First Bancorp (FBP) Delivers Record Year, Confident Outlook

First Bancorp (FBP) ((FBP)) has held its Q4 earnings call. Read on for the main highlights of the call.

First Bancorp Caps Record Year With Confident, Yet Cautious, 2026 Outlook

First Bancorp (FBP) struck an upbeat tone on its latest earnings call, underscoring a record year for revenue and net income, stronger profitability metrics, and meaningful capital returns to shareholders. Management highlighted steady improvements in deposits and asset quality and laid out constructive 2026 targets for loan growth, efficiency and margin expansion. At the same time, executives were candid about headwinds from loan repricing, a weak auto market, selective credit inflows and a rising expense base tied to technology and growth investments. Overall, the call painted a picture of a bank with solid operational momentum and ample capital flexibility, navigating manageable risks.

Record Full-Year Revenue and Net Income

First Bancorp closed 2025 with more than $1.0 billion in total revenues, delivering record net income of $345 million and diluted GAAP EPS of $2.15. On an adjusted basis, which strips out certain one-time items, net income reached $325.3 million, or $2.02 per share, representing an 8.6% increase over 2024. Management framed this performance as evidence that the bank’s diversified business model and disciplined balance sheet strategy can generate consistent earnings growth even in a shifting rate and credit environment.

Strong Profitability and Returns on Assets

Profitability metrics moved decisively higher in 2025. Return on average assets rose to 1.81%, up from 1.58% in 2024, marking the fourth consecutive year the bank has exceeded its multi‑year target of 1.50% ROA. This sustained outperformance signals not only higher earnings power but also improved balance sheet efficiency, which is especially notable given ongoing investments in technology and business expansion.

Solid Quarterly Earnings and Adjusted Performance

For the fourth quarter, First Bancorp reported net income of $87.1 million. Adjusted pretax, pre‑provision income reached $129.2 million once the effects of earlier one‑time items are excluded, and adjusted EPS rose roughly 8% quarter‑over‑quarter. Management emphasized that underlying trends remain strong when the noise from temporary tax and accounting adjustments is stripped out, with core earnings momentum continuing into year‑end.

Expense Discipline and Improving Efficiency

Cost control remained a key theme, with the quarterly GAAP efficiency ratio improving to 49%. Looking ahead, management expects to keep the full‑year 2026 efficiency ratio at about 52% or better, even as technology upgrades and business promotion spending lift the absolute expense base. The bank is positioning these investments as necessary to support future growth and digital capabilities while still protecting profitability levels that rank well within the industry.

Robust Capital Returns and Strong Capital Metrics

Shareholder payouts accelerated in 2025. First Bancorp repurchased $50 million of common stock in the quarter and $150 million over the full year, alongside $28 million in dividends in the fourth quarter. The board also approved an 11% increase in the quarterly common dividend to $0.20 per share starting in 2026. Tangible book value per share jumped 24% year‑over‑year to $12.29, and the tangible common equity ratio expanded to about 10%. Taken together, these metrics underscore both capital strength and management’s confidence in returning a high proportion of earnings to investors.

Deposit and Funding Improvements Support Margin

Funding trends were notably positive. Core customer deposits increased by $267 million in the quarter, with noninterest‑bearing deposits up about $170 million, a 3.2% rise. The cost of government deposits declined roughly 31 basis points, helping reduce overall funding costs by about 5 basis points quarter‑over‑quarter. This combination of deposit growth and lower funding costs gives the bank additional room to manage margin pressure elsewhere in the balance sheet.

Loan Origination and Moderate Loan Growth

Loan production remained active, with $1.4 billion in originations during the quarter and total loans growing by $80 million versus the prior period, led primarily by commercial segments. While growth was modest, management framed it as healthy and disciplined, and guided to 3%–5% organic loan growth in 2026. The focus appears to be on maintaining credit quality while capturing attractive opportunities in commercial lending rather than chasing volume for its own sake.

Asset Quality at Best‑Ever Levels

Credit metrics remained a clear bright spot. Nonperforming assets fell to an all‑time low of 60 basis points of total assets. The allowance for credit losses increased slightly to $249 million, or 1.9% of loans, mainly reflecting portfolio growth rather than deteriorating quality. Net charge‑offs held steady at 63 basis points of average loans in the quarter. Management stressed that these figures demonstrate a resilient portfolio that can absorb pockets of stress without undermining overall performance.

Reinvestment Upside in the Securities Portfolio

The investment portfolio is expected to be a tailwind in 2026. Management anticipates about $848 million of securities cash flows next year, at an average yield of roughly 1.65%, available for reinvestment at higher prevailing rates. Investment income already rose $4 million in the quarter, with a 33‑basis‑point improvement in yields. Executives estimate this reinvestment activity should boost net interest margin by approximately 2–3 basis points per quarter in 2026, assuming market conditions cooperate.

Growing Fee Income and Revenue Diversification

Noninterest income helped diversify revenue in the quarter. Other income increased by $3.5 million, driven by a $1.8 million gain from purchase tax credits and a $1.6 million rise in mortgage banking and card processing fees tied to higher transaction volumes. While some items are episodic, management highlighted the strength in recurring fee categories such as card and mortgage as important complements to spread‑based income.

EPS Noise and One‑Time Reporting Distortions

The call revealed some confusion around reported EPS, with the CEO initially referencing $0.8055 per share for the quarter, while the CFO clarified that Q4 EPS was $0.55 per share. The discrepancy stems from the impact of prior quarter one‑offs, including a $16.6 million reversal of a deferred tax asset valuation allowance and a $2.3 million employee tax credit in Q3. Management acknowledged that these items complicate quarter‑to‑quarter comparisons and urged investors to focus on adjusted metrics to gauge underlying earnings power.

Margin Pressure from Floating‑Rate Loan Repricing

Despite positive funding trends, the bank is seeing some margin pressure from lower yields on floating‑rate loans. The yield on the commercial and industrial portfolio fell 27 basis points quarter‑over‑quarter as loans repriced lower in line with declines in benchmark rates such as prime and SOFR. Overall loan yields declined about 7 basis points, partly offset by higher loan balances and reinvestment gains in the securities book. Management is counting on reinvestment and deposit mix improvements to more than offset this drag over time.

Commercial and Auto Credit Inflows

While overall asset quality remains strong, there were some credit inflows worth watching. Inflows to non‑accrual loans rose to $46 million in the quarter, up $14 million, including two commercial and industrial cases totaling around $12 million that migrated to nonperforming status. Early delinquencies increased by $2.1 million, with auto loan delinquencies rising by about $7 million. Management characterized these movements as manageable, noting that they are well covered by reserves and being actively monitored.

Weak Auto Market and Portfolio Contraction

The auto lending segment is under pressure, reflecting a broader market slowdown. The auto retail market contracted roughly 10% year‑over‑year, with second‑half volumes down more than 15%. First Bancorp’s own auto portfolio shrank by about $6–7 million during the quarter. Executives do not anticipate near‑term growth in this segment absent changes to tariffs or excise structures, suggesting the bank will stay cautious and selective in auto credit while leaning on other lending categories for growth.

Higher Expense Base in 2026

Operating expenses are expected to move higher in 2026 as the bank invests in technology, systems and business promotion. Management guided to a quarterly expense base of $128–$130 million (excluding OREO volatility), implying that the efficiency ratio may widen to 50%–52% even as revenue initiatives progress. The message to investors is that these outlays are strategic, aimed at enhancing digital capabilities and growth prospects while still preserving a solid profitability profile.

Concentrated Credit Workouts Continue

The bank continues to manage a small number of legacy or larger syndicated exposures, including certain telecom participations and club deals. Although these credits are not material to the overall portfolio, the timing and level of recoveries remain uncertain. Management emphasized that these positions are being actively worked through in conjunction with lead banks in the syndicates, and that any volatility should be contained relative to the bank’s broader asset base and reserve levels.

Margin Outlook Tied to Repricing and Rate Path

The anticipated margin expansion of 2–3 basis points per quarter in 2026 hinges on reinvesting low‑yielding securities into higher‑yielding assets and the future path of market interest rates. The benefit from $848 million of expected securities cash flows, including $494 million arriving in the first half of the year, is significant, but sensitive to shifts in rate expectations and the mix between loans and deposits. Management acknowledged this dependency, underscoring that margin outcomes will track closely with broader rate and funding dynamics.

Guidance and Forward-Looking Outlook

Management reaffirmed 2026 guidance calling for 3%–5% organic loan growth, a GAAP efficiency ratio around 50%–52% with quarterly expenses of $128–$130 million excluding OREO, and net interest margin expansion of roughly 2–3 basis points per quarter, helped by reinvestment of maturing low‑yield securities. The bank plans to return close to 100% of annual earnings via a mix of dividends—supported by the 11% increase in the quarterly payout to $0.20—and share repurchases around $50 million per quarter, backed by a tangible common equity ratio near 10% and tangible book value of $12.29. Asset quality is expected to remain stable, with nonperforming assets around 0.60% of total assets, nonaccrual loans near 70 basis points of loans, net charge‑offs roughly 63 basis points and the allowance for credit losses at about 1.9% of loans, while maintaining ROA around 1.8%.

In sum, First Bancorp’s earnings call portrayed a bank coming off a record year, combining strong profitability, healthy credit metrics and aggressive capital returns with a realistic view of interest‑rate, credit and expense headwinds. The strategy for 2026 leans on modest but steady loan growth, margin enhancement from securities reinvestment and disciplined cost management, all while maintaining high payout levels. For investors, the story is one of solid core performance with manageable risks, making the bank’s execution on its margin and credit outlook key areas to track in the year ahead.