First BanCorp Surpasses Q2 EPS Estimates

First BanCorp. (FBP 0.76%), the financial institution with a major presence in Puerto Rico, Florida, and the U.S. Virgin Islands, reported results for Q2 2025 on July 22, 2025. The most notable headline is the GAAP EPS of $0.50 in Q2 2025, which beat the consensus estimate of $0.46 by $0.04, or 8.75% (GAAP). Net interest income and profitability metrics (GAAP) both increased year over year, while revenue (GAAP) came in at $246.85 million—short of analyst expectations by $4.83 million, or 1.9%. Despite the revenue miss, the period saw continued loan growth, margin expansion, and robust capital returns to shareholders. The overall quarter reflects steady performance and ongoing operational discipline, though deposit trends and non-interest income volatility deserve continued observation.

Source: First BanCorp. Note: Analyst estimates for the quarter provided by FactSet.

Business Overview and Strategic Focus

First BanCorp. delivers financial services primarily through its banking subsidiary, with activities across commercial lending, consumer (retail) banking, and mortgage origination. It serves individual and business customers in Puerto Rico, Florida, and the U.S. Virgin Islands. Its business model relies on a diversified mix of commercial, consumer, and residential real estate loans, complemented by deposit products and select non-interest income streams.

In recent years, the company has focused on loan growth, efficiency improvements, and disciplined capital management. Key success factors include robust regulatory compliance, prudent risk management, and a commitment to market competitiveness. Diversification across customer segments and geographic markets helps buffer the business against localized downturns.

Quarter Highlights: Data and Key Developments

Profitability stood out in the quarter. EPS (GAAP) exceeded expectations at $0.50, reflecting solid pre-tax, pre-provision operating income and tight control of expenses. Net interest income (GAAP) reached $215.9 million, up 8.2% from the year-ago quarter (Q2 2024), while the net interest margin (GAAP) improved to 4.56%. This margin, which measures the difference between interest income and interest paid relative to average earning assets, rose four basis points from the previous period (Q1 2025, GAAP), driven mostly by reduced funding costs and a modest benefit from an extra day.

Non-interest income posted at $30.95 million, down from the prior quarter and slightly below last year's level. This decrease in non-interest income was mainly due to the absence of seasonal insurance commission receipts and lower gains on tax credits. Expenses remained well-managed, with non-interest expenses rising slightly to $123.34 million (GAAP), driven by a mix of higher card-processing costs (which saw a reversal of reimbursements from Q1 2025) and a decrease in compensation and benefits following seasonal stock-based awards in the previous quarter. The efficiency ratio—an indicator of operating costs as a share of revenue—improved by 1.26 percentage points from Q2 2024 to Q2 2025, coming in below 50% (GAAP), which management describes as a top-quartile efficiency ratio.

Asset quality indicators stayed stable. Provision for credit losses (GAAP) was $20.587 million—a decline from the prior quarter but an increase from the same period last year. Lower net charge-offs, which represent loan amounts unlikely to be collected, and a more optimistic unemployment forecast in Puerto Rico contributed to this trend. Net charge-offs (GAAP) fell to 0.60% of average loans (annualized), down from earlier periods, though the quarter did include the inflow of a $4.3 million nonaccrual construction loan tied to Puerto Rico’s hospitality sector.

On the lending side, loans grew to $12.88 billion as of quarter-end. Commercial and industrial lending, especially in Puerto Rico and Florida, contributed most to the quarter’s expansion, with Florida’s loan book rising by $78.4 million and Puerto Rico’s by $64.4 million. Loan origination activity was 5% higher than the comparable prior period for the year-to-date period. Deposit balances declined by $268.5 million versus the earlier quarter, mainly because of fluctuations in a few large commercial accounts. Non-interest-bearing deposits fell $285.8 million. To offset some of the outflow, the company raised additional brokered certificates of deposit—a type of deposit sold to investors by a third-party broker—by $44.1 million.

The company’s capital ratios remain well above regulatory minimums. Its Common Equity Tier 1 (CET1) ratio, a key measure of financial strength, stood at 16.61% as of quarter-end. The tangible common equity ratio, reflecting the portion of shareholders’ equity not attributable to preferred stock or intangible assets, rose to 9.56%. Liquidity, defined as liquid assets relative to total assets, dipped from 18.76% in Q1 2025 to 17.58% as loan growth and investment purchases weighed on cash and equivalents. The period also saw meaningful capital returns to shareholders: $28.2 million spent on share repurchases. Technology investment continued, with rollouts of new digital banking features and ongoing work on mobile payment solutions, highlighted by the planned addition of Apple Pay and recent launches of Samsung Pay and Google Pay for Mastercard debit users.

Geographically, Puerto Rico continues to anchor commercial and consumer lending, while Florida showed expanding commercial loan activity.

Looking Ahead: Guidance and Investor Considerations

Management did not issue formal financial guidance for the coming quarter or fiscal 2025 in its earnings release. Leadership reiterated its intent to “responsibly growing our business and returning” but stopped short of providing explicit forecasts. Commentary on the analyst call estimated net interest margin could expand by approximately five to seven basis points per quarter for the remainder of the year, depending on the timing and amount of rate cuts.

Key areas for investors to monitor in coming periods include potential further volatility in commercial deposit balances, as the current quarter’s outflows stemmed mostly from a few large accounts rather than a broad-based trend. Non-interest income could remain lumpy, particularly from seasonal insurance commissions and tax credit gains. With capital and asset quality metrics strong, scrutiny will focus on revenue growth and whether loan demand across regions can be sustained if competitive and regulatory pressures intensify. The company continues to repurchase stock under its $100 million authorization.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.