Hello and welcome to the First Bank Corp 3rd Quarter 2025 Financial Results. My name is Carla and I will be coordinating your call today. During the presentation, you can register to ask questions by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I would now like to hand you over to the Investor Relations Officer, Damon Rodriguez, to begin. Please go ahead when you're ready.

Thank you, Carla. Good morning, everyone, and thank you for joining First Bank Corp's conference call and webcast to discuss the company's financial results for the third quarter of 2025. Joining you today from First Bank 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 filings. 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 released, you can access them at our website at fbvinvestor.com. At this time, I'd like to turn the call over to our CEO, Aurelio Aleman.

Thank you, Ramon, and good morning to everyone, and thanks for joining our call again today. I will begin by briefly discussing our financial performance for the third quarter, then move on to discuss our outlook for the franchise. We're definitely very I'm very pleased with the progress on the quarter as we delivered another exceptional quarter of financial results that underscore our ability to produce consistent returns to our shareholders and consistent progress in our franchise metrics. We earned $100 million income during the quarter, including the benefit of certain non-recurrent special items that Orlando will explain later. However, adjusted for these items, normalized earnings per share grew 13 percent when compared to the prior year. Most of the improvement came from record net interest income, a well-managed expense base, and disciplined loan production. Turning to the balance sheet, our strong capital position enabled us to continue supporting our clients on the loan production side. We grew total loan of $181 million for 5.6% in quarter annualized, surpassing $13 billion in total loan for the first time since 2010. Since the beginning of the second quarter, we've been experiencing slowdown in consumer credit demand. Especially, I want to comment on the auto industry, which has been, you know, below our original expectation for the year. After the sector-specific studies were announced in April, industry-wide sales began trading down, which has negatively impacted overall long-ordination in this space during the year and long-mix production. For some additional context, total retail sales in our industry are down seven percent year-to-day as of September, but when looking at the third quarter sales, they are below 17 percent compared to the third quarter of the prior year. Thankfully, you know, we've been able to mitigate this slowdown by executing our grow-low plan within the commercial and construction and this segment coupled with a steady on products and progress in the residential mortgage business you know it's about business diversification and regional diversification contributing to that in terms of deposit it was a good quarter we grew 140 million on core franchise deposits uh trends in the market you know flows remain favorable although we're seeing you know higher competition uh in year seeking flows you know we We believe that could be temporary, particularly from affluent customers and government relations. That said, we continue to focus on what is our core deposit franchise while deploying a measurable approach to retaining valuable cost-core customer relationships. In terms of asset quality, credit continues to behave in line with expectations, consumer charge of stabilizing, healthy commercial credit trends, and a 7% reduction in non-performing Finally, our, you know, earning performance related to growth across all capital ratios while expanding our lumber organically and being able to repurchase another 50 million in shares of Comma Stokes. Consistent with the strategy of returning 100% annual earnings to shareholders, as we announced yesterday, our board authorized an additional 200 million share buyback program that we expect to execute through 2026. Please, let's move to slide five for some additional highlights on the macro. In terms of the macro, you know, the operating background remains, I have to say, stable with, you know, uncertain elements that are surrounding us as we continue to monitor and assess the potential impact that evolving trade dynamics are bringing to the market. any potential impact of federal government shutdown studies related inflationary pressures are having pressure on businesses and consumers across our regions as you know everybody's realizing that said we are encouraged by the resiliency of the labor markets in puerto rico the continued improving trend of the tourism activity and the recently announced investments of manufacturing companies expanding production capacity in Puerto Rico or establishing new facilities. We believe, you know, that the ongoing expansion of the manufacturing sector coupled with the consistent flow of federal disaster funds earmarked for infrastructure will continue to support local economy for the years to come. Our franchise is in a great position to benefit from the tailwinds, and we expect to strategically deploy our access capital to continue growing organically our regions. Year-to-date, total number of initials other than credit card additional activity are up by 7% when compared to prior year. You know, being supported by, you know, self-discipline, client outreach, well-managed regional and business line diversification, which is really, you know, the strength of our franchise. Based on current commercial lending pipelines, the evolving rate environment, and the ongoing normalization of industry-wide auto sales, our long-growth guide for the year will probably be closer to the 3-4 percent range, depending on commercial credit line uses and any level of unexpected payments that we don't have knowledge today. We will provide, you know, an updated guide on our, you know, for 2026, once we report up for quarter in January, and also, you know, full year forecast for next year. With that, I would like to thank you for your interest in First Bank, and definitely very proud of our team's accomplishments to 2025. I look forward to a strong end of the year. Now I will turn the call to Orlando to go over financial results in more detail before we open the call for questions. Orlando?

Good morning, everyone. As Aurelio mentioned, we had a strong quarter with a net income reaching 100 million or 63 cents a share. That compares to 80 million or 50 cents a share in the second quarter. Return on average assets for the quarter was 2.1 percent, much higher than last quarter. This quarter did include a few things that I'm going to touch upon. We had a 16.6 million reversal of evaluation allowance on deferred tax assets that are related to net operating losses of the holding company. This quarter, a new legislation was enacted in Puerto Rico allowing limited liability companies to be treated as disregarded entities. Based on this change, we now expect that NOLs at the holding company will be mostly utilized against revenues from from one of its subsidiaries, resulting in the reversal. Also, during the quarter, we collected 2.3 million in payroll taxes related to the employee retention credit. That's been outstanding for a while but we collected it this quarter and and it resulted in a reduction of payroll costs obviously and we also recorded a 2.8 million valuation allowance for commercial other real estate property in the virgin island as a result of an ongoing litigation which involved a potential loss of title of the property if we were to exclude the dta evaluation allowance and and And the employee retention credit components from results, non-GAAP adjusted earnings per chair were $0.51, and return average assets was 1.7%. The quarter also had a reduction of $3 million in provision as compared to last quarter. Provision was $17.6 million. This was mostly due to a $2.2 million benefit in the allowance for residential mortgage. You know, we've seen improved updated loss experience in this portfolio, and also the projected macroeconomic for unemployment has an improvement in the trends. In terms of net interest income, you know, we reached $217.9 million for the quarter, which is $2 million higher than last quarter. That includes a $1.3 million improvement due to an extra day in the quarter. Compared to the third quarter net interest income, the third quarter of 2024, I'm sorry, net interest income, it's 8% higher. Net interest margin for the quarter was 457, one basis point higher than last quarter. And over the last four quarters, margin has grown 32 basis points debated in prior calls there the reinvestment of the cash flows from the investment portfolio resulted in a 16 16 basis points expansion in the investment portfolio yields however the margin ended up growing less than the five to seven basis point guidance we had provided um faurelio mentioned we saw a slowdown in consumer lending originations for the quarter which was below our expectations and ended up reducing the average balance in the portfolio by 12 million. Remember, these are high-yielding portfolios, and they are more creative to net interest income. Also, we saw increased competitive pricing pressures that led to a 15 basis points increase in the cost of government deposits and a two basis points increase in the cost of time deposits. The average cost of all other retail and commercial deposits remain flat at 72 basis points as compared to prior quarter. In addition, when we look at the mix of deposits, we see a shift with time deposits growing 166 million at the end of the quarter, while lower cost interest bearing no maturity deposits decreased 45 million regarding other loan portfolios we saw improvements in the quarter with net interest income on commercial loans increasing 3.8 million related to 126 million increase in average balances three basis points increasing yield and and we had an extra day in the quarter which also improved uh the the the net interest income the average balance on the residential portfolio grew 19 million for the quarter. For the fourth quarter, we will continue to benefit from yield improvements from the investment of the cash flows from the investment portfolio, but this will be partially upset by the two projected Federal Reserve rate cuts that would result in reduction in yields on the floating commercial loan portfolio, as well as the cash balances in the Fed. Remember, we have a floating commercial portfolio, which about half of it is exploding with either prime or so forth, mostly assets priced today. Considering that we have an asset sensitive position, repricing on the asset side will happen faster than on the liability side. We expect that margin for the fourth quarter to be sort of flat with increases in that interest income coming from loan portfolio growth. In terms of other income for the quarter, it was relatively flat, flat reduction on car processing income due to lower transaction volumes. Expenses for the quarter were $124.9 million, which is $1.6 million higher than last quarter. which is mostly due to the net loss on the OREO operation related to the $2.8 million valuation adjustment I just mentioned. Also, payroll expenses decreased $300,000 due to the $2.3 million employee retention credit. That basically compensated for the $1.8 million increase we had from annual marine increases and from an additional payroll day in the quarter. If we were to exclude Oreos and excluding the employee retention credit, expenses were $126.2 million, which compares to $124 million in the second quarter, which is slightly above our guidance, but pretty much in line with the $125 to $126 million we had provided. the efficiency ratio for the quarter was 50 percent pretty much unchanged also when compared to prior to the second quarter the project that expands trend for technology projects and business promotion efforts we plan to do in the fourth quarter and so we we reiterate our guidance expense base of 125 to 126 million for the next couple of quarters and still believe our efficiency ratio, efficient ratio will be in that range of 50 to 52 percent considering expenses and income components. In terms of credit quality, it remained fairly stable in the quarters. In the quarter MPAs decreased 8.6 million, basically 3.8 million decrease in non-accrual loans, mostly residential mortgages and CRE loans, and a $5 million reduction in OREO balances. That includes the $2.8 million adjustment on the VI property I mentioned. Inflows to non-accrual were $32.2 million, which is $2.2 million lower than last quarter. Mostly commercial and residential mortgage inflows of $6.7 million, which are offset by, I'm sorry, reduction of 6.7 million in residential and commercial with an offset of 4.5 million increase in consumer inflows. Loans in early delinquency, which we find it as 30 to 89 days past two, increased 8.9 million, mostly one case in the Florida region, a six million commercial case. that the payment was not received until later in October. In terms of consumer loans, early delinquency, it remained relatively flat from the second quarter, increasing only 300,000. Moving on to the allowance. The allowance is down 1.6 million to 247 million. The decrease is mainly in the residential mortgage portfolio as low severities have continued to improve. On the other hand, the allowance for commercial loans increased based on the portfolio growth and some deterioration that is projected on the CRE price index as part of the macroeconomic forward projections. The ratio of the allowance for credit losses to loans decreased four basis points to 189, and this was mostly a decrease of nine basis points in the allowance for credit losses on the residential mortgage portfolio. Net charge-offs for the quarter were 19.9 million, 62 basis points of average loans, which is up about $800,000 from prior quarter, or two basis points. Last quarter we had an $800,000 commercial loan recovery, and this quarter we did not have any of this size to offset some of the charges. As Aurelio mentioned, consumer charge-off levels continue to be normalizing and commercial charges continue to be very low. On the capital front, again, our strong capital base continues to support the actions of share repurchases and dividends. During the quarter, we declared $29 million in dividends and repurchased the $50 million in common stock we had mentioned. Regulatory capital ratios continue to build up as these capital actions were upset by the earnings generated in the quarter. In addition to all of this, we registered a 6% increase in the tangible book value per share to $11.79, and the tangible common equity ratio expanded to 9.7%, percent, also due to the 49 million improvement in the fair value of available for sale securities. The remaining AOCL still represents $2.42 in tangible book value per share and over 177 basis points in the tangible common equity ratio. As we announced yesterday, our board approved of an additional $200 million in share repurchase. Our intention is to continue the approach of opportunistically executing on our capital actions based on market circumstances, with the base assumption of repurchasing approximately $50 million per quarter through the end of 2026. But again, as we have done so far, we will continue to deploy our excess capital in a thoughtful manner, looking for long-term best interest of our franchise and our shareholders. With that, operator, I would like to open the call for questions.

Sure. We will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We will make a quick pause here for the questions to be registered. And our first question comes from Brett Rabiton with Host Group.

Hey, guys. I wanted to start off, just want to make sure on the tax situation, that's one time, right? That doesn't continue from here in terms of any benefit.

Well, there will be a benefit in the sense that we won't have reversals of deferred tax asset at these levels but there is a benefit uh on the normal operating losses or expenses we have at the holding company uh those are annual expenses that are now we're not yielding any tax benefit and and they will be offset also against uh revenues from from this sub so it's not a that it's a huge amount but uh you saw that the effective tax rate uh came down a bit and and that's reflecting some of that benefit so not at the level of this reversal of dta but there is a

a little benefit on on on the effective tax rate going forward okay that's helpful um and then wanted just to talk about i i've seen the stats and i know that um the auto lending has finally uh come in as expected for for some time a bit um you know any any thoughts on the health of the consumer in Puerto Rico, and, you know, your credit trends seem fairly stable from a consumer perspective, but just wanted to hear any thoughts on how you guys are seeing on the grounds consumer activity.

Well, I think, you know, it's clearly, you know, auto sales, we can call it normalizing, you know, we were expecting for the year, you know, 5% adjustment coming down. It's actually seven years to date, but obviously, you know, it disrupted by, you know, there were increased sales in the second quarter because of the tariff when they were coming. Now you see a reduction, some sales were accelerated. So I think we need to see, you know, what happened this quarter to, you know, to normalize those auto sales and see what is the real, you know, stable volume, you know, they have fluctuated between, you know, 100 to 120 units, 20 000 units per year for some years uh so we expect you know somewhere on that range probably probably the second half of the year will determine how we how we project 2026. yes credit demand has been it's been lower it's been on the other hand on secure credit mines being a little bit lower you know we we remember you know three years ago two years ago we we have been doing adjusted policies we've seen the good performance of the portfolios across the board, you know, and, you know, some of the higher losses that we experience in credit cards and on Secure are being leveling. So we expect stability on the consumer, but we don't expect portfolio growth as we achieved for some years. So the portfolio growth will come from Resi, which is performing excellent, and from the commercial portfolios that we continue to gain some share across the different sectors. So that, you know, I would say stability in the consumer, obviously working hard to, you know, diminish any contraction of the portfolio, you know, as we continue to move on with products and services in that segment.

Okay. And then one last one, if I can, just around the margin guidance for Fidish in the fourth quarter.

Does that assume, you know, in the face of the rate cuts, does that assume you are able to lower funding costs you know deposits you know even though the beta in puerto rico on the way up was obviously a lot slower than the mainland are you expecting the beta on deposits to be better on the way down i i think you know one element that definitely will come down we have some index deposits for the government that are they move with the rate and some of that will come down uh we we don't see the other core retail products you know coming down yet uh other than time deposits but we we do see some reduction other than time that they they happen you know they move with the market uh you know so there there would be some some some some reduction in cost of on the cost of deposits uh expected to happen you know during the quarter obviously how much that kind of offset the mix of the portfolio, obviously the margin is very strong, so having less consumer loans at high yield impact the margin directly, as well as which segments of the deposits are growing, which this quarter we have growth on the city book at market, not necessarily above market, so as an example, so it depends on the whole mix of the balance

sheet which is which is big yeah okay uh great appreciate all the color guys thank you and the next question comes from timor brazilian with wells fargo hi good morning good morning uh back on the deposits can you just elaborate a little bit more on the competitive pressures that you're you're seeing on the government side i guess how much economics are you having to give up how much of that is going to potentially lower some of the benefits of being able to reprice those with some of these rate cuts? And then just lastly, you said that you were optimistic that some of these competitive pressures might abate here. Maybe just give us some color as to what gives you that confidence.

Well, I think the cycle matters. Some of these are contracted deposits that are indexed so so they are already contracted and they're not necessarily offered up for bid so so so they would you know by if the rates move they would move uh with them you know either monthly or quarterly so some of them are you know in our case probably 40 percent of the government book is on that that pocket i think the others you know the city whatever matures obviously move down with rates. I think competitive pressures are really coming from the smaller players, not from the large players. And the way we manage that is we go after operational accounts plus what additional services the government entities need. But we compete in pricing where we have other type of relationship, not just to get a CD or it really has to add something else to the to the mix of the products that we sell on the friday services you know municipalities uh and other government these have a lot of payment services deposits so and obviously to complement that you know we compete on cds when they come to the market okay and i guess maybe tying that into kind of 4q 1q is the expectation that deposit costs drop with these subsequent rate cuts, or do some of these, I guess, how much of an offset

could some of these competitive pressures be to the land drop in deposit costs?

We do expect some reduction in deposit costs coming down as a result of the reduction in rates. The main point is that typically we have seen the betas on some of these deposit products move at a, there is a lag as compared to some of the floating asset products. So there is a timing issue in terms of when we see that on the asset side versus the deposit side. But we do expect reductions is just the pace at which all of them will come down. Okay.

And then just on credit, credit results at First Bank and 3Q were really strong. There was a couple let's say in migrations, inbounds on the NPL side for your competitor banks on the island, including some degradation maybe on Puerto Rico itself. I guess to what extent does credit at the other banks influence your own level of reserving and the way that you're thinking about your own portfolio, if at all?

Well, we've been telling for some time that you know we have a firm risk appetite and we have policies that we follow and we have you know the ticket you know deal size tickets that we that we cap and so you know it really our methodology is really the performance of our portfolio obviously if there are things that could impact an industry you know we take that into consideration but you know well from what we have seen so far we don't see any systemic or industry-wide, you know, impactful.

Yeah, other than, you know, we tend to look at each of our cases individually. And again, as Aurelio mentioned, unless we see something in industry, it would be more of what we're seeing on our own customer base and what are the results and the lines of business they have.

Okay, great.

And then just last for me, I think more recently, First Bank has been open to doing maybe M&A on the mainland. Can you just remind us of what you would be considering in terms of size, location, assets, deposits, and kind of just your updated view on capital deployment here?

Well, you know, capital deployment priorities are obviously number one organic growth. So, you know, a fit in the Florida market could be an alternative. If it's for us, you know, it's a franchise that enhances, you know, our current franchise. You know, it's very easy to originate loans in Florida if you have the right team, and they move from one back to the other, and as long as you have a good discipline of credit, you will perform well. And I think we have a history of that. I think it would be definitely have to be complementary to our deposit franchise. That would be the profile. We have the capital, so size will depend. Thank you for the call.

Thank you. And our next question comes from Kelly Moto with KBW.

Hey, good morning. Thanks for the question. Good morning, Kelly. I wanted to circle back to the competitive landscape in Puerto Rico. I appreciate the color around the government deposits. Wondering if there's been any, you know, competitor competition from outside the Puerto Rico banks, if you've seen any new entrants into the market and just opine on the competitive landscape.

You know, none of the deposits, you know, it's really, you know, what we see, it's more aggressive now in the smaller players, as I mentioned. You know, obviously, in the credit card business, there's always been, you know, a lot of entrants, and they dominate, U.S. banks dominate the card issuance, including, you know, the larger brands, so the larger banks, so nothing new on that front.

And it's also the credit unions that play in the market, but not coming from the outside. It's entities that have operations in Puerto Rico.

Okay. Got it. That's helpful.

I'm sorry. The only caveat, Kelly, I'm sorry. The only caveat is there is one player, big player, which is called the U.S. Treasury. And you face that with some of the high-end customers that they could move monies into treasuries. Yeah.

Got it. That's helpful. Um, there's been a lot of news on, um, on shoring, you know, early glimmers of that picking up and, and helping Puerto Rico. Have you seen any notable impacts and how should we be thinking about that? Like more from a high level in terms of, um, the potential.

Yeah, I think, you know, in the short in the in the short term, you know, they have announced a few deals. And we will try to put some more detail on that in our investor deck, a more granular things that have been already approved or negotiated, you know, we're trying to get more data on that. In addition, you know, but we don't see that, you know, you know, it's really in the short term, probably, you know, we continue to sustain and improve the construction sector and whatever is related to materials and the labor-related benefit of that, but not necessarily we see anything that most flows through the economy other than that, in fact, in the short term. As we see these expansions become you know operational then we'll probably see you know more employment you know better compensation and and expansion of the workforce yeah but we don't expect that until probably you know second half 2026 or further but it you know it the good thing is it's a long-term benefit to sustain you know the economy of the island rather than having a long-term risk By not having this comment, yeah.

Got it. That's really helpful. And then I guess circling back to the margin, I know you guys have had – we saw a nice uplift from the securities book. Can you remind us about the cash flows on that, one, and then, two, what the new low-yield originations look like, just so we can kind of get a sense of the potential offset to some of the floating rate dynamics that you already articulated?

So we have about 600 million of cash flows coming in this fourth quarter. The yields on that are around one and a half percent on average. So that would be some of the cash flows that would immediately reprise. We also have um about a billion more in the first half of 2026 that also you know on average are yielding that one and a half percent that it's also come to um obviously with rates coming down the reinvestment component it's uh it's a bit lower than what we were you know we're seeing rates somewhere between 50 to 100 basis points lower already in some of the reinvestment options within our policy guides, and some of it obviously could go into lending, but as Abrelio made reference to, it would be more on the commercial and residential side.

Okay.

And if your loan book right now is 777, what does the new loan origination yields look like, I guess, in Q3? you're talking about uh the overall or you're talking about just the uh the the other that's the average yield looks that average those are average yields including consumer uh you if you if you take a look at the at the commercial side uh mortgage we're talking about um sort of six percent uh six and a quarter kind of rates right it's marketed so whatever you see in the market uh the commercial portfolio yields are right now overall commercial portfolios including everything it's about um um 670 on average uh so that's a combination of what goes into um construction or or CRE and CNI obviously um so that that you know we are not seeing big changes on spreads it's a function of the of the base uh the base meaning the the base rate uh which we either uh so far or or prime which are the main ones that would be the the ones the adjustments we'll see but uh but not necessarily on the spreads it's a lot more consumer consumer you know yields are going to be similar to what we have now. But it's only an issue of what's the level. We, you know, consumer on average are about 10.5% that what we have in the, in the blended in the whole portfolio of consumer portfolio. And that should stay sort of around those levels. But it's a function of volume more than anything on the consumer.

Okay, thank you.

Thank you. So just as a reminder that if you'd like to ask a question, e-star one on your telephone keypad. The next question comes from Aaron Sikonovic with True Securities.

Thanks. I'm sorry if you mentioned this, but what's your outlook for loan growth into the fourth quarter? I think you said that NII is expected to be higher despite the kind of flattish name. Just thinking about what you're thinking there on loan growth.

Yeah. I did mention that we have the guidance that we have for the full year. It's between three and four percent. And I think the original guidance was five, mid-single-digit. You know, this is actually considering what happened in the auto lending side over, you know, the third quarter and actually part of the second quarter. It's a primary driver. You know, some offset has been provided by mortgage, and we do have a fairly strong five lending commercial. Obviously, there's always timing issues on those, but for the pilots continue helping.

Okay, and you announced a new share repurchase program and there's still some remaining authorization from the prior plan. Can you talk about the cadence you're expecting in terms of share repurchases over the next several quarters?

Well, you know, we we always been opportunistic in the market and and we still have 38 million from the from the this year authorization. We can, you know, you know, move back and forth and increase or decrease as we believe is prudent. Again, you know, open market is our approach, you know, no ASRs are, you know, on schedule or as part of the strategy, so we'll continue monitoring.

Yeah. As I mentioned, our base assumption continues to be around 50 million a quarter, obviously, with the flexibility or the optionality of saying a little bit more, a little bit less depending on what are the circumstances on the market.

All right. And then lastly, just to follow up on the mainland M&A question, I mean, it seems like a lot of other mainland banks are also looking to expand in that geography. You know, would you say that the environment currently would be somewhat challenging to get a deal done, you know, around that area?

You know, again, you know, opportunities come and go. So, you know, we'll see, we'll continue to monitor and see, you know, what could happen. I think there's, there's some, you know, if you see some of the Mac reports, obviously there's a credit site could be more reflected in the U.S. So that could bring opportunities. Okay. Thank you. These are always, you know, these are always the timing opportunity.

Thank you. right the next question comes from steve moss with raymond james uh good morning maybe um orlando just following up morning and maybe just following up orlando on the margin here in terms of the timing of the cash flows from the securities portfolio is that just you know is that throughout the quarter is that kind of late in the quarter to impact the margin uh Well, you know, you saw it's not really equally spread, but you can assume it's on average, you know, November and December tend to be the highest in terms of the cash flow coming in. You saw that last quarter, we had that 16 basis points pick up. Uh, so, so we, we had about 500 million, uh, for this, for the third quarter that, uh, those were the cash flows, um, uh, more or less that we're having, you know, the, the big repricing impact. So, so we, you know, and all of it, all of it did not benefit the third quarter. Some of it we'll see in the fourth quarter. Uh, so, so it averaged out a bit. So we should see, pick up, obviously with the only difference is what I mentioned, that we are seeing rates, the options that we have in rates being between 50 to 100 basis points lower based on our policy guidelines of what we put in the portfolio. as you know we we don't we don't put much of credit risk in the portfolio it's it's it's more of a interest rate more than anything right okay just appreciate that color and then on the uh loan loss reserve here you guys have made you know a number of i guess qualitative

adjustments if you will over probably last 12 or maybe 18 months just kind of curious here um And, you know, kind of as you think about credits performing quite well on the island for an extended period, you know, your consumer credit charge offs are lower year over year. Just kind of curious as to, you know, where you think that reserve ratio could shake out over the next six, 12 months.

It's, you know, we don't talk about specific guidance like that is specific. But what I can tell you is that on the mortgage side, we have seen the trends with the lower charge-offs that our methodology uses historical loss information that it's updated, you know, all the time. And obviously, as you get more history with better numbers in terms of losses, that improves the ratio. So the residential reserves should come down. There is always an uncertainty on the forecast, the macroeconomic forecast projections. We've seen the stability on the unemployment sector, the unemployment ratios in Puerto Rico reflect on the way the trends are expected on some of the portfolios, especially when you look at the downside scenarios we do include in our reserves calculations. So a mortgage, I do expect, you know, with credit expectations we have, that it would come down, continue to come down a bit. Consumer, we're still seeing, obviously, we had, as you mentioned, the 23, during 23 and 24, we saw increases related to those vintages of the older vintages, the 22 and 23 vintage. We see more stability now on the charge-offs and that affects calculations. So that for now will be sort of stable, I would say, in the meantime. And commercial has been pretty good, so I don't see major changes in commercial.

Okay, great.

I appreciate all the color.

Thank you. Thank you, Steve. Thanks, Steve.

Just as another reminder that if you'd like to ask a question, it's star one on the telephone keypad. We have a follow-up from Kelly with KBW.

Kelly Cervantes Hey, thank you for letting me jump back on. I just wanted to close the loop on the tax rate just given it looks like the FTE adjustment is up a bit and there was some noise in the quarter. Do you have a good approximation of what the go-forward tax rate looks like here? Is it any materially different after adjusting for some of these one-time things you had in the quarter? Any help would be appreciated.

The number that we put in the press of effective tax rate of about 22.2 percent, which is the estimated for the full 2025, already reflects some of these expected improvements. So I would say that's a good number to use as a guidance. You know, remember that a few things here and there. As we reinvest on the investment portfolio, a large chunk of that would have tax benefits. And since we are reinvested at better yields, that reflects on the rates. Then you have other components of the operations on some of the growth on the commercial lending side. That's on a taxable side. So the 22.2, I think, reflects a fairly good number that should be between that 22 to 22.5% range. It's what I'm expecting now. Got it.

I apologize. I missed that in the release. Thank you.

Thank you. So just as a final reminder, a star one on your telephone keypad to ask a question. And as we have no further questions in the queue, I will hand back over to Armand Rodriguez for any final comments.

Thanks to everyone for participating in today's call. We will be attending HOPD's Financial Services Conference in Naples on November 4th. We look forward to seeing a number of you at this event and we greatly appreciate your continued support. Have a great day. Thank you.

Thank you everyone for joining today's call. This concludes the call, please. You may not disconnect. Have a great day.