First BanCorp's Loans Rose 6% in Q2

First BanCorp (NYSE:FBP) reported second-quarter 2025 results on July 22, highlighting $80 million in net income, a return on assets of 1.69%, and a net interest margin of 4.56% (up 8 basis points quarter-over-quarter on a normalized GAAP basis). Management reiterated its guidance for mid-single-digit percentage loan growth for the year, and provided detail on capital deployment, asset quality, and funding strategy, setting the stage for continued shareholder returns and efficiency investments.

Commercial loan growth supports FBP’s asset expansion

Average commercial and construction loans increased $100 million quarter over quarter, with total loans up 6% annualized, while lending pipelines for the second half remain robust. This growth is supported by favorable economic conditions in Puerto Rico and Florida, with additional headroom as $1 billion in investment portfolio maturities will be available to fund new loans in the second half of 2025.

"We grew total loans by 6% for the quarter annualized, mostly driven by strong commercial loan production in Puerto Rico and Florida. Commercial lending pipelines actually continue to be strong as we enter the second half of the year, which is crucial for our strategy."
— Aurelio Aleman, President and Chief Executive Officer

This momentum in commercial lending, combined with available liquidity from maturing securities, positions the bank for further loan growth.

FBP delivers margin expansion and further cost discipline

Net interest income (GAAP) reached $215.9 million, an increase of $3.5 million from the first quarter, with the net interest margin rising to 4.56% (normalized for nonrecurring items), as funding costs declined by 9 basis points to 2.14%. The efficiency ratio stayed at the low end of the year-to-date range, at 50%, while operating expenses of $123.3 million were below previously guided levels, reflecting ongoing technology investments and process improvements.

"This translates into a net interest margin of 4.56%, which is four basis points higher than the 4.52% reported last quarter on a GAAP basis. However, as we discussed in the prior earnings call, if we exclude the items I mentioned before, the fees on the loan that we canceled, the normalized margin for the first quarter was really 4.48%, thus resulting in an 8 basis point sequential margin increase this quarter as compared to the first quarter."
— Orlando Berges, Executive Vice President and Chief Financial Officer

Net interest margin expanded sequentially, and expenses remained below guidance, reflecting effective cost management.

Disciplined capital deployment sustains FBP’s total shareholder returns

The company enacted share buybacks, dividends, and redemption of TruPS (trust-preferred securities) amounting to over 107% of earnings year to date, increasing tangible book value per share to $11.16 (up 5% quarter over quarter); $29 million in dividends and $28 million in share repurchases were executed. With $100 million remaining on its 2024 buyback authorization and a commitment to deploy 100% of annual earnings via capital actions, FBP maintains a highly shareholder-friendly capital allocation strategy.

"Consistent with the strategy that we announced year to date, we have deployed over 107% of earnings in the form of dividends, buybacks, and redemption of TruPS. We definitely feel this action best suits the long-term interest of the franchise and our shareholders."
— Aurelio Aleman, President and Chief Executive Officer

This approach signals management’s confidence in balance sheet strength.

Looking ahead

Management reaffirmed guidance for mid-single-digit loan growth for 2025 and anticipates net interest margin (GAAP) expansion of 5% to 7% basis points per quarter through year-end, with over $1 billion in investment portfolio maturities expected in the second half of 2025, providing flexibility for loan funding. Quarterly operating expenses are projected in the $125 million to $126 million range (excluding gains/losses on other real estate owned operations) for the next couple of quarters. The efficiency ratio was 50% and is expected to be between 50% and 52% over the next couple of quarters. The company plans to opportunistically utilize its remaining $100 million buyback authorization and to provide updated capital allocation guidance in Q3.

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