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DATE

Wednesday, July 22, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Corporate Strategy and Investor Relations Officer - Ramon Rodriguez
• President and Chief Executive Officer - Aurelio Alemán-Bermudez
• Chief Financial Officer - Said Ortiz

TAKEAWAYS

• Net Income and EPS -- $96.1 million or $0.63 per diluted share, representing a 24% increase in net income year over year.
• Pretax Preprovision Income -- $138 million, reaching an all-time high and increasing 11% compared to the prior year.
• Return on Average Assets (ROA) -- 2.02%, marking the 18th consecutive quarter with an ROA above 1.5%.
• Total Loans -- $13.3 billion, representing 5% growth on a linked-quarter annualized basis.
• Loan Originations -- $1.7 billion, a 21% increase year over year driven by healthy commercial pipelines.
• Total Deposits -- Grew by $274 million during the quarter, primarily due to higher government balances and a slight increase in core customer deposits.
• Net Interest Income (NII) -- $229.1 million, an increase of 3.7% quarter over quarter, including $3.4 million from accelerated fee recognition on two refinancings.
• Net Interest Margin (NIM) -- 4.87%, a 12-basis-point increase from the prior quarter reflecting higher asset yields.
• Adjusted NIM -- 4.80% when excluding the impact of fee accelerations, which was five basis points higher than the previous quarter.
• Investment Portfolio Yield -- Increased by 18 basis points as the company reinvested cash flows from maturing securities into higher-yielding instruments.
• Funding Costs -- Total deposit costs decreased by two basis points quarter over quarter as the company proactively managed its interest-bearing liabilities.
• Noninterest Income -- $35.7 million, down from $37.7 million in the previous quarter due to the absence of seasonal contingent insurance commissions received in the first quarter.
• Operating Expenses -- $127.3 million, remaining relatively flat as higher technology costs were offset by expense discipline.
• Efficiency Ratio -- 48.1%, an improvement from 49.1% in the prior quarter driven by higher total revenue.
• Early Stage Delinquency -- Increased by $32.9 million quarter over quarter, primarily due to a $20.7 million rise in the auto and finance leases portfolio.
• Net Charge-offs -- $16 million or 49 basis points of average loans, improving from 65 basis points in the prior quarter.
• Allowance for Credit Losses (ACL) -- $145 million or 1.85% of total loans, maintained at a level reflecting loan growth and stable credit quality.
• Nonperforming Assets -- Increased by $5.1 million, largely due to a single $4.8 million commercial and industrial loan inflow in Florida.
• CET1 Ratio -- 17%, providing substantial capital to support strategic investments despite ongoing capital deployment.
• Share Repurchases -- $50 million of common stock repurchased during the quarter as part of the company's capital plan.
• Dividends -- $0.20 per share, representing a total dividend payment of $31 million for the quarter.
• Loan Growth Guidance -- 3% to 5% for the full year 2026, with management expecting continued commercial activity in Puerto Rico and Florida.
• NIM Guidance -- 3 to 5 basis points of expansion per quarter for the remainder of 2026, assuming interest rates remain stable.
• Operating Expense Guidance -- $128 million to $130 million per quarter for the second half of the year, accounting for merit increases and technology initiatives.
• Digital Adoption -- 95% of deposit transactions captured through digital and self-service channels, with active digital users growing 6% year over year.

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RISKS

• Alemán-Bermudez stated, "early delinquency... came up during the quarter... we continue to monitor a decision on delinquency trends and broader consumer market conditions," regarding a $32.9 million increase in early-stage delinquencies primarily in the auto portfolio.
• Alemán-Bermudez noted that while auto sales are beginning to normalize, "industry wholesale continue to reflect the impact of tariff," which contributed to a 3% year-over-year decline in June industry sales.

SUMMARY

Management reported that **First BanCorp.** (FBP +4.41%) achieved record pretax preprovision income and expanded its net interest margin during the second quarter. The company stated that commercial loan demand in Puerto Rico and Florida remains strong, supporting the full-year loan growth target of 3% to 5%. Management noted that capital ratios remain high despite $50 million in share repurchases, and the bank is focusing on digital transformation and artificial intelligence implementation to improve operational efficiency. While credit quality remains stable, management is monitoring a seasonal increase in early-stage delinquencies within the auto loan portfolio and the impact of tariffs on the broader automotive industry.

• CEO Alemán-Bermudez highlighted the hospitality sector as a significant driver of originations, noting that "investors are looking to play some of their excess liquidity in projects" in Puerto Rico due to positive macro trends.
• The company is prioritizing investments in technology, with Alemán-Bermudez stating the bank is in the "early innings of this AI journey," focusing on automating routine processes and enhancing client experience.
• CFO Ortiz indicated that the balance sheet remains asset-sensitive, stating that the company is "well positioned for additional NIM expansion" if interest rate cuts occur in the second half of the year.
• Management expects to reprice approximately $1.2 billion in securities over the next 18 months, with $400 million maturing in the second half of 2026 currently yielding only 1.92%.
• The company expanded its footprint by opening one new branch recently, with another scheduled to open in August as part of its multiyear physical and digital expansion strategy.
• Ortiz noted that the efficiency ratio for 2026 is expected to trend toward the lower end of the 50% to 52% range as revenue growth outpaces planned technology and personnel investments.
• Management confirmed they are evaluating "potential alternative strategic opportunity" and M&A activity that would fit the company's operating model and deliver consistent results.

INDUSTRY GLOSSARY

• ACL: Allowance for Credit Losses, a reserve established to cover estimated losses in the loan portfolio.
• ADR: Average Daily Rate, a metric used in the hospitality industry to represent the average rental income per paid occupied room.
• C&I: Commercial and Industrial loans, which are typically made to businesses for working capital or capital expenditures.
• CET1 Ratio: Common Equity Tier 1 Ratio, a key regulatory measure of a bank's core equity capital compared to its total risk-weighted assets.
• NII: Net Interest Income, the difference between the interest income earned on assets and the interest expense paid on liabilities.
• NIM: Net Interest Margin, a measure of the difference between interest income generated and the amount of interest paid out to lenders, relative to the amount of interest-earning assets.
• OREO: Other Real Estate Owned, a term for real estate property owned by a bank that is not part of its business operations, usually acquired through foreclosure.
• ROA: Return on Average Assets, a financial ratio that shows how profitable a company is relative to its total assets.
• SOFR: Secured Overnight Financing Rate, a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, used as a benchmark for interest rates.

Full Conference Call Transcript

Operator: Good morning and welcome to the First Bank Corp. Second Quarter 26 Financial Results Conference Call. All participants are in a listen only mode. After the speakers' remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I would now I would like to turn the call over to Ramon Rodriguez, First Bancorp's corporate strategy and investor relations officer. Thank you. Please go ahead.

Ramon Rodriguez: Thank you, Julianne. Good morning, everyone, and thank you for joining FirstBank Corp's conference call and webcast discuss the company's financial results for the second quarter of 26. I am here with Aurelio Alemán-Bermudez, president and chief executive officer and Said Ortiz, CFO, chief financial officer. Before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements such as rejections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from the forward-looking statements made due to the important factors described in the company's SEC filings.

The company assumes no obligations to update any forward-looking statements made during the call. If anyone does not already have a copy of the webcast presentation, or press release, you can access them at our website at fbbinvestor.com. At this time, I would like to turn the call over to our CEO, Aurelio Alemán-Bermudez.

Aurelio Alemán-Bermudez: Thank you, Ramon. Good morning to everyone, and thanks for joining our earnings call again. We concluded the first half of the year with another quarter of strong core performance. Delivering growth across the franchise and generating very attractive return for our shareholders. We earned $96 million in net income or $0.62 per share. That is up 24% when compared to same quarter last year. Underlying revenue trends, I have to say, remained very strong during the quarter. Pretax pre-provision income reaching an all time high of $138 million is up 11% from a year ago. This translates into a 2% return on average assets and this is our 18th consecutive ROA above 1.5%.

Continuing the strongest and most consistent period of financial performance in our actual history. Moving to the balance sheet, very pleased on how loan growth accelerated during the quarter. Driven primarily by commercial activity in Puerto Rico, reaching $13.3 billion in total loans. That is up 5% on a linked quarter annualized basis. Total loan origination for the quarter were very encouraging, reaching $1.7 billion during the quarter. Reflecting a 21% year over year increase. Given what we see in our pipelines, we do expect this level of activity to continue for the remainder of the year. This actually reinforce our path to achieve our full year growth objective for 2026.

Total deposit grew by $274 million during the quarter primarily driven by an increase in the government deposit, but also we have slight increase in core customer deposit. Credit performance remains sound with lower net charge off and not performing at the remaining near historical lows, That said, early delinquency--early delinquency--came up during the quarter, but essentially, when we look at it, over the same period last year, was flat to prior year June, And was actually below December 2025. So we continue to monitor a decision on delinquency trends and broader consumer market conditions. Regarding capital deployment, consistent with prior quarters, we completed our $50 million of share buybacks. And we paid $0.20 per share dividend.

You know, even after these actions, we ended the quarter with a very strong CET1 of 17%. Which leaves, you know, ample room to investing strategically in our franchise technology and has competitiveness and improve the customer experience, which is our primary objective. Moving to slide 5, I am happy to see that in spite of the global noise and war, we continue to see an environment that is positive. And stable. Supportive of the lung activity that we see. If we look at the main market unemployment stands at 5.6%. Which is, you know, pretty good for our market considering trends.

Preconstruction activity continues to provide economic support and the island continue to benefit from encouraging, reassuring, and manufacturing investments announcements. That will that will that represent actually future benefit. While industry on the other hand, industry wholesale continue to reflect the impact of tariff, The recent trends for the last quarter suggest that the market is beginning to normalize. With June industry wide auto sales down 3% year over year. So we believe sales are stabilizing. Again, this backdrop core business continues to perform really well. Loan growth accelerating in the second half of the year. As business activity in Puerto Rico continues and also in Florida is having you know, a really good pipeline also.

That said, you know, we sustain our loan growth guidance target of 3% to 5% for the year, obviously, you know, looking forward to achieve that in the second half of the year. We also continue depending on customer engagement through the multichannel strategy Active digital users continue to grow with 6% versus prior year, and we continue to increase to 95% now deposit transaction captured to digital and service channels. As we look ahead, you know, the priorities really remain unchanged, very focused on our execution, focused on growing the market share in our core business. Confident and willing to grow organically, to discipline execution while evaluating potential alternative strategic opportunity as they arise.

Maximizing the significant organic growth opportunities that we see in front of us. At the same time, you know, continue to invest in the franchise, technology, leveraging AI to automate routine processes, and enhance the client experience I think we all are in the early innings of this AI journey, and we are encouraged by the opportunities that we see. At the end, it is about how you can service the customer better, how you can improve processes shorten lifecycle, and improve the management of potential fraud. This quarter reflect what has become a hallmark in our franchise: strong profitability, disciplined risk management, robust capital generation, and what is most important is consistent execution across our different cycles.

As always, I really thank you for your interest in FirstBank. We appreciate your support. Now I will turn the call to Said, our recently appointed CFO, to welcome Said to the call to go over the financial results in more detail. Said?

Said Ortiz: Thanks, Aurelio, and good morning, everyone. As Aurelio mentioned, for the second quarter of 26, we earned $96.1 million or $0.63 per diluted share which compared to $88 million or 57¢ per share last quarter. Pretax pre-provision income increased by $6 million or 5% when compared to the previous quarter, and reached an all time high of $138 million. The return on average assets was 2.02% for the quarter compared to 1.89% on the previous quarter. Results for the quarter did include additional interest income on approximately $3.4 million related to 2 refinancings during the quarter, commercial loan and municipal bond, which resulted in accelerated recognition of the fees or discounts.

If we exclude this impact, net income would have amounted to $93 million or about $0.60 per diluted share. The provision for the quarter was relatively flat. The provision did benefit from a reduction in charge offs of approximately $5 million primarily in the auto portfolio. This was offset by loan growth particularly in the commercial and residential portfolio, The macro, as Aurelio mentioned, continues to show slight improvements in the unemployment projection and the home price index but a lower degree than on the previous quarter. Income tax expense for the quarter was $24 million compared to $25 million in the previous quarter.

Results included about a $1.3 million benefit from a lower estimated tax rate for the year as a result of the proportion of tax exempt income to taxable income. The estimated annual effective tax rate expected to be closer to 21% compared to 21.6% in the previous quarter. Moving on to slide 8. Looking at net interest income, we grew about 3.7% quarter-over-quarter, and amounted to $229.1 million compared to $221 million in the previous quarter. The increase of $8.1 million in net interest income includes the $3.4 million of additional interest income related to the aforementioned refinancing. Of which 1.8 was included as part of interest income investment security and $1.6 million was included as interest income on loans.

Excluding the impact of the fee acceleration, interest income on loans grew by $1.7 million primarily due to the initial day in the quarter. Interest income on investments and cash increased by $4.5 million. Excluding the aforementioned refinancing, the yield on the investment portfolio continued to increase. It increased by 18 basis points as we have continued to reinvest cash flows from maturing securities into higher-yielding instruments. Looking at the interest expense side, we continue to proactively manage our funding costs with overall deposit costs declining by 2 basis points versus the prior quarter.

The cost of paying deposits, excluding broker deposits and public funds, decreased by 8 basis points to 0.26% On the other hand, cost of interest bearing checking and savings account increased by 5 basis points to 1.26% driven by higher rates on certain government accounts. Additionally, the cost of preferred deposit decreased by 9 basis points and the average balance in the quarter was down by approximately $27 million. Our net interest margin on a GAAP basis was 4.87%, A 12 basis points increase when compared to the previous quarter.

If we exclude the acceleration of fee discounts recognized in the quarter, our net interest margin would have been closer to 4.80%, reflecting a 5 basis points increase when compared to our prior quarter. It was slightly higher than the 2 to 3 basis points per quarter guidance we have provided at the beginning of the year. As you know, the rate environment has continued to evolve, and with any rate cuts in the second half of the year, we believe our asset sensitivity balance sheet position continues to be well positioned for additional NIM expansion. We expect for the remainder of 2026 our margin to expand by 3 to 5 basis points per quarter out of the 4.80% base.

Shifting to other income, and operating expenses on page 9. Non-interest income was--it amounted to $35.7 million versus $37.7 million--I am sorry, it was down. It amounted to $35.7 million versus $37.7 million in the previous quarter. The decrease was mostly related to seasonal contingent commissions which are typically received in the first quarter. Operating expenses for the quarter were relatively flat when compared to the previous quarter. reaching $127.3 million If we exclude the gains from OREO operations, expenses amounted to $128.2 million and were on the lower end of our guidance. The efficiency ratio was 48.1%, slightly lower than the 49.1% on the previous quarter. Associated with the higher levels of income we saw this quarter.

We expect our quarterly expense base for the remainder of 2026, excluding OREO gains, or losses to range between $128 million to $130 million as merit increases take effect during the third quarter combined with pickup in business promotions and pricing and expense trends on our technology products. We believe that our efficiency ratio levels for 2026 will be closer to the lower end of our 50% to 52% range as the changes in expenses and income components continue to play out in the future. Moving to slide 10 to discuss asset quality.

Nonperforming assets grew $5.1 million when compared to the previous quarter, mainly related to the inflow of a C&I loan in the Florida region of approximately $4.8 million, which is--this 1 is well collateralized. Excluding this relationship, nonperforming assets decreased by $9.7 million as we did see reductions in the residential mortgage portfolio consumer portfolio, and repo setups. Inflows to non-accrual were $47 million, which is $6.4 million higher than last quarter. Excluding the aforementioned inflow in the Florida region, inflows to nonaccruals were $8.4 million lower than prior quarter. Mostly driven by a $4.6 million decrease on the auto and finance lease portfolio.

On the other hand, we did see early stage delinquency up in the quarter by approximately $32.9 million when compared to the previous quarter, mainly due to a $20.7 million increase in the auto and finance leases portfolio. In the first quarter, we did see a reduction in early delinquency, as consumers typically receive tax refunds early in the year. Early delinquency in the consumer portfolio, if we compare it to December 2025, it is actually lower by approximately $10.3 million. We continue to see stability in the overall delinquency trends, and credit quality and continue to closely monitor consumer behaviors more broadly. Moving on to the allowance and capital on slide 11.

In terms of the allowance, it amounted to $145 million, which represents 1.85% of total loans. And was relatively flat when compared to previous quarter. In general, the allowance increased due to loan growth, particularly in the commercial and residential portfolios, and higher delinquency in the auto and finance lease portfolios just mentioned. Such increase was offset by multiple factors, including improvement in the macroeconomic projections, particularly on employment and HPI, combined with improvements in delinquency in the consumer unsecured portfolio. Net charge-offs for the quarter were approximately $16 million or 49 basis points of average loans significantly lower than the 65 basis points we had in the prior quarter.

This improvement was mostly due to a decrease of $4.7 million in consumer and finance leases net charge off mainly the auto portfolio. Capital remains strong on our healthy and consistent profitability levels have enabled us to repurchase $50 million of shares of common stocks and declare $31 million in dividends, Our regulatory capital ratios continue to exceed regulatory levels and remain relatively unchanged against prior quarter as earnings have offset capital deployment actions and growth in RWAs. Annual book value per share grew to $12.68 while tangible common equity ratio decreased 3 basis points to 10.08%. Mainly related to growth in intangible assets.

We still hold about $2.36 of intangible book value per share about a 166-basis-point intangible common equity ratio. Equity ratio related to the other comprehensive loss adjustments from the investment portfolio. Overall, we are very satisfied with the results for the second quarter and remain focused on supporting our clients and growing our business. While delivering close to 100% of earnings to shareholders in the form of buybacks and dividends. This concludes our prepared remarks. Operator, please open the call for questions.

Operator: Thank you. Thank you. As a reminder, to ask a question, please press star 1. To withdraw any questions, press 1 again. Our first question comes from Arren Cyganovich from Truist Securities. Please go ahead. Your line is open.

Aurelio Alemán-Bermudez: Good morning, Arren.

Operator: Erin, you may be on mute.

Arren Cyganovich: Sorry about that. Loan growth, very solid. This quarter, and sounds like your pipelines are going well both in Puerto Rico and in Florida. Maybe you could talk a little bit about what types of originations you are doing, what kind of spreads you are seeing in the competitive environment there?

Aurelio Alemán-Bermudez: Yes. As I said before, obviously, you know, the growth this quarter primarily was commercial. You know, on the other hand, better stability on the auto consumer portfolios than we have anticipated. So there was a little slightly growth there too. Not a contraction, which is which is very positive. On the commercial side, you know, I think it is a good mix. Of you know, some acquisitions by the larger player some CRE some construction, C&I. So it is a good mix of assets around development of warehouse you know, hotels, actually, small piece on the health care part of it, But it is it is all I will say commercial activity.

Not necessarily focused on the very large, but for the middle market. And there was some transaction in the government of significant size which was the refinancing of debt restructure debt, which we increase our exposure on a very solid in a very solid municipality in terms of financials. So overall, that and there was some infrastructure refinancing too. Which led to an increase. So I think if, you know, we look for diversification of risk and where we position our capital in terms of the asset classes that help.

Aurelio Alemán-Bermudez: And with, you know, just around 17% of CET1 what are you seeing on maybe the M&A front, something that you might be able to utilize all that excess capital? As I mentioned before, we look into things like potential activity. You know, there is not much we can say about that, but, you know, we are we are active you know, participants in looking at what could be you know, a strategic fit for our franchise. You know, that could follow our same operating model and could deliver, you know, the consistent results that we have. But there is not much we can say other than that. it is opportunistic.

In the meantime, we continue to deliver execute our buyback and deliver a competitive dividend. And, obviously, primary organic growth. So we are seeing we are seeing, you know, good activity in our new region in Florida that we that we opened in the last quarter last year, the local office. So we are we continue to see pretty good activity there too. So the organic play continues to lead the front of our efforts. Okay. Thank you.

Operator: Our next question comes from Kelly Motta from KBW. Please go ahead. Your line is open.

Kelly Motta: Hi. Thank you so much for the question. Great quarter.

Aurelio Alemán-Bermudez: Thank you, Kelly.

Kelly Motta: Maybe to kick it off, you know, the margin clearly a highlight and even, you know, if you exclude those loan fees, definitely came in well above where we had expected with what it sounds like some expansion ahead. Can you walk through some remind us the repricing dynamics of the securities book? Clearly, that is a big driver here. Okay.

Aurelio Alemán-Bermudez: I am going to make a few comment and pass it to Said. I think it is important that, you know, there is obviously the yield curve. You know, had to do with this with versus our projection. You know, rates continue to be better in the investment portfolio. Those maturities as I will talk about But, also, you know, loan activity, on the commercial book, which, you know, it is it is significant portion of our book. it is variable. So those 2 components are important in understanding how our margin you know, continues to get better, which is good to say that it is better than anticipated.

And that is why, you know, we revisit the forward guidance to a higher range. Obviously, this quarter, we did have what we consider you know, nonrecurring items regarding those these 2 loans that were renewed and have some benefits underneath. Right?

Said Ortiz: Yeah. Yeah. In terms of in the investment portfolio, we expect about $400 million on the second half of the year. Those are yielding around 1.92%. So and I am looking at 2027, there are about $100 million coming in of securities yielding about 1.73%. So all in the next 18 months, it is about $1.2 billion of repricing coming Okay.

Kelly Motta: that is helpful. And then I apologize if you hit on this, but with the deposit growth, looks like about 2 thirds of that was on the government deposits. Can you help us out with the expectations around flows on that side as well as any commentary on how competitive pricing dynamics are holding up for the core portfolio? Thank you.

Aurelio Alemán-Bermudez: Yeah. When you look at deposit growth, it is almost flat. Obviously, you know, there is a portion of government deposits that are linked to an index. And there is always been volatility on that government book in terms of you know, large chunks moving in or out in a specific quarter. Based on key relationships that receive funds primarily from for reconstruction. And funds come in, go out, and some other time deposit that we negotiate with our core relationships. That are transactional based. Yeah.

I will say, just think about where the government deposit staying around this average that we have for, like, for the last year, you know, you know, liquidity is very solid in still you know, funding coming in through you know, both CDBG and FEMA for different purpose. Reconstruction, you know, even, you know, prep power or some of the other entities that we have in the portfolio. I think in the core customer, we are seeing again obviously, linked to money market rates and the pressure on rates. You know, you start to see again, you know, high balances to that need to be retained in the quarter.

We, for example, we, for example, increased customers in both retail and commercial on the deposits, but in some of the large customer, we lose some of the deposit. Net-net was positive. But we start to see a little bit of that noise. You know, and we start to compete to retain, you know, better. So I will say, you know, deposit costs, will continue to be, you know, in the same place that we are because it is a very large deposit base. And when you look at the CDs is a very specific component that you can actually play and not really impact the franchise.

So I will say stability in both government deposits and, obviously, we continue to target growing our core franchise. Great. I will step back. Nice quarter again. Thank you so much. Thank you, Kelly.

Operator: Our next question comes from Steve Moss from Raymond James. Please go ahead. Your line is open.

Aurelio Alemán-Bermudez: Morning, Steve.

Steve Moss: Analyst (Steve Moss): Good morning, you guys. Thank you. Morning.

Aurelio Alemán-Bermudez: Maybe just, you know, thinking about, you know, expenses here and the efficiency ratio longer term. I mean, obviously, you know, healthy business trends here. I know you guys are still guiding towards the 50% or being at the low end of the 50% efficiency ratio range. Just kind of curious, you know, longer term you think you could go a little lower here just kind of given balance sheet dynamics, just better growth on the island? Or you know, does your sense still kind of you think it will shake out later longer-term? Yeah. If you see, you know, the absolute number on expense is very close to the guidance that we provide.

So we are we are making investments in both the technology and actually some of the branch expansion that we touched talk about in the early part of the year. You know, there is 1 of the new branches just opened last week, and there is another 1 opening in a couple of weeks. So that continues. And then the technology transformation to cloud and the AI investment, it is there. So, again, you know, I think it is always you know, we like always like to see the efficiency ratio going down by more revenue. And that is what happened this year.

Obviously, again, I think I think the, you know, there is been as a sensitive, so there is a part we are doing, you know, really good growth on loans, but there is also there is a contribution coming from the rate environment that is helping every bank. So that was asset-sensitive. So yes, there is always an opportunity to move below 50%, We are there today. And, you know, if revenues continue at the pace and there is a simple relationship of revenue and expense, so we will we will be there. But, obviously, we still have, you know, significant investments ahead that we will continue doing either way. Without the new revenue opportunity or not.

So that is why we have placed that 50% target. Yeah.

Steve Moss: Great. that is helpful there. And then just kinda, you know, thinking about business activity on the island, quite the step up here year over year in originations.

Aurelio Alemán-Bermudez: You know, I realized there is onshoring. Obviously, Farewell Dynamics would the government. Is there as you look at this activity here, just kind of curious what you think are the biggest drivers maybe versus a year ago Obviously, healthy pipeline. it is good to hear that the outlook for the second half of the year. I think, you know, I have to highlight 1 sector, which is hospitality. You know, hospitality sector in Puerto Rico continues to show, you know, significant trends, better trends than prior cycles. Sustainable both ADRs, the occupancy, visitors, there is still, you know, other projects coming around, and some of them are ongoing. And, you know, I think investor confidence.

This investment continue to show a very positive investor confidence in the island. For, you know, whatever political and macro challenges are out there, both in Puerto Rico and The US, Economies continue to sustain these trends, and investors are looking to play some of their excess liquidity in projects. So we are benefiting out of that. And I think the island is a positive place for that for some years now. Got you. And then, you know, on capital deployment here, I know you guys generally target 100% payout ratio. Obviously, earnings have been strong and run ahead of your planned buyback.

Should we expect a catch up in the with the buyback or a special dividend later this year? You know, we as you know, we keep the optionality, and every quarter, we sit down that will happen now in August, September. In October, you would see our we will publish again our capital plan which we it is it is a cycle that we do. So we will you know, definitely, that is our strategic goal, and, you know, we have not concluded on how we are gonna get there. So but you know, we will we will probably talk about that in the next call. In more detail. Okay. Aurelio, I appreciate all the color here.

Thank you very much. Thank you. Thanks.

Operator: For any additional questions, please press star followed by the number 1. Our next question comes from Manuel Navas from Piper Sandler. Please go ahead. Your line is open.

Manuel Navas: A lot of my questions have been asked and answered. Just want to circle back on the early delinquency rise You had some commentary around it. Is there anything more specific in the auto portfolio we should be watching? Is there any particular FICO scores that are that are rising more than others? Anything you could add on that delinquency rise.

Aurelio Alemán-Bermudez: To be honest, you know, obviously, you know, we I would say seasonal because we compare to prior periods, you know, we see we saw a significant improvement in the first quarter that we attribute to a lot of liquidity that came in the island for, you know, tax taxes, benefits, and other matters. We are back to what I could say a more normal level normalized level. We do not expect, you know, significant updates from it updates from here. In that those delinquency levels, When we look at the charge of flowing through it is really focused on the early delinquency buckets.

So we do not see anything, you know, we do not see anything that tell us that this is this is gonna continue. At this stage. Yeah. it is actually better than December and in line with prior year. Yeah. Okay. And most other credit metrics are pretty solid. I just wanted to ask about that 1. Yeah. No.

Manuel Navas: I know right Additionally, as we look at this new kind of can we reset on the margin and your sensitivities to hikes or potential declines. I appreciate the new kind of go-forward guidance with kind of flat rates. But what would happen in either increases or decreases from here?

Aurelio Alemán-Bermudez: Well, we disclose that on the 10-Q. Those of any big moves up, and it is gonna be similar or consistent with what has been disclosed in the queue on NII. Right? So 2% to 3%, which we and you have the breakdowns there by each of the scenarios that we evaluate. Okay. Thank you. Thank you, Manuel.

Operator: Our next question comes from Arren Cyganovich from Truist Securities.

Arren Cyganovich: Thanks for the follow-up. I just wanted to just clarify on the NIM guidance. You are not assuming any rate increases through the end of the year?

Aurelio Alemán-Bermudez: Correct. Okay. Thank you. Yeah. Mhmm.

Operator: And we have no further questions. This will conclude today's conference call. Thank you for your participation. You may now disconnect.