial/construction loans and economic uncertainty. CRE price declines and slower trade activity add risks, though bulk consumer loan sales generated $2.4 million in recoveries, easing some pressures.

CEO Aurelio Alemán emphasized the Corporation’s “resilience” and “strategic flexibility,” pointing to deposit growth and disciplined asset redeployment as key strengths.

Conclusion: A Balanced Story of Strength and Caution

First BanCorp’s Q1 results reflect a well-executed strategy to capitalize on margin opportunities while maintaining capital fortitude. The NIM’s 36-basis-point annual improvement, efficiency ratio reduction, and rising tangible book value ($10.64 per share) highlight operational excellence.

However, the $129.4 million NPA increase and elevated provision costs underscore vulnerabilities in Florida’s CRE market. Investors should monitor CRE portfolio performance and deposit trends in Florida, where outflows could pressure liquidity.

Despite these risks, First BanCorp’s robust capital position (CET1 of 16.62%) and shareholder-friendly policies suggest management’s confidence in navigating the macroeconomic environment. For income-oriented investors, the $0.47 dividend per share and 9.10% tangible equity ratio offer stability.

In a sector grappling with margin pressures and credit risks, First BanCorp’s Q1 performance stands out—a testament to its ability to balance growth, prudence, and adaptability in an uncertain landscape.