First BanCorp (FBP) 2025 Q3 法說會逐字稿

Hello and welcome to the First BanCorp third quarter 2025 financial results. My name is Carla and I will be coordinating your call today. (Operator Instructions).

I would now like to hand you over to the Investor Relations officer, Ramon Rodriguez, to begin. Please go ahead when you're ready.

Thank you, Carla. Good morning everyone and thank you for joining First BanCorp's conference call and webcast to discuss the company's financial results for the third quarter of 2025. Joining you today from First BanCorp are Aurelio Aleman, 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 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 release, you can access them at our website at www.fbpinvestor.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 pleased with the progress on the quarter as we deliver 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 earn $100 million in net 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% when compared to the prior year. Most of the improvement came from record net interest income, a well-managed expense base, and discipline loan production.

Turning to the balance sheet, our strong capital position enable us to continue supporting our clients on the loan production side, we grew total loan (inaudible) $181 million or 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 below our original expectation for the year.

After the sector specific ties were announced in April, industry-wide sales began trading down, which has impacted overall long origination in this space within the year and long mix production. For some additional context, total retail sales in our industry are down 7% year today as of September. But when looking at the third quarter sales, they are below 17% compared to the third quarter of the prior year.

Thankfully, we've been able to mitigate this slowdown by securing a grow [look] plan within the commercial and construction and the segment coupled with a steady on production progress in the residential mortgage business. 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. Trends in the market flows remain favorable. Although we're seeing higher competition, [in you see] flows, 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 measured approach to retaining valuable cost core customers' 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 assets.

Finally, our, any performance related to growth across all capital ratios while expanding our lumber organically and being able to repurchase another 50 million shares of common stock. Consistent with the strategy of returning 100% annual earning 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 5 for some highlights on the macro. In terms of the macro, the operating background remains, I have to say stable, with on certain 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 that is related inflationary pressures are having pressure on businesses and consumers across our regions as everybody's realizing. That said, we are encouraged by the resiliency of the labor markets in Puerto Rico. They continue improving trend of the tourism activity, and the resilient announced investments of manufacturing companies, expanding production capacity in Puerto Rico or establishing new facilities.

We believe that the ongoing expansion of the manufacturing sector coupled with the consistent flow of federal disaster funds. A earmark 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 ours capital to continue growing organically our regions. Year to date, total loan originations [auto credit card regulation] activity are all by 7% when compared to prior year. [It will be] supported by self-discipline, client outreach, well managed regional and business line diversification, which is really, 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 loan growth guide for the year will probably be closer to the 3%, 4% range, depending on commercial credit line uses and any level of unexpected payments that we don't have knowledge today. We will provide an updated guide for 2026 once we report out for four quarter in January, and also full year forecast for next year. With that, I would like to thank you for your interesting First Bank. I'm definitely very proud of our team's accomplishments to 2025. I look forward to a strong end of the year.

And now I will turn the call to Orlando to go over financial results in more detail before we open the call for questions. Orlando.

Hey, good morning, everyone. As Aurelio mentioned, we had a strong quarter with the net income, reaching $100 million or $0.63 a share. That compares to $80 million or $0.50 a share in the second quarter. Return on average assets for the quarter was 2.1% much higher than last quarter. This quarter did include a few things that I'm going to touch up on. 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 a disregarded entities. Based on this change, we now expect that NOLs and the holding company will be mostly utilized against revenues 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 it resulted in a reduction of payroll costs, obviously. And we also recorded a $2.8 million valuation allowance for a commercial or real estate property in the Virgin Islands as a result of an ongoing litigation which involved the potential loss of title of the property.

If we were to exclude the DTA evaluation allowance and the employee retention credit, components from results, non-GAAP adjusted earnings per share 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. We've seen updated -- improved updated loss experience in this portfolio and also the projected macroeconomic for unemployment has an improvement in the trends.

In terms of our net interest income, 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 the extra day in the quarter. Compared to the third quarter net interest, the third quarter of 2024, I'm sorry, net interest income, it's 8% higher. Net interest margin for the quarter was 457, 1 basis point higher than last quarter. And over the last four quarters, margin has grown 32 basis points.

Debated in prior calls where the reinvestment of the cash flows from the investment portfolio resulted in the 16 basis points expansion in the investment portfolio yields. However, the margin ended up growing less than the 5 to 7 basis point guidance, we had provided.

Aurelio 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 accretive 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 2 basis points increasing the cost of time deposits. The average cost of all other retail and commercial deposits remain flat at 72 basis points as compared to per quarter. In addition, when we look at the mix of deposits, you, 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 in common on commercial loans increasing $3.8 million, related to $126 million increase in average balances, 3 basis points increasing yields, and we had an extra day in the quarter, which also improved the net interest. The average balance on the residential portfolio grew $90 million for the quarter.

For the fourth quarter, we will continue to benefit from yield improvements from the reinvestment of the cash flows from the investment portfolio, but this will be partially offset 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, it's floating with either Prime or so for mostly, as its price, today.

Knowing 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 was relatively flat, slight 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. It's 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 a $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 a slightly above our guidance but very much in in line with the $125 million to $126 million we have provided. The efficiency ratio for the quarter was 50%, pretty much unchanged, also when compared to prior to the second quarter.

The projected expense trend for technology projects and business promotion efforts we plan to do in the fourth quarter. And so we reiterate our guidance expense base of $125 million to $126 million for the next couple of quarters. And you'll believe our efficiency ratio -- our efficient ratio will be in that range of 50% to 52% considering expenses and income components.

In terms of credit quality, it remained fairly stable 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 [VR] property I mentioned.

Inflows to non-accrual were $32.2 million, which is $2.2 million lower than last quarter, mostly commercial residential mortgage inflows of 6.7, 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 define it as 30 to 89 days past due, increased $8.9 million, mostly 11 case in the Florida region, a $6 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 loss severities have continued to improve. On the other hand, the allowance for commercial loans increased based on the portfolio growth and then some deterioration that is projected on the CRE price index as part of the macroeconomic over projections.

The ratio of the allowance for credit losses to loans decreased 4 basis points to [189], and this was mostly a decrease of 9 basis points in the allowance for grave 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 of levels continue to be normalizing and commercial charge 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 we purchased the [50 million] in common stock we had mentioned. Regulatory capital ratios continue to be low, but these capital actions were upset by the earnings generated in the quarter.

In addition to all of this, we register a 6% increase in the tangible book value per share to $11.79 and the tangible common equity ratio expanded to 9.7%, also due to the $49 million improvement in the fair value of available for sale securities. The remaining [AL-CLs] 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 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 to 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 interests of our franchise and our shareholders. With that operator, I would like to open the call for questions.

Brett Rabatin, Hovde Group.

Hey guys, good morning. 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 on the normal operating losses or expenses we have at the holding company. Those are annual expenses that are now we're not yielding any tax benefit and they will be offset also against revenues from this stuff.

So it's not that huge amount, but you saw that the effective tax rate came down a bit and that's reflecting some of that benefit. So not at the level of this reversal of DTA but there is a little benefit on the effective tax rate going forward.

Okay, that's helpful, and then wanted just to talk about I've seen the stats and I know that the auto lending is finally come in as expected for some time a bit. Any thoughts on the health of the consumer in Puerto Rico and 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 it's clearly, auto sales, we can call it normalizing, we were expecting for the year, 5% adjustment coming down. It's actually seven years today, but obviously, it's disrupted by, there were increased sales in the second quarter because of the tariffs and they were coming. Now you see a reduction, some sales were accelerated. So I think we need to see what happened this quarter to normalize those auto sales and see what is the real stable volume, they have fluctuated between, [100 to 120 units, 20,000] units per year for some years. So we expect somewhere around that range, probably the second half of the year will determine how we project 2026.

Yes, credit demand is being lower. It's been, on the other hand, unsecured credit demand is being a little bit lower. We remember three years ago, two years ago, we have been doing adjusted policies. We've seen the good performance of the portfolios across the board, and some of the higher losses that we experience in credit cards and unsecure are being leveling.

So we expect stability on the consumer, but we don't expect portfolio growth that we achieved for some years. So the portfolio growth will come from residential which is performing excellent and from the commercial portfolios that we continue to gain some share across the different sectors.

So that, I would say stability on the consumer, obviously working hard to diminish any contraction of the portfolio. As we continue to move on with products and services on that on that segment.

Okay. And then one last one if I can just around the margin guidance the flat in the fourth quarter, does that assume, in the face of the rate cuts, does that assume you are able to lower funding costs, you, deposits, even though [the beta] in Puerto Rico on the way up was obviously a lot slower than the main ones are you expecting the beta on deposits to be better on the way down?

I think, one element that definitely will come down, we have some index deposits by the government that are they move with the rates and some of that will come down. We don't see the other core retail products coming down yet.

Other than time deposits, but we do see some.

Reduction other than time that they have -- they move in the market, so there will be some reduction on the cost of deposits expected to happen during the quarter. Obviously, how much that can upset the mix of the portfolio. Obviously, the margin is very strong, so and having less consumer loans at high yield, impact the margin directly, as well as if, 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 big.

Okay, great, thank you guys.

Timur Braziler, Wells Fargo.

Hi, good morning.

Good morning, Timur.

Back on the deposits, can you just elaborate a little bit more on the competitive pressures that 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 its cycle matters, some of these are contracted deposits that are index so they are already contracted and they're not necessarily up for up for bid. So they would -- by -- if the rates move, they will move with them, either monthly or quarterly. So some of them are, in our case, probably 40% of the government book is on that [pocket].

I think the others, 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 relationships, not just to get a CD or it's really have to add something else to the mix of the products that we sell on the franchise services. Municipalities have and other governments have a lot of payment services, deposit, pay. So and obviously to complement that, 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 the subsequent rate cuts or do some of these I guess how much of an offset some of these competitive pressures be to the plan drop and deposit costs?

We do expect some reduction in deposit cost coming down from -- 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 -- 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. It's just the pace at which all of them will come down.

Okay. And then just on credit results at First Bank and 3Q were really strong. There was a couple, let's say in migration inbounds on the MPL 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 in the way that you're thinking about your own portfolio, if at all.

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

Yes, other than, you know we tend to like look at each of our cases individually and, again, as Aurelio mentioned, unless we see something in industry would be more of what we're seeing on our own customer base. And what are the results that -- 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, capital employment priorities are obviously number one organic growth. A fit in the Florida market could be an alternative, a fit for us, it's a franchise that enhanced our current franchise, it's very easy to originate loans in Florida if you have the right teams. And they move from one bank 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.

Okay, thank you for the call.

Kelly Motta, KBW.

Hi, good morning, thanks for the question. I wanted to 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 competitor, competition from outside the Puerto Rico banks, any if you've seen any new entrants into the market and, just, opine on the competitive landscape, thank you.

Not on the deposits, it's really what we see, it's more aggressive now on the smaller players, as I mentioned. Obviously in the credit card business, there's always been a lot of entrants, and they dominate US banks, dominate the card insurance including, the larger brands. So the larger banks, so no, nothing new on that front, yes.

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

Okay, got it. That's helpful --

There's the only caveat -- Kelly, I'm sorry -- the only caveat, there is one player, big player, which is called the US Treasury, and so the you face that with some of the high-end, customers that they could move monies into treasury.

Got it. That's helpful. There's been a lot of news on onshoring, early glimmers of that picking up 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 the potential?

Yes, I think you know in the short-term, 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, we're trying to get more data on that.

In addition, but we don't see that, it's really in the short-term, probably 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 impact in the short-term, as we see this expansions become operational, then we'll probably see more employment, better compensation, and expansion of the workforce, yes.

But we don't expect that until probably second half 2026 or go further, but it -- the good thing is it's a long-term benefit to sustain the economy of the island rather than having a long-term risk by not having this commitment, yes.

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 on the securities book. Can you remind us about the cash flows on that, one; and then two, what the new loan 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 1.5% on average. So that would be some of the cash flows that would immediately reprise. We also have, about $1 billion more in the first half of 2026 that also, on average, are yielding that 1.5% that it's also come to obviously with rates coming down, the reinvestment component, it's a bit lower than what we were, we're seeing rates somewhere between 50 basis points 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 Aurelio made reference to it would be more on the commercial and residential side.

Okay, and if your loan book right now is 77, what's the new loan origination deals look like at I guess in Q3?

You're talking about the overall or you're talking about just the, yes, that's the average yield, the average, those are average yields including consumer. If you take a look at the commercial side, mortgages, we're talking about, sort of 6%, [6.25%] kind of rates, right, it's market so whatever you see in the market. The commercial portfolio yields are right now, overall commercial portfolios including everything, it's about 6.70% on average, so that's a combination of what goes into construction or CRE and [C&I] obviously, so that -- we are not seeing big changes on spreads, it's a function of the base. The base meaning the base rate, which we either, [SOFR] or Prime, which are the main ones, that would be the ones the adjustments we'll see, but not necessarily on the spread, it's a lot more.

Consumer yields are going to be similar to what we have now, but it's only an issue of what's the level. We, consumer on average are about 10.5% that what we have 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 a volume more than anything on the consumer.

Okay, thank you.

Arren Cyganovich, Truist.

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 and just thinking about what you're thinking there and longer.

I did mention that we have the guidance that we have for the full year is between 3% and 4%. And I think the original guidance was [5 mid single digit], this is actually considering what happened in the auto lending side over the third quarter and actually part of the second quarter. It's a primary driver some offset has been provided by mortgage and we do have a fairly strong fight on the commercial. Obviously, there's always timing issues on those. But the pipelines continue healthy.

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?

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

Yes, as I mentioned, where 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.

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

Again, opportunities come and go, so we'll see, we continue to monitor and see what could happen. I think there's some -- if you see some of the bank reports, obviously there's a credit site could be more reflected in the US, so that could bring opportunities.

Got it. Okay, thank you. These are always, these are always the timing opportunity.

Thank you.

Steve Moss, Raymond James.

And maybe just following up Orlando on the margin here in terms of the timing of the cash flows from the security portfolio, is that just -- is that throughout the quarter, or is that kind of late in the quarter to impact the margin?

Well you saw it's not really equally spread, but you can assume it's on average, November and December tend to be the highest in terms of the [free] cash flow coming in. You saw that last quarter we had that 16 basis points pick up, so we had about $500 million for the third quarter that -- those were the cash flows. More or less that we're having the big pricing impact. So we -- and all of it did not benefit the third quarter. Some of it we'll see in the fourth quarter. So it averaged out a bit.

So we should see pick up obviously with the only difference it's what I mentioned that we are seeing rates that the options that we have in rates being between 50 basis points to 100 basis points lower based on our policy guidelines of what we put in the portfolio. As you know, we don't put much of credit risk in the portfolio. It's more of an interest rate more than anything.

Right, okay, just appreciate that color and then on the loan loss reserve here you guys have made a number of, I guess, qualitative adjustments, if you will, or probably the last 12 months or maybe 18 months. Just kind of curious here, kind of as you think about credits perform quite well on the island for an extended period, your consumer credit charge-offs are lower year over year. Just kind of curious as to where you think that reserve ratio could shake out over the next 6- to 12 months.

It's we don't talk about specific guidance like that specific, but what I can tell you is that on the mortgage side, we have seen the trends with the lower charge of that our methodology uses historical loss information that it's updated 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 and the unemployment ratios in Puerto Rico reflect on the way the trends are expected on some of the portfolio, especially and when you look at the downside of scenarios we do include in our reserve calculations.

So mortgage, I do expect with credit expectations we have that it would continue to come down a bit. The consumer, we're still seeing, obviously we had, as you mentioned, the '23 and '24 we saw increases related to those vintages of the older vintages of 2022 and 2023 vintage, we see more stability now on the charges and that includes 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.

Thanks, Steve.

Kelly Motta, KBW.

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 for tax rate looks like here? Is it any materially different after adjusting for some of these onetime things you have in the quarter? Any help would be appreciated.

The number that we put in the price of effective tax rate of about 22.2%, 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.

We remember that, with 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 our 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 fairly good, a number that should be between that 22% to 22.5% range. It's what I'm expecting,

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

Yes. Thank you. (Operator Instructions)

And as we have no further questions in the queue, I will hand back over to Ramon Rodriguez for any final comments.

Thanks to everyone for participating in today's call. We will be attending Hovde's Financial Services Conference on November 4. 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 conclude the call, please you may not disconnect. Have a great day.