Thank you, Becky. Good morning, everyone, and thank you for joining First BanCorp's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2025.

Joining you today from First BanCorp are Aurelio Alemán, President and Chief Executive Officer, and Orlando Berges, Executive Vice President and Chief Financial Officer. Before we begin today's call, it is my responsibility to inform you 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 release, you can access them at our website at fbp-investor.com. At this time, I'd like to turn the call over to our CEO, Aurelio Alemán.

Thanks, Ramón, and good morning to everyone, and thank you for joining our call today. Our results for this quarter represent a strong capstone to a year of outstanding performance and disciplined execution, highlighted by record revenues, positive operating leverage, and a stable credit performance.

We did deliver top performing bank across multiple metrics. We produced $87 million in net income, or 55 cents per share, generated a top-quartile return on assets of 1.8%, and prudently managed our expense base, resulting in a 49% efficiency ratio for the quarter.

Turning to the balance sheet, we continued to first and foremost deploy our capital to support our clients by facilitating $1.4 billion in loan origination during the quarter. Total loans grew by $80 million, mainly reflecting growth across the commercial segments.

Growth was slightly impacted by elevated commercial loan payoffs and slightly lower consumer loan production. Core customer deposits increased by $267 million, and more importantly, we achieved this while productively continuing to reduce total deposit costs.

In addition, government deposits decreased during the quarter as we continue to look for efficiencies in higher cost deposits in this part of the cycle. That said, we also see a pickup, a 3.2% pickup in core non-interest bearing deposits during the quarter.

On the asset quality side, the ratio of non-performing assets to total assets continued to decrease, reaching an all-time low level of 60 basis points during the quarter. Consumer credit continued to stabilize, net charge-offs to average loans at 63 basis points, essentially flat to the prior quarter.

Finally, this quarter, we repurchased $50 million in shares of common stock and declared $28 million in dividends. I think to put in perspective, since we began the buyback program in 2021, we have repurchased over 28% of shares outstanding.

Still, given our excess capital position and meaningful capital generation, we are well positioned to further increase our return of capital to shareholders in 2026. As such, we're very pleased that our board approved an 11% increase to the quarterly common stock dividend to 20 cents per share, starting in the first quarter of 2026.

Please let's move to slide 5 to provide some highlights of the full year. Definitely 2025 was a year of changes, geopolitical and the macro, but again, significant progress as we demonstrate the investments we're making are driving strong operating performance.

We crossed $1 billion in total revenues, generated record net income of $345 million, grew earnings per share by 19%, and posted a strong 1.8% return on assets for the year, all while improving our capital and liquidity levels. Our strong profitability allowed us to continue returning approximately 95% of earnings to shareholders, while increasing tangible book value per share by 24%.

Our consistent investments to advance our omnichannel strategy and improve our interaction with customers across multiple channels, meaning digital, branch, continue to show encouraging results. In both channels, digital and personalized branch contact, results were improved.

Active retail digital users were up 5% when compared to last year. 95% of deposit transactions were captured through self-service channels, and our branch sales and service delivery efforts continue to pay off.

In terms of the macro, I think the second half of the year showed slightly lower economy in our main market. In spite of this, we do remain constructive on the underlying trends to the economy for 2026.

On one side, we do expect consumer confidence to moderate somewhat. Impact of tariff-related pricing inflationary pressures and geopolitical tensions will continue to develop through the year.

On the other hand, we see multiple developments that will serve as important driver of stability and the future for the growth of the economy, both in Puerto Rico and actually our second market, Florida. Resilient labor market here, unemployment rate hovering about 5.7%, another year of strong tourism activity, passenger traffic at the airport up 3%, reaching a record height of 13.6 million passengers, already over $2.2 billion in announced investment to expand manufacturing capacity in the island driven by the onshoring efforts, and the consistent flow of federal disaster relief funds that will support critical infrastructure development for the years to come.

There is still $40 billion in the year. We don't have final numbers yet on the last quarter, but it seems it was basically flat to prior year in terms of disbursements of the federal fund programs.

Looking ahead to 2026, again, we have ample experience navigating dynamic environments, and we are definitely well positioned to continue growing within our markets and deliver consistent returns to the shareholders. Our guidance remains largely unchanged.

We're focused on delivering 3% to 5% organic loan growth, sustaining a 52% or better efficiency ratio, maintaining a strong profitability metrics, and returning close to 100% of annual earnings back to shareholders. Asset quality is expected to remain stable, with consumer credit quality gradually returning to pre-pandemic levels, as we have seen, driven by basically inflationary pressures to the consumer, even though compensation is better and there is a stable unemployment.

We are in great capital position, continue to make the right investments to modernize, enhance our franchise, to drive both growth and efficiencies, and deliver strong performance in 2026. With that, I thank you for your continued trust.

I thank our clients, and we are very grateful to our dedicated employees for their commitment and support, and we're looking forward to another exceptional year for our institution. With that, I will now turn the call over to Orlando.

Thanks, Aurelio, and good morning, everyone. As you saw in the release, this quarter we earned $87.1 million, 55 cents per share, which compares to the $100.5 million or 63 cents a share we had in the third quarter.

Last last quarter results included the reversal of $16.6 million valuation allowance on deferred tax assets related to to net operating losses at the holding company, and we also had a $2.3 million employee tax credit, that if we exclude both of them, represent about 12 cents per share for the quarter. Comparing the the quarters, excluding these items, earnings per share was 8% higher this quarter from from the the amounts in the third quarter.

Adjusted pre-tax pre-provision income was $129.2 million, which compares to $121.5 million in in the third quarter. For for the full year '25, net income was $344.9 million, which represents $2.15 per share, and adjusted pre-tax pre-provision income reached an all-time high of $499.2 million, which is 10% higher than 2024.

On a on a non-GAAP basis, adjusting for the items I mentioned before, net income reached $325.3 million for the year, which is $2.02 per share, which is 8.6% higher than than 2024. Return on average assets for 2025 was 1.81%, which compares to 1.58% in 2024.

On a non-GAAP adjusted basis, return on assets was 1.71% for the year. 2025 marks the the fourth consecutive year that we surpassed our return on average target return on average assets target of 1.50%.

Again, strong strong year, and we are pleased, very pleased with that. In terms of net interest income for the quarter, we have an increase of $4.9 million for reaching $222.8 million.

This includes $800,000 we collected on on a nonaccrual loan that was paid off, as well as $500,000 collected on a prepayment penalty on on a loan that also was paid off in the Florida region. Net interest margin for the quarter was 4.68%, but adjusted for these items would have been 4.65% or 8 basis points higher than last quarter.

If you recall, we were expecting that margin would be sort of flat for the quarter, but we were able to achieve a $2.2 million reduction in interest expense on deposits, largely due to a 31 basis points reduction in the cost of our government deposits. This this was higher than we had anticipated.

We were able to reprice some of the accounts based on market rates, and and the reduction we had in government deposits that Aurelio mentioned was mostly seen on on the higher-cost accounts. Also, the the cost of other interest-bearing checking and savings account decreased 4 basis points during the quarter.

We combine all of these items with the with the fact that we grew non-interest-bearing deposits by about $170 million in the quarter. This helped reduce the overall funding cost for the quarter by 5 basis points.

Meanwhile, we we continue to see the pickup in the investment portfolio yield through the reinvestment of cash flows that we have been mentioning. During the quarter, we registered a $4 million increase in income from investments as we continue to replace lower-yielding maturing securities with higher-yielding ones.

This resulted in a 33 basis points improvement in the yield. A little bit offset or by $2.4 million decrease in in income from cash accounts due to the reduction on the Fed funds rate and and lower average balances in the quarter.

On on the lending side, the yield on the C&I portfolio came down 27 basis points as compared to last quarter as the floating-rate portion of the portfolio repriced tied to the reduction in prime rate and and and the reduction in SOFR. The the yields on the other loan portfolios remained at very similar levels, resulting in an overall reduction of only of the loan portfolios of only 7 basis points.

This this this reduction in yields was impact partially compensated by by an increase of $155 million in the average balance of the of loan portfolios. What we what we expect it's that some of the same dynamics in 2026, some of the same dynamics that drove margin for 2025, we have approximately $848 million in cash flows during 2026 coming from securities that have an average yield of 1.65% that will definitely be repriced at higher rates.

Out of this amount, $494 million are expected in the first half of the year, benefiting the the second part part of the year. Based on current expectations that we have for interest rate changes in the year in in 2026, and our projected loan and deposit movements, we expect expect that margin will grow 2 to 3 basis points per quarter during 20 2026.

Other income items, we had a $3.5 million increase against prior quarter. Part of it was related to a $1.8 million gain from purchase income tax credits, and we also had an increase of $1.6 million in mortgage banking revenues and card processing income based on volumes of sales and transactions.

Operating expenses for the quarter were $126.9 million, which is $2 million higher than last quarter. Employee compensation was $3.4 million higher, but this was related to to the $2.3 million employee retention credit that was recorded during the third quarter.

Actual increase was $1.1 million, which was due in part to the full-quarter effect of merit increases that were granted in the third quarter. We also saw in the quarter an increase of $2.1 million in business promotion, which it's mostly related to seasonal marketing efforts.

These these increases were partially compensated by an improvement in in REO operations, since we during the You might remember that during the third quarter, we booked $2.8 million valuation allowance on a repossessed property that we didn't have this quarter. We also had this quarter a reversal of $1.1 million of part of the accrual for the FDIC special assessment.

Expenses before OREO results and and the reversal of the accrual of the FDIC special assessment were $128.8 million for the quarter, which compares to $126.2 million in the third quarter, adding back the the employee retention credit. This is slightly higher than than our guidance, and reflects some of the investments we're doing in technology, but the efficiency ratio remained strong, coming down to 49% in the quarter.

At this point, based on the projected trend for ongoing technology projects and and some of the business promotion efforts we were undertaking at the beginning of the year, we expect that quarterly expense base for 2026 will be in the range of $128 to $130 million, excluding the OREO losses, gains or losses, I mean. However, we we do believe that our efficiency ratio will still be in that range of 50 to 52%, considering the changes on the expense side, but also on the income components.

In terms of asset quality, we saw a stable quarter. NPAs decreased by $5.3 million.

Basically, we we had two commercial cases, nonaccrual cases, that amounted to $15 million that were collected in the quarter, and we had a reduction of $1.8 million in OREO, other real estate owned assets, as a result of sales we achieved during the quarter. On the other hand, we had the two two C&I loan cases amounting to $12 million that migrated to non-performing in the quarter.

Overall, nonaccrual loans represent 70 basis points of total loans compared to 74 basis points at the end of the third quarter. In terms of inflows to nonaccrual, they were $14 million higher this quarter, $46 million, but it's related to these two cases that I mentioned that went into non-performing, two C&I loan cases.

In terms of delinquency, we saw loans in early delinquency, which we define as 30 to 89 days past due, increase $2.1 million. It was mostly on the auto portfolio that increased $7 million, but we had some reductions of $6 million in the Florida C&I loan delinquencies.

The allowance for credit losses on loans increased $2 million in the quarter to $249 million, represent 1.9% of loans, compared to 1.89% in the in the third quarter. This increase mostly relates to the growth we had in the commercial and residential mortgage portfolios.

Net charge-off for the quarter were $20.4 million, or 63 basis points of average loans, fairly in line with the with the 62 basis points we had in the prior quarter. On the on the capital front, we obviously our strong profitability allowed us to repurchase continue the repurchases.

We we did $50 million in repurchase of shares in the quarter, and we declared $28 million in dividends. Regulatory capital ratios continued to build up as these capital actions were offset by the earnings we generated in the quarter.

We also registered a 4% increase in tangible book value per share to $12.29, and the TCE ratio expanded to 10%, mostly due to $38 million improvement in the fair value of available-for-sale investment securities. The remaining AOCL now represent $2.22 in tangible book value per share, and slightly over 160 basis points in our tangible common equity ratio.

Again, this year, we sustained our commitment to deliver close to the 100% of earnings, as Aurelio mentioned, through capital actions. We repurchased This year, we repurchased $150 million in common shares.

We paid $115 million in dividends, and and redeemed the remaining $62 million in subordinated debentures, while growing our tangible book value per share by 24%. As we announced yesterday, our board of directors approved an increase of 2 cents per share quarterly dividends.

Again, our intention is to continue the approach of of executing our capital actions based on market circumstances, with with our base assumption of repurchasing approximately $50 million in shares per quarter through through the end of 2026. Again, as we have done so far, we will continue to deploy our excess capital in a thoughtful manner, always looking for the long-term best interest of the franchise and and our shareholders.

This concludes our prepared remarks. Operator, please open up the the call for questions.

Hi, guys. This is Anya Pelshaw speaking on behalf of Brett.

We were just wondering if you feel there's any more mix shift change with lower liquidity and any other levers that might aid the NIM going forward from here?

The levers would be similar. I think it's going to come from these cash flows on the investment portfolio.

We still have those low-yielding securities that are coming due. Again, as Aurelio mentioned, we see the loan pipeline on the commercial side and residential being really strong, not so much on the consumer side, which are higher-yielding assets.

Still the mix of these items with the options to reprice some of the deposit components as rates come down, those would be the key drivers. The 2 to 3 basis points we just mentioned, it's that mix that we expect happening.

Right now, we're assuming there's going to be probably two more rates toward the end of the year and two more cuts, and that would have some impact. Clearly, the repricing of the commercial portfolio, the floating side does have some impact, and that's included in our numbers.

The rate reduction we had in mid-December obviously is going to reflect more on that portfolio now in the first quarter. The overall, we still feel that there should be an improvement in margin.

Thank you. What are you guys seeing as far as competition goes?

How much more do you think the cost of funds could be lower with lower rates? What are you seeing as far as the competitive front?

We haven't set a specific number, but you have to look at components. Number one, we do have still some wholesale funding through broker CDs mostly.

Those are repricing with market. We don't have long-term issues of brokers.

Mostly, they were originally issued somewhere between 9 months and 18 months. Those are coming due and are being reissued to fund our Florida operation at lower rates.

The other component, it's the time deposit side. Obviously, with rates coming down, we're seeing some of the ones that were issued at higher rates now being repriced at slightly lower rates.

As rates come down, some of the other government deposit accounts will have some repricing. Some of them are tied to market indexes.

Those are where we see most of it. The regular transaction accounts, they could come down a little bit, but not so much.

As if you go back, you'll see that they didn't go up as much either when rates were going up. We expect similar trends.

Those accounts had a 14% beta. We don't see that changing that much, but the other components are expected to come down.

Thank you. You guys touched on credit quality a little bit during your talk, but was just wondering if you could expand on, it's obviously fairly stable, but is there anything that you see might change that for better or for worse?

No. In reality, we believe there's stability.

We don't see any specific noise. We saw some deterioration on the consumer delinquencies, which is normal life, also charge-off.

I think we call it stable when you look at the mix of assets. Mortgages at its lowest ever point, and commercial similar to that.

We don't see potential disruptors on that, and closely monitoring the unsecured market on the consumer. We're encouraged by the recent trends that we see in the portfolios, yeah.

Thank you. That's all for me.

Thank you.

Thank you.

Good morning.

Morning. Good morning, Steve.

Morning. Maybe just on the loan growth front, just curious with regard to auto if you have any updated thoughts about what you're seeing in that market.

I heard Aurelio, your tariff comments earlier, but just kind of curious, any new thoughts or incremental color you may have.

Yeah. When we look at what happened last year, the overall market on the retail side, was down 10%.

Most of that contraction happened after the tariff were implemented. If you consider that it's actually the second half of the year, the reduction was over 15% compared to prior year.

We We believe we have seen months of stabilization at a level that will be around an additional 5% this year contraction, considering that normalization of the last quarter, unless there's some reversion on the pricing. It's very fluid because some of the manufacturers are still looking to adjust pricing down.

Some of them implemented the tariff immediately. Others didn't.

The ones that didn't, obviously regained some of the share. The others lost shares.

This is the percentages I provided you is a combination of all of the industry. We saw the quarter, we saw a contraction in the portfolio of about $6 million overall in the two segments.

A little bit probably 7 in that range. Obviously, we're looking forward to stabilize the portfolio and recuperate that contraction.

We don't expect any growth at all in the segment. Unless there is adjustments on tariff or excise tax in the island that could help that industry.

Still a pretty good year for the auto sector. We're just coming from exceptional years, everything is relative to the prior period.

It will be a stable if we compare to other cycles of the auto sector. Then The consumer demand on the other products is kind of stable, but we don't see growth as we continue to focus on underwriting in a sound manner.

Okay. That's helpful.

Then on the securities cash flows, just kind of curious as to how you're thinking about the reinvestment of proceeds here. Is that largely continued, new investment securities purchases, just maybe curious as to what you're seeing for the yield on those cash flows.

As we don't take credit risk on the portfolio. It's a market-driven kind of situation.

We're expecting that we can see somewhere between 2 and 3 basis points pickup on those cash flows, depending on the securities and the loan side, both of them. We'll continue to see agency investments, CMO investments, and agency pass-through.

That's the kind of things that we typically do most. The first half of the year, at this point, we're not expecting significant changes on rates.

Probably end of June, early July, it's where we are expecting that. I think that the market is somewhere in there also.

That allows us to maximize some of the reinvestment of these items. I see it always as a 2 to 3 basis points pickup on those 1 1.65% that matures on the first half of the year.

Okay. Appreciate that, Orlando.

Then on the telecom NPL, was that a club deal? Just kind of curious, any color you can give there, and kind of thoughts on maybe timing of potential resolution.

Yeah. There's not a lot of new information on it.

I think all banks continue to work with the lead bank on understanding with the resolution. There's a lot of value behind it, obviously, I think it's just waiting.

As we manage any other NPA, towards resolution, that's the main goal. It's just matter of time and progress.

Yeah. For us, it's a very small participation, yeah.

Right. Okay.

Then just one last one for me here. On capital, you guys have been, steady with your capital ratios here.

Just kind of curious, definitely on on the mainland, there's more of an attitude towards a greater return of capital to shareholders and reducing, common equity Tier 1 Tier 1 ratios. Just kind of curious if you guys are thinking of about anything along those lines these days.

Obviously our priorities are to organic growth as much as we can. We continue organic expansion in Florida also.

We just opened in the last quarter an office in Boca Raton. Then obviously there could be non-organic opportunities always open and looking.

If nothing comes to the table that meets our accretion and strategic value, we continue using the capital to continue deploying to shareholders, buying the shares. We always have the three options.

Organic, it's the most efficient in terms of returns. The others, we continue to play them both as market show opportunities.

We try to be as opportunistic as we can, so.

Okay. Great.

I appreciate all the color then. I'll step back in the queue.

Nice quarter.

Thank you.

Hi, this is Charlie on for Kelly Motta. Thanks for the question.

Just a point of clarification, I was just wondering specifically how you guys are calculating the efficiency ratio you guided to 52%. Is that ex-OREO gains or just a point of clarification there, thank you.

The efficiency ratio is typically calculated with everything. As you saw the number, this quarter was including everything.

We tend to calculate it on a GAAP basis so that it's reported consistently. That number has been coming down as we have continued to settle some of those OREO properties we've had on the market.

The older properties that we had repossessed were taken at lower values and that's been compensated. We do include it as part of the guidance of the 52%, even though we do include the expense guidance without it because of the volatility it could present on total expenses.

The 52, 50 to 52 guidance is on a GAAP basis considering movements in expenses and in revenues.

Great. Thank you.

Then you saw some great non-interest bearing deposit flows this quarter. Just wondering if you could dig into that a little and remind us of any seasonality or changes in your go-to-market strategy that drove this.

Thank you.

That is that is a goal. That's the value of the franchise, and we have multiple initiatives always in play to achieve that, and build core relationships that bring that.

It's a core strategy that we put a lot of emphasis across all regions. For this year, in efficiency ratio, as Orlando mentioned, for example, we will be opening a new branch in the west coast in a town that there's only one bank competing.

That's an area that we've been expanding. That obviously the goal is to grow customers, grow non-interest bearing deposits, and grow loans in the same regions, which the branch also is a vehicle for small business lending and all type of loan originations.

It's a key strategy, and obviously you have to look for tactics and sales strategies and products to achieve it.

Great. Thanks for taking my questions.

I'll step back.

Thank you.

Thank you.

Thanks to everyone for participating in today's call. We will be attending BofA's Financial Services Conference in Miami on February 10th and KBW's Conference in Boca on February 12th.

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.