First BanCorp (FBP) Q1 2026 Earnings Transcript

First BanCorp delivered strong Q1 results, with net income up 21% year over year to $88.8 million, EPS of $0.57, and pretax pre-provision income at an all-time high of $131 million. Credit quality improved materially as early-stage delinquencies fell 24% sequentially and nonperforming assets declined $5.3 million, while NIM expanded 7 bps to 4.75% and management reaffirmed 3%-5% loan growth guidance. Capital returns remained aggressive at $81.5 million combined buybacks and dividends, equal to 92% of net income, even as the CET1 ratio stayed elevated at 16.9%.

Analysis

FBP is executing the classic late-cycle bank sweet spot: asset yields are still re-pricing upward faster than liability costs, while credit remains benign enough to let capital return stay aggressive. The second-order winner is not just FBP shareholders; it is the broader Puerto Rico/Florida franchise model, because management is effectively converting a shrinking consumer book into a higher-quality, more fee- and commercial-heavy mix without sacrificing margin. The reinvestment runway is still meaningful, so near-term earnings power likely remains underappreciated even if reported loan growth looks mediocre.

The bigger tell is that capital return is not a sign of a lack of uses for capital; it is a signal that management sees no urgent need to hoard for credit, and that is a bullish read on underwriting. That said, the market may be too relaxed about concentration risk: consumer delinquencies improved sharply, but the portfolio is still exposed to auto and local macro shocks, and the reserve framework is now leaning on benign macro assumptions plus a geopolitical overlay that can change quickly. If oil/inflation pressures hit Puerto Rico consumption harder than the bank expects, the first-order hit will show up in originations and delinquencies before it appears in headline NPAs.

The contrarian angle is that FBP’s multiple may be capped by the belief that this is a “high-yield but slow-growth” story, when in reality the setup is closer to a levered net interest margin compounder with optionality from securities reinvestment, deposit mix, and share count reduction. The risk/reward improves over the next 1-2 quarters if deposit beta stays low and commercial pipeline conversion holds; it deteriorates if rate cuts arrive too late to help NIM but early enough to pressure asset yields without giving much relief on funding. The AI/tech spend is a medium-term drag, but it is also a moat investment: if execution is real, expense growth should decelerate in 18-24 months while revenue per employee improves.

Key Decisions for Investors

• Long FBP common into the next 1-2 quarters on pullbacks: thesis is 3-5% loan growth plus ~2-3 bps quarterly NIM expansion can still drive EPS upside even with flat-ish balance sheet growth; risk is a consumer slowdown in Puerto Rico before commercial origination converts.
• Sell FBP 12-18 month covered calls against a core long: capital return and TBV accretion should support the stock, but the market may not fully rerate until the reinvestment benefit is visible in quarterly NII; option premium can monetize the valuation ceiling.
• Pair trade: long FBP / short a lower-capital-return regional bank with weaker deposit mix and slower securities repricing over the next 6 months; FBP has better self-funded EPS growth and more visible buyback support.
• Watch for a tactical add if the stock weakens on 'low loan growth' headlines: the better entry is on any miss from consumer contraction, since the commercial pipeline and securities runoff should offset part of the drag over the next two quarters.
• If you want a cleaner rates expression, use FBP as a selective long against FIS or other tech-exposed financials only if market fears accelerate on AI spend; FBP’s spend is temporary while earnings support is near-term.