Puerto Rican financial institution First BanCorp (NYSE: FBP) fell short of the market’s revenue expectations in Q1 CY2026, with sales falling 2.7% year on year to $241.4 million. Its non-GAAP profit of $0.57 per share was 11% above analysts’ consensus estimates.

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StockStory’s Take

First BanCorp’s first quarter results showcased resilience in core banking operations, with management pointing to strong non-GAAP profitability and continued credit stability despite a softer loan environment. CEO Aurelio Alemán-Bermúdez credited healthy commercial pipelines and robust core deposit growth as key contributors, while noting that seasonally weaker consumer lending and ongoing market uncertainties limited broader loan expansion. Alemán-Bermúdez emphasized, “Driving core client deposit growth is a key priority for us, and we’re very encouraged by the execution during the quarter.”

Looking forward, First BanCorp’s management outlined a strategy built on disciplined capital deployment, technology investment, and cautious optimism about the economic backdrop. The company expects gradual net interest margin expansion, supported by reinvestment of maturing securities at higher yields and ongoing efforts to grow low-cost deposits. CFO Orlando Berges-González noted, “We would see some reductions on time deposits, not so much in some of the other deposit accounts,” highlighting the bank’s sensitivity to shifting interest rates and deposit mix. Strategic focus remains on sustaining asset quality and leveraging digital and AI-driven platforms to enhance service efficiency.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to robust deposit gathering, stable asset quality, and targeted investments in technology and branch expansion, while noting cautious optimism given ongoing macroeconomic and consumer trends.

• Core deposit growth focus: First BanCorp reported notable growth in core client deposits, excluding brokered and public funds, reflecting the effectiveness of relationship-driven sales strategies and branch network investments. Management highlighted the opening of new branches and a 4,000-client increase in retail and small business segments as evidence of successful execution.
• Loan growth dynamics: Total loans declined slightly, primarily due to seasonally soft consumer credit demand—especially in auto lending—though commercial and mortgage pipelines remain healthy. CEO Alemán-Bermúdez said, “We expect additional commercial growth both in Puerto Rico and Florida based on what we have at hand in the pipelines today.”
• Credit quality stability: Asset quality remained a strength, with nonperforming assets at record lows and early-stage delinquencies declining 24% quarter-over-quarter. Management attributed this to proactive credit policy adjustments made in previous years and continued improvements in consumer loan performance.
• Technology and AI investment: The company advanced its cloud migration strategy and expanded AI use cases, focusing on operational efficiency and fraud management. Management described a vendor-driven approach, with investments aimed at enhancing data analytics and client engagement, while noting that tech-related expenses are expected to remain elevated for the next 18 to 24 months.
• Capital allocation discipline: With a net payout ratio of 92% via dividends and buybacks, First BanCorp continues to prioritize capital returns while maintaining a strong CET1 ratio. Management stated that M&A in Florida remains an option if suitable opportunities arise but emphasized a balanced approach to capital deployment.

Drivers of Future Performance

Management expects near-term performance to be driven by deposit mix improvements, reinvestment of maturing securities, and ongoing investments in digital infrastructure, set against a backdrop of cautious loan growth and stable asset quality.

• Deposit mix and funding cost: The company aims to sustain growth in low-cost core deposits, which could further improve net interest margin (NIM) if the deposit mix continues to shift away from higher-cost sources. CFO Berges-González explained that increasing core deposits—particularly savings and checking accounts—could help reduce funding costs and support margin expansion.
• Loan portfolio composition: Management expects commercial and mortgage lending to offset anticipated declines in higher-yielding consumer loans, particularly auto loans. While consumer demand is softening, the company is maintaining its 3% to 5% loan growth guidance, driven by a healthy pipeline in Puerto Rico and Florida.
• Tech investments and efficiency: Ongoing cloud migration and AI integration are set to drive operational efficiencies and improve client service, though management acknowledged that technology expenses will remain elevated over the next 18-24 months before stabilizing. These investments are expected to support both revenue growth and cost containment in future periods.

Catalysts in Upcoming Quarters

Our analyst team is closely monitoring (1) the pace and composition of core deposit growth, (2) progress in migrating technology infrastructure to the cloud while leveraging AI for operational efficiency, and (3) the balance between commercial loan growth and consumer loan runoff. Execution on branch expansion and any developments in potential Florida acquisitions will also be key to evaluating First BanCorp’s trajectory.

First BanCorp currently trades at $23.65, down from $24.04 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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