Hello, everyone, and thank you for joining the first Bancorp fourth quarter 2024 and full year financial results. My name is Becky, and I'll be your operator today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Ramon Rodriguez, Investor Relations Officer, to begin. Please go ahead.

Thank you, Becky. Good morning, everyone, and thank you for joining FirstBank Corp's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2024. Joining you today from FirstBank Corp are Aurelio Aleman, President and Chief Executive Officer, and Orlando Verges, Executive Vice President and 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 projections 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 latest SEC filing. The company assumes no obligation 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 fppinvestor.com. At this time, I'd like to turn the call over to our CEO, Aurelio Aleman.

Thank you, Ramon. Good morning to everyone, and thanks for joining our earnings call today. I will begin by briefly discussing the business performance for the fourth quarter. Then we'll move on to provide some high-level highlights of how we perform during the full year. we're quite excited how we closed 2024 and and with another quarter of consistent execution and strong financial performance we earned 76 million in net income and grew pre-tax pre-provision income by five percent to 117 million primarily driven by net interest margin income expansion and our discipline expense management process return average asset once again strong at 1.56 percent and the organization continued to operate at an efficiency ratio close to 52 percent which is in line with our guidance turning to the balance sheet the quarter was strong total loans grew by 303 million of 97 9.7 percent in the quarter analyzed driven by growth actually across all business segments consumer commercial and mortgage and and between Puerto Rico and the Florida region primarily particularly within the commercial and construction lending segments however we we saw we were expecting some portfolio repayments in in the quarter which came a little bit lower we anticipate that some of that will come in you know between the first and second quarter of this year in the range of probably 50 to 100 million in terms of deposit core deposit trends were also very encouraging with total deposits other than broker and government up two percent sequentially from private quarter and four percent when we include you know government deposit as as we have seen in private quarters we we did some we see some seasonality in deposit an inflow during the quarter that, you know, they are temporary in nature or they have to do with the variability of the government sector funding of reconstruction activity. Credit performance was relatively stable during the quarter with non-performing assets hitting another record low of 61 basis points of total assets. On the capital front and liquidity, our liquidity and capital position remains very strong. we sustain our commitment to deliver over 100% of earnings in the form of capital actions by redeeming $50 million of our outstanding junior debentures and paying $26.3 million in common dividends. Even when accounting for these actions, our regulatory capital ratios increase during the quarter and remain significantly above well capitalized. We still have $200 million left in our capital plan authorization, which we expect to continue deploying through 2025 in a manner that best suits the long-term interest of the franchise. Please let's turn to slide five to provide some highlights of the year. The solid performance of the quarter cap a year of record results for the franchise in the back of a positive economic backdrop of our operating markets. We raised, actually, total record revenue, 6% increase in earnings per share and reached a multi-year low in non-performing assets. The low portfolio expanded by 4.7% of $569 million. We added $267 million in core, customer deposit, and distributed 100% of earnings to shareholders. loan growth was actually quite in line with our guidance of mid-single-digit growth. Consistent with our strategy, our well-position balance sheet allows us to capitalize on bondbook and non-reprising opportunities under the current rate environment, while productively managing funded costs that actually will continue through 2025. We're considering stable deposits going forward, our asset mix will continue to skew towards higher yielding assets, which coupled with gradually declining funding costs should drive additional net interest income expansion in 2025. Over the course of 2024, our franchise made great progress advancing technology initiatives to improve our interaction with customers through both the convenience of digital channels and service-focused relationship officers. We are achieving the targets we set to measure our strategy's success and we're seeing the benefit of the investment with many technology to accelerate our growth and improve how we serve our communities and customers. As we look ahead, the operating environment for 2025, actually the operating environment seems conductive of another year of positive performance and organic capital generation. If we look at the key economic metrics in the environment, during the fourth quarter, payroll employment continue to improve, tourism metrics and passenger activity are at our main airport reach record levels again, and disaster relief from disbursement rate raised to another year of sequential increments in 2024. And we do expect this trend to continue, as per the Puerto Rico Planning Board is forecasting another year of economic growth in 2025. So given this backdrop for 2025, we're sustaining our Mitchell-LG in Long Growth Guidance. We're sustaining our 100% net payout ratio of our capital. A that includes the redeeming the remaining 61 million of two units were into the ventures and executed reason which are repurchase opportunities and and definitely maintaining a sustainable dividend payout policy. In line with this guy, we were very pleased to announce earlier this week that our board approved 13 percent increase in our quarterly constant dividend that was raised to 18 cents per share. Again we will continue to monitor general macro how things develop political changes as we as we execute our strategy as we execute our capital deployment plan and to close I have to say that I'm really really proud of our what our teams have accomplished so far. We are very positive and look forward to a very positive 2025 with optimism and excitement of our lives ahead of us. Now I will turn the call over to Orlando to go over some more detail and we will be back for questions. Thanks to all.

Good morning everyone. As Aurelio mentioned we recorded very strong results during the quarter earning 75.7 million in net income or 46 cents a share, which compares with $0.45 a share in the third quarter. We saw the results for the quarter saw improvements in net interest income, which were partially offset by the higher provision for credit losses. The provision for the fourth quarter was $5.7 million higher than last quarter, but this was mostly related to a $5.5 million release we had in the allowance for residential mortgage loans during the third quarter based on the consistent positive outlook on microeconomic variables, but also this quarter we provided for the higher loan portfolios that we achieved at the end of the quarter. In general, the economic outlook remained fairly consistent going forward from what we had in the third quarter in terms of estimating the allowance. The income tax expense for the quarter was $20.3 million, which is $2.3 million lower than last quarter. At the end, we ended up with a higher proportion of exempt income for the year, which resulted in a slightly lower effective tax rate. The effective tax rate was just under 24% for the year 24, and we're expecting that tax rate for 25 will be in that same range from 24 to 24.5%. For the full year 24, net income was $299 million, very similar to the 303 we achieved in 23, but earnings per share were $1.81 for this year, which is 10 cents higher than we had in 23, which is the benefit of the share count reduction based on the buybacks we have done over the last few years. Return on average assets for the year was 158, and return on equity was 19.1% on a gap basis. If we were to eliminate the other comprehensive loss impact from the capital on a non-gap basis, the adjusted return on equity would be 13.6%. As I mentioned, that interest income for the quarter was $7.2 million higher than last quarter, reaching $209.3 million. You might recall from last quarter's earnings call, we had mentioned that we were expecting that the net interest margin for the fourth quarter would be similar to the third quarter. However, we were able to achieve an eight basis points improvement in margin from 425 to 433 in this fourth quarter. At that time, we were expecting loan repricing impact would offset some other improvements, even though we did see that repricing impact on the floating rate commercial loans the commercial portfolio grew an average 192 million more than compensated for for this pricing reduction while we achieve 20 37 million in growth in the residential and consumer portfolios also growth in deposits for the quarter allowed us to to reinvest about 220 million of of maturing investment securities at a rate of 540. We look at cash flows during the quarter, cash flows for the investment portfolio were 470 million. And that includes 367 million in securities that mature with an average deal of 65 basis points. So the pickup in margin in yield was quite significant as compared to those 65 basis points. The deposits on interest in retail and commercial transaction accounts grew $348 million on average for the quarter. These deposits have an average cost of 1.52%. On the other hand, higher cost time deposits and broker cities decreased by $130 million. Also during the quarter, junior sub-deventures with a cost of $78 million decreased by with with a cost of 7.78%, I'm sorry, decreased 50 million on average. And we did redeem an additional 50 million at the end of the third, of the fourth quarter, the impact would be seen, you know, now in 2025. The reduction in borrowings and broker CDs resulted in interest expense reduction of 2.8 million for the fourth quarter. As we look ahead into 2025, we still see opportunities for both net interest income and margin expansion as we redeploy what we estimate to be somewhere between $1.5 to $1.6 billion of investment portfolio cash flows in 2025 that are currently yielding about 1.25% of ours either loans or higher yield insecurities or paying down some of the higher cost borrowings. If we were to assume normal flow of deposits, we expect that margin could improve around 20 basis points by the end of 2025. In terms of other income, it was fairly online. It It was down a bit mostly from a decrease in insurance income due to lower production. On the expense side, expenses were $124.5 million, a $1.6 million increase from the third quarter. Oreo gains this quarter were $1 million or $300,000 less than last quarter. Excluding OREO, expenses for the quarter were $125.6 million, which is at a $1.3 million higher than last quarter, and higher than the top range guidance we had provided. The increase was in part related to business promotion initiatives that took place at the end of the year and were a bit higher than we had originally anticipated. However, we did register operating leverage as increasing interest income was enough to offset increase in expenses, resulting in a lower efficiency ratio of 51.6% for the quarter. Based on the current stage of several ongoing technology projects, branch network expansions plan for 25, we estimate that our expense base for the next couple of quarters would be in the range of $125 to $126 million, excluding any OREO gains. We continue to estimate that our efficiency ratio will be around 52% considering the changes in expenses and income components. In terms of asset quality, NPAs decreased $800,000. They now represent 61 basis points of assets. Most of the reduction was due to a repayment of a $1.8 million on accrual commercial loan. Inflows for the quarter were $1.6 million lower than last quarter, mostly consumer, even though we have seen some early delinquency increases. The macro is fairly stable, and the labor market is healthy, but consumer credit continues to show weaknesses. Overall loans in early delinquency increased $9.6 million from last quarter, with consumer loans increasing $14 million, obviously offset by a decrease of $5.4 million in commercial We continue to proactively manage this great cycle on the consumer side and the ventages that had impacts, and we're estimating somewhere in the middle part of the year towards the end of the year to achieve the stability we had anticipated on the consumer. The allowance for credit losses decreased $3.1 million to $244 million during the quarter, mostly from a $4 million reduction in the allowance for commercial loans. Based on the improvements we have seen on both the financial condition of borrowers and obviously the macroeconomic forecast, particularly on the consumer real estate indexes, which have continued to show improvement. The allowance for the consumer portfolios did increase $1 million due to the recent loss trends. Overall, the allowance came down to 1.91% of loan from 1.98% as we continue to see this good credit trends in the commercial and residential mortgage portfolio. However, the allowance on consumer loan has gone up to 3.85% of loans based on on lost trends that we have had in the portfolio. Net charge-off for the quarter were 24.6 million or 78 basis points of average loans, pretty much in line with the prior quarter. Consumer charge-off increased 1.3 million, but we had a 1.2 million decrease in commercial charge-off. On the capital front, regulatory ratios increased during the quarter, and we continue to operate significantly above the regulatory well-capitalized levels. We deployed, as Aurelio mentioned, 100% of our quarterly earnings for the redemption of $50 million in the union subordinated ventures and $26 million payment of common dividends, consistent with the guidance we have provided. The tangible value per share did decrease to $991 and TCE decreased to $8.4, which was mostly due to an 82 million decrease in the fair value of available for sale investment portfolio. The remaining just another comprehensive loss that we have on the book still represent $3.41 in tangible book value per share and over 258 basis points in intangible common equity ratio. You know, as Aurelio mentioned, we will continue to deploy excess capital in a thoughtful matter, always looking for the long-term best interest of our franchise and our shareholders. This concludes our remarks. Operator, please open the call for questions.

Thank you. As a reminder to ask a question, please press style followed by one on your telephone keypad now. If you change your mind, please press style followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Frank Chiroldi from Piper Sandler. Frank, your line is not open. Please go ahead.

Morning. On the 52% efficiency ratio for 2025, you know, I guess that's just sustaining where you are, right? I mean, I believe that's a non-FTE NII is in that calculation. But then can you just remind us, are Oreo gains, is there some level of that assumed in 2025 that's also in that calc, or could Oreo gains kind of move that even lower?

No, it's included in that. We do, you know, the numbers have been coming down, as we have mentioned. We do expect to still achieve probably Oreo gains on the first half of the year. but that's significantly going to go down by the second half of 2025. So it's mostly the other expense components and obviously the income side, as you mentioned.

And you've been pretty consistent there around that 52% level.

How focused are you, I guess, in 2025 on that? do you see opportunities to ramp up or delay investments uh depending upon you know the the revenue outlook uh to kind of uh really hone in on that 52 percent well in reality you know we see we see the consistent the consistent the revenue side and the we're counting on some of the opportunities that we're executing uh as ronando mentioned we expect some margin improvement you have the reinvestment of the portfolio or the cash flows and then we have you know a single you know making the target of growing the portfolio again so those components you know we bring some revenue we're not really stopping on investments you know we have included we are including you know significant investment in technology to continue which is bringing other benefits with some of them will be more long-term but they are and we also have some branch openings that are part of that number that will start, you know, happening during the, you know, we're moving branches into areas that we're not, we don't have a presence where there is a deposit opportunity and a commercial bank opportunity on the small and medium market side. So, you know, we're not really halting on those investments.

Okay. And then just a point of clarification, I just, Orlando, I heard you mention the NIM. I think you said NIM could be up 20 basis points year over year. Is that the number you gave?

20 basis points is, you know, based on the quarterly pickup we expect. It would be like the margin at the end of the fourth quarter of the year as compared to the fourth quarter of 2024. That's what we're talking. It's like with the reinvestment of the portfolio and obviously considering expected deposit flows and expected new loan productions, we believe margin will continue to pick up based on that. As I mentioned, the cash flows that are coming due from the investment portfolio or estimated cash flows that are going to be around one and a half to 1.6 billion in 2025. On average, yield of 125, it's not equally distributed. The ones that mature in the first half of the year are like 150. And then the other half, it's smaller. It's a lower amount of yield. But still, you're going to get a good take up on the reimbursement or the amounts that could be channeled to loan portfolios. You know, obviously, we're still, you know, dealing with what's the expectation on rates. We had a hundred basis points assumption originally, like three months ago, that would happen in 25. But now we feel it's probably going to be 25 or 50 basis points. So we will see that part of it. But still, you know, assuming these rates and the pickup on those components, we will have a good push on the margin.

Okay. And then just lastly, I think there's about $60 million, I think you said, in redemption left. So is it a pretty fair expectation or assessment that stock buybacks is probably another quarter to go before you get back into the market there? And repurchases will be sort of the return to capital story more for the last three quarters of the year?

Yeah, I think your assessment is the most probable scenario right now as we speak. Yeah.

All right, great.

Thank you. Our next question is from Timur Brasilia from Wells Fargo. Your line is not open. Please go ahead.

Hi, good morning. Morning, Timur. Looking at the link quarter deposit growth, particularly on the public fund side, I guess, what was the dynamic this quarter that drove balances higher in a period that maybe typically sees some seasonal outflows? Was that market share gain? Is that a little bit transitory in nature? Maybe just give us a dynamic to some of the deposit growth seen in the foreto.

I would say there's a combination. obviously we have a very strong strategy that we're executing on cash management payment services to government entities and municipalities and that is coupled with you know the parallel strategy that we have with some of the large participants in in the reconstruction area so there was there was inflow of funds from from both sides you know obviously on the on the infrastructure side there's always some chunkiness of funds that come in and out so that was not the the growth wasn't necessarily the growth is really the net of what came in and out so it was a a significant quarter of projects and and and funds moving from fema or cdbg into these entities for completing projects so so it's

a combination you know we have a core strategy from services to municipalities and other entities and we have a strategy to support you know the the entities that are actively in the reconstruction phases yeah but yes there's always some seasonality in the later part of the year yeah um for the loan growth you know the the u.s mainland loan growth was strong in 4q uh look like cni on the virgin islands is also pretty strong in 4q can you just maybe give us a little bit of color where you're seeing the growth on the mainland and is that primarily where you were

expecting maybe some elevated payoff activity that didn't come to bear in the fourth quarter yeah the the you know i think you know when you look at the core strategy of florida again it's commercial in all the segments small middle and and large with the balance of the larger corporation which is part of the region is part of the of the larger bank so you know if you look through the year there's there was also you know good quarters and and and and active quarters obviously you know we it happened last year too that we have supported up you know some of the cases that closed that were pending to close finally conclude in the year so there's some and then in puerto rico there's some large deal and construction you know noise that happened and also in the quarter, some of them move ahead or completed. So again, it's very difficult to predict at the pace. That's why we focus on the mid-single-digit when we add and subtract. So we do expect more growth in the commercial this year. We expect some growth in the mortgage we didn't have in the plans before. And then continue to have growth in the consumer, even though we acknowledge it as a lower rate growth rate than we have achieved over the last five years. It's just the different cycles of each of the business and portfolios. And then we have booked construction loans that we'll continue to fund until completion, which was probably one of the highlights of 2024, the volume of construction activity that was booked that is is there and will continue to it doesn't need to to close along for disbursement to continue to to move on go ahead so it's a mix that you know and then just predict predicting predicting quarter by quarters you know it's almost impossible for for this commercial activity yeah okay make sense and then just last for me um looking at the allowance looking at the performance

of the consumer, I guess, A, what gives you greater confidence that consumer credit begins to stabilize middle of 25, and then, B, as we look at all the different components of the allowance, you know, it's come down now for six straight quarters, it looks like. Are we nearing a plateau there for allowance, or do you foresee continued mix shift and continued ability to maybe continue releasing some reserves here throughout the course of the year?

That we, you know, we have to divide it by portfolio. We feel that the residential mortgage portfolio has continued to behave extremely well. That's what ended up resulting in some releases. Home price index has been, you know, that we see on even on the Oreos we sell that are definitely strong. So that helps. I think that probably the portfolio has been growing a little bit as compared to what we had before that we were coming down. On the commercial side, probably we're there. I mean, it's been quite good for quite a long time. On the consumer side, we still, as I mentioned, feel there is some volatility. The allowance on the consumer side has gone up like 20 basis points from the end of 23 to the end of 24 or something like that. And obviously, the growth has mostly been on the auto portfolios that entail lower losses. But there is still going to be a little bit of noise. I would say on the allowance. So in general, we would be sort of at this level is my expectation for the next couple of quarters. Great.

Thank you.

Thank you. Our next question is from Kelly Motta from KBW. Your line is now open. Please go ahead.

Hey, good morning. Thanks for the question. I was hoping to dig in a bit more on expenses. I appreciate the, I think you said 125 to 126 million per quarter outlook but um looking at fourth quarter can you remind us um it looks like you've had a larger kick up in business promotion expenses um in the fourth quarter these past two years um could you write us the seasonality of that and kind of um if that had any relation to um you know the meaningful increase in deposits we saw this quarter the the the end of the year typically has a combination of things it's um uh events we we do for customers uh as part of the you know year-end kind of uh of uh christmas celebrations

and recognition of of us recognizing our customers loyalty uh so that's that's one thing uh there are trends on campaigns that we would like to start early in 25, that we start, you know, towards the end of the year to start moving some things. Those are mostly on the lending side, not so much on the deposit side. Obviously, you know, things on the digital front and the deposits are big, and we try to push for that, and participation in activities that happen towards the end of the year so it's a it's a combination and it's it directly completely related to what the deposit the deposit growth uh i wouldn't say that uh but clearly uh our marketing people are going to say yes that it has to do with all the different efforts they put out there um i i appreciate that um and i mean the deposit growth is obviously very nice um and i understand um

partly seasonal and partly, you know, unique to flows that's what's happening with government deposits. But I'm hoping just on the core Puerto Rico deposit base, I was hoping you could provide an update on just the competitive environment there if you're seeing, you know, any ability to, you know, lower those core deposit costs, which are already, you know, pretty low when compared to mainland banks and rationally price?

To be honest, you know, if rates don't move lower than they are today, we don't see a lot of opportunities in what is in the core core. I think competition is reasonable. But but obviously the movement in rates is not it's not supporting at this stage that any other competitor, you know, see low, you know, behaving like in that scenario of lowering rates. So I think we have to see, you know, what happened with the Fed and the potential, you know, additional moves. On the other hand, there is, you know, a lot of funding that is that is massuring and it's already being, you know, either either eliminated or out of the cost or or or it's been renewed at a lower rate.

Yeah, there are opportunities on the broker cities, whatever we renew. If we renew anything, rates are lower than what they're coming to. Same thing, we see some opportunities in some of the advances we take from the FHLB. Some of the government deposits have been repriced as treasury rates have come down. But some of the core accounts, I still feel like, Aurelio, that, you know, they are not necessarily going to come down a lot, assuming rates are at this level.

Got it. Maybe last question for me is just on balance sheet size. I think you already hit on this pretty well, but just as a point of clarification, earning assets for the quarter were about just over $19 billion. end um it sounds like based on the cadence of um investment portfolio maturities like 1.5 to 1.6 coupled with your mid single digit low growth guidance it seems like the balance sheet is probably flat to slightly down over over 2025 is that is that the right way to think about it as we we look ahead with the positive growth in nii just driven off of the the remix into higher yielding assets?

Yeah, the way I see it, Kelly, it's, you know, the cash flows from the investment portfolio are not necessarily going to reduce the size of the balance sheet, because we'll end up mostly with other investments or with loans. And, you know, there is a level of investment that we need to keep on the books for collateral for public funds and some of the other things that we do so we we're we we have taken down that portfolio significantly on all the excess that we had uh but it's now reaching a level that uh we're probably going to be you know either going to loans or slightly or going to securities so that would keep the balance sheet sort of where we are you know you know we grow the investment the loan portfolio as expected uh it's going to push that a little bit up. Obviously, deposits have a lot to do with it. So, you know, the assumption that it's sort of flat to, I would say, flat to slightly higher, other than some of the seasonality Aurelio mentioned, the deposits. So, that range of 18-8 to 19-3 or 4, it's probably going to be a reasonable range of the balance sheet size.

Awesome. Thank you so much for all the color. I'll step back.

Thank you, Kelly.

Thank you. Our next question is from Steve Moss from Raymond James. Your line is now open. Please go ahead.

Good morning, Steve. Maybe just on loan pricing here, I apologize if I missed it, but just kind of curious, given the rate volatility we've seen here over the last couple of months, what you guys are seeing for loans these days.

Loan pricing, you mean?

Yeah.

Well, I mean, it hasn't changed much in terms of what you would call the spreads, no? Obviously, pricing has come down a bit because most of the pricing, it's either LIBOR-based or SOFOR-based. SOFOR is down and Prime is down. so that that means that pricing on some of the portfolios have been down doesn't necessarily mean that the spread uh it's down from what it used to be uh that i'm talking commercial at this point uh on the consumer side it has changed a bit but uh you know the credit cards we do we do adjust based on prime but some of the other portfolios have remained fairly consistent So, if you think about yield, the loan yields are down like 20 basis points or 10 basis points compared to last quarter.

Actually, 12. If you look at the loan portfolio yield on page 8 of the presentation, the overall loan portfolio.

So, that's been a function of, you know, the 52, 53% floating components that we have on the on the commercial side more more than anything uh that that repriced with prime and uh and uh so far mostly a little bit a little bit with kind of uh of pricing strategy great appreciate that and then in terms of just the the billion five and cash flows it sounds like it's barely just equally distributed um over the four quarters is that a fair assumption no let me give you some some color in that it's not equally um hold on one second so it's gonna be about um first first quarter it's maybe somewhere between 325 and and and 375 it's a range we estimate uh second quarter it's going to be around 240 to 260. uh fourth quarter third quarter i'm sorry it's somewhere around 400 and the last quarter it's going to be about 525 to 550.

Great appreciate all that most of my questions all my questions is asked and answered at this point so thank you very much.

Thank you Steve.

Thank you we currently have no further questions so I'll hand back to Ramon for closing remarks.

Thanks to everyone for participating in today's call we will be attending B of A's conference in Miami on February 11, KBW's conference in Boca on February 13, and Raymond James' conference in Orlando on March 4. We look forward to seeing a number of you at these events and we greatly appreciate your continued support. Have a great day. Thank you. Thank you all.

This concludes today's call. Thank you for joining. You may now disconnect your