10-K: First BanCorp. Reports Strong 2025 Earnings, Capital Growth

First BanCorp. reported a significant increase in net income to $344.9 million for 2025, driven by lower funding costs and strategic asset redeployment, alongside robust capital deployment actions.

Summary

• Net income increased to $344.9 million ($2.15 diluted EPS) in 2025 from $298.7 million ($1.81 diluted EPS) in 2024.
• Net interest income rose to $868.9 million in 2025 from $807.5 million in 2024, driven by a lower cost of funds and the redeployment of cash flows from lower-yielding investment securities into loans and higher-yielding investment securities.
• Provision for credit losses increased to $86.0 million in 2025 from $59.9 million in 2024, primarily due to C&I loan growth and a deteriorating economic outlook for commercial real estate property performance and the forecasted CRE price index.
• Non-interest income increased slightly to $131.9 million in 2025 from $130.7 million in 2024, mainly due to a $1.4 million increase in revenues from mortgage banking activities.
• Non-interest expenses increased to $498.1 million in 2025 from $487.1 million in 2024; however, adjusted non-interest expenses (excluding special items) increased by $15.5 million, driven by higher employee compensation and a $5.9 million unfavorable variance in net gain on OREO operations.
• Income tax expense decreased to $71.9 million in 2025 from $92.5 million in 2024, benefiting from a one-time reversal of approximately $16.6 million in valuation allowance related to NOL carryforwards and a lower annual effective tax rate.
• Total assets decreased by $160.0 million to $19.1 billion as of December 31, 2025, primarily related to a decrease in cash and cash equivalents and total deposits, partially offset by an increase in total loans and an increase in the fair value of available-for-sale debt securities.
• Total liabilities decreased by $457.6 million to $17.2 billion, driven by a $271.7 million decrease in borrowings and a $201.2 million decrease in deposits.
• Total stockholders' equity increased by $297.6 million to $2.0 billion, supported by net income and a $212.4 million increase in the fair value of available-for-sale debt securities, partially offset by $150.0 million in common stock repurchases and $115.7 million in common stock dividends declared.
• Total non-performing assets decreased by $4.2 million to $114.1 million as of December 31, 2025.
• The Board of Directors declared a quarterly cash dividend of $0.20 per common share, an 11% increase compared to the most recent quarterly dividend paid in December 2025.
• The Corporation returned approximately $327.4 million, or 95% of 2025 earnings, to shareholders through common stock repurchases, common stock dividends, and the redemption of outstanding trust-preferred securities.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant net income growth, improved efficiency, and robust capital management. While credit loss provisions increased and deposits decreased, the overall financial health and strategic outlook are positive, supported by proactive capital deployment and a favorable economic environment in key operating regions.

Positives

• Net income increased significantly to $344.9 million in 2025, up from $298.7 million in 2024.
• Net interest income grew to $868.9 million, driven by lower funding costs and strategic asset redeployment.
• Net interest margin expanded to 4.58% in 2025 from 4.25% in 2024.
• Efficiency ratio improved to 49.77% in 2025 from 51.92% in 2024.
• Total stockholders' equity increased by $297.6 million to $2.0 billion.
• Capital ratios remain strong: CET1 at 16.76%, Tier 1 at 16.76%, Total Capital at 18.01%, and Leverage ratio at 11.58%, all exceeding well-capitalized thresholds.
• Quarterly cash dividend increased by 11% to $0.20 per common share.
• Total non-performing assets decreased by $4.2 million to $114.1 million.
• A one-time reversal of $16.6 million in valuation allowance related to deferred tax assets was recorded due to the enactment of Act 65-2025.
• The Corporation maintains a strong liquidity position with $6.3 billion available to meet liquidity needs, representing 132% of estimated uninsured deposits.
• The voluntary employee turnover rate declined to 9.59% in 2025 from 10.91% in 2024, indicating effective compensation, engagement, and retention strategies.
• Puerto Rico's real gross national product (GNP) grew 0.4% in fiscal year 2025, marking the fifth consecutive year of positive economic growth.
• Puerto Rico's unemployment rate decreased from 5.63% in 2024 to 5.56% in 2025, remaining near historic lows.
• Puerto Rico is gaining momentum as a hub for reshoring, with 17 companies announcing over $2 billion in committed capital investments and over 4,000 jobs to be created.

Negatives

• Provision for credit losses increased to $86.0 million in 2025 from $59.9 million in 2024, primarily due to C&I loan growth and a deterioration in the economic outlook for commercial real estate property performance.
• Adjusted non-interest expenses increased by $15.5 million, partly due to a $5.9 million unfavorable variance in net gain on OREO operations, including a $2.8 million valuation adjustment on a commercial OREO property in the Virgin Islands due to ongoing litigation.
• Total assets decreased by $160.0 million, primarily related to a decrease in cash and cash equivalents and total deposits.
• Total deposits decreased by $201.2 million to $16.7 billion as of December 31, 2025.
• The average cost of interest-bearing checking and saving accounts decreased by 15 bps, but this was mostly driven by a 42 bps decrease in the cost of government deposits, suggesting other deposit costs may not have decreased as much.
• The Corporation had a net unrealized loss on available-for-sale debt securities of $347.2 million as of December 31, 2025.
• The U.S. economy's momentum moderated during the second half of 2025, with a modest increase in unemployment.
• The Federal Reserve implemented three 25 basis points rate cuts in September, October, and December 2025, reducing the federal funds target range to 3.50%-3.75%, which could put downward pressure on net interest margin.
• The fiscal year 2026 budget for Puerto Rico prepares the government for potential further declines in federal funding.
• The U.S. Virgin Islands' real GDP decreased 1.3% in 2022, and the Bureau of Economic Analysis (BEA) has paused the production of GDP statistics for the USVI due to funding issues.

Risks

• Changes in the interest rate environment and inflation levels could adversely affect the level, composition, and performance of assets and liabilities, impacting net interest income, net interest margin, loan originations, deposit attrition, overall results of operations, and liquidity position.
• Volatility in the financial services industry could result in bank deposit runoffs, liquidity constraints, and increased regulatory requirements and costs.
• Adverse changes in general political and economic conditions in Puerto Rico, the U.S., USVI, and BVI, including interest rate environment, unemployment rates, market liquidity and volatility, trade policies, housing absorption rates, real estate markets, and U.S. capital markets.
• The impact of litigation or the threat of litigation, including any settlements or judgments against the Corporation, and potential resulting adverse publicity or other reputational harm.
• Cybersecurity incidents, such as data security breaches, ransomware, malware, denial of service attacks, hacking, identity theft, and state-sponsored cyberthreats, could disrupt business, lead to misuse of information, increase costs, and harm reputation.
• General competitive factors and other market risks, including competition from other banks, insurance companies, mortgage banking companies, small loan companies, automobile financing companies, leasing companies, brokerage firms, credit unions, certain retailers, fintech companies, and digital platforms.
• Uncertainty regarding the implementation of Puerto Rico's debt restructuring plan (Plan of Adjustment or PoA) and the revised fiscal plan for Puerto Rico (2025 Fiscal Plan).
• The impact of changes in accounting standards, or determinations and assumptions in applying those standards, and of forecasts of economic variables considered for the determination of the allowance for credit losses (ACL).
• The risk that additional portions of the unrealized losses in the debt securities portfolio are determined to be credit-related, resulting in additional charges to the provision for credit losses.
• The impacts of applicable legislative, tax, or regulatory changes or changes in legislative, tax, or regulatory priorities, including as a result of the One Big Beautiful Bill Act, and uncertainties regarding the U.S. debt ceiling and federal budget.
• The risk of possible failure or circumvention of internal controls and procedures and the risk that risk management policies may not be adequate.
• The risk that the FDIC may further increase the deposit insurance premium and/or require further special assessments.
• Any need to recognize impairments on financial instruments, goodwill, and other intangible assets.
• The risk that the impact of the occurrence of any of these uncertainties on capital would preclude further growth of FirstBank and preclude the Board from declaring dividends.
• Uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding asset quality, liquidity plans, maintenance of capital levels, and compliance with applicable laws and regulations.
• ESG risks that could adversely affect reputation and the market price of securities due to evolving stakeholder expectations and the complex regulatory and political landscape.
• Natural disasters, public health crises, political crises, negative global climate patterns, or other catastrophic events, especially in Puerto Rico and the USVI, could cause significant adverse effects on the economy and disrupt operations.
• Deterioration in collateral values, particularly for commercial and construction loan portfolios, could result in increased credit losses.
• Labor shortages, challenges in attracting and retaining qualified personnel, and constraints in the supply chain could adversely affect clients' operations and the company's business.
• The failure of other financial institutions could adversely affect routine financing transactions and expose the company to credit risk from counterparties.
• Certain funding sources, such as brokered CDs and FHLB advances, may not be available or may prove insufficient and/or costly to replace.
• Dependence on cash dividends from FirstBank to meet holding company cash obligations.
• The ACL may not be adequate to cover actual losses, potentially requiring material increases.
• Defective and repurchased loans may harm business and financial condition.
• Inability to accurately estimate exposure to litigation risk when recording balance sheet reserves for probable loss contingencies.
• Negative publicity or other reputational harm could damage relationships with customers and third parties.
• Recognition of deferred tax assets is dependent upon the generation of future taxable income by the Bank, and changes in tax laws or sustained losses could limit their utilization.
• The ability to use Net Operating Loss (NOL) carryforwards may be limited by Section 382 of the U.S. Internal Revenue Code following an ownership change.

Future Outlook

The economic backdrop for 2026 is broadly constructive and supportive of strategic priorities. The company expects to deliver organic loan growth, primarily in commercial and residential mortgage loans, despite anticipated declines in the consumer loan portfolio. Asset quality is expected to remain stable, with consumer credit trends continuing to normalize. Quarterly net interest margin expansion of approximately 2 to 3 basis points is anticipated, assuming two additional Federal Reserve rate cuts during the second half of 2026, along with projected loan growth and deposit mix changes. Cash flows of approximately $1.1 billion from the investment securities portfolio (excluding U.S. Treasury securities) are expected to be redeployed into higher-yielding interest-earning assets. The Corporation enters 2026 with strong capital levels, ample liquidity, a diversified earnings profile, and expects to return close to 100% of annual earnings to shareholders through capital deployment actions.

Management Comments

• We remain focused on delivering organic loan growth, primarily on commercial and residential mortgage loans despite anticipated declines in the consumer loan portfolio, and maintaining strong profitability metrics.
• Asset quality is expected to remain stable, with consumer credit trends continuing to normalize.
• Overall, the Corporation enters 2026 with strong capital levels, ample liquidity, diversified earnings profile, and expects to return close to 100% of annual earnings to shareholders through capital deployment actions positioning it well to navigate a moderating economic environment while continuing to deliver value to shareholders.

Industry Context

StockSavvy.ai notes that the banking industry faced heightened market volatility and increased regulatory scrutiny in 2023 due to regional bank failures, leading to increased deposit insurance premiums. The Federal Reserve's rate cuts in late 2025 reflect a moderating U.S. economy and a transition towards a more balanced labor market. The company's focus on organic loan growth and managing funding costs aligns with broader industry efforts to navigate evolving interest rate environments and competitive pressures from fintech and digital platforms. The rescission of the Interagency Guidance on Leveraged Lending by OCC and FDIC in December 2025 indicates a shift towards general principles for safe and sound lending, potentially easing some restrictions on banks' leveraged lending activities. The delay and subsequent intent to rescind the 2023 CRA final rule suggest a fluctuating regulatory landscape for community reinvestment.

Comparison to Industry Standards

• The company's Common Equity Tier 1 (CET1) capital ratio of 16.76% significantly exceeds the Basel III minimum of 4.5% plus a 2.5% capital conservation buffer (total 7.0%), indicating a very strong capital position compared to global benchmarks.
• The efficiency ratio of 49.77% is generally considered strong in the banking industry, often comparing favorably to peers, as lower ratios indicate better cost management.
• The return on average assets of 1.81% and return on average common equity of 18.74% are robust, suggesting efficient asset utilization and strong profitability relative to many regional and national banks.
• The company's average tenure of 11 years for its workforce and a voluntary turnover rate of 9.59% in 2025 compare favorably to industry averages, which often see higher turnover, especially in call centers and branches.

Management Changes

Corporate Governance

Legal Proceedings

• The Corporation is involved in ongoing litigation in the U.S. Virgin Islands regarding its leasehold interests in a commercial OREO property. The Supreme Court of the Virgin Islands affirmed the defendant's claim for possession and damages regarding certain parcels under the lease, despite ruling in favor of FirstBank's declaratory judgment on an undeveloped parcel. This resulted in a $2.8 million valuation adjustment to the OREO balance and a $1.9 million reserve for escrowed payments and disputes over interest/late fees. The ultimate outcome remains uncertain.

Related Party Transactions

• Loans granted to directors, executive officers, and certain related individuals or entities in the ordinary course of business. The balance of these loans decreased from $787 thousand at December 31, 2024, to $198 thousand at December 31, 2025.
• Other changes in 2025 reflected the retirement of three executive officers.
• The Corporation, in the ordinary course of its business, obtains services from related parties or makes contributions to non-profit organizations that have some association with the Corporation.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, an 11% dividend increase, and an ongoing stock repurchase program, indicating strong returns and capital management.
• Employees: Positive impact from competitive compensation, talent development programs, comprehensive health and wellness benefits, and a declining voluntary turnover rate.
• Customers: Continued provision of full-service banking, mortgage, auto financing, and insurance services. Potential impact from changes in interest rates on borrowing costs and deposit returns.
• Regulators: Continued compliance with stringent federal and Puerto Rican regulations, maintaining well-capitalized status. Ongoing monitoring of regulatory changes and potential special assessments.
• Communities: Commitment to the corporate sustainability program, including ESG matters, and community initiatives (volunteering over 2,800 hours supporting more than 35 organizations in 2025).

Next Steps

• Execute the remaining $187.2 million stock repurchase authorization during 2026.
• Continue to pay quarterly dividends on common stock, subject to Board approval.
• Focus on delivering organic loan growth, primarily in commercial and residential mortgage loans, despite anticipated declines in the consumer loan portfolio.
• Maintain stable asset quality and monitor consumer credit trends.
• Redeploy approximately $1.1 billion in cash flows from the investment securities portfolio (excluding U.S. Treasury securities) into higher-yielding interest-earning assets.
• Navigate a moderating economic environment while sustaining net interest margin performance.
• Consider the guidance of ASU 2025-11 when preparing interim disclosures for the first quarter of 2028.
• Consider ASU 2025-08 for loans that are acquired on or after the adoption date.
• Disclose required information by the adoption date of ASU 2024-03.

Key Dates

Recommendation

The company demonstrates strong financial performance with significant net income growth, expanding net interest margin, and improved efficiency. Its capital ratios are robust, exceeding regulatory requirements, and management is committed to returning value to shareholders through increased dividends and ongoing stock repurchases. While there are risks related to commercial real estate and economic moderation, the proactive capital deployment strategy, diversified earnings profile, and stable asset quality outlook position the company favorably for continued growth and shareholder returns.

Keywords

Banking, Financial Services, Puerto Rico, Commercial Banking, Consumer Lending, Mortgage Banking, SEC Filing, 10-K, Financial Performance, Capital Management, Risk Management, Net Interest Income, Credit Quality, Deposits, Loans, Stock Repurchase, Dividends, ESG, Cybersecurity, Economic Outlook, USVI, Florida