First BanCorp (FBP)

Puerto Rican financial institution First BanCorp (NYSE:FBP) fell short of the market’s revenue expectations in Q3 CY2025, but sales rose 6% year on year to $248.7 million. Its non-GAAP profit of $0.51 per share was 5% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1948 in San Juan, First BanCorp (NYSE:FBP) is a bank holding company that provides commercial banking, consumer financing, mortgage services, and insurance products across Puerto Rico, the U.S. mainland, and the Caribbean.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

First BanCorp competes with other financial institutions operating in Puerto Rico, including Popular, Inc. (NASDAQ:BPOP), OFG Bancorp (NYSE:OFG), and Citigroup (NYSE:C). In its U.S. mainland operations, the company faces competition from larger national banks like JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC), as well as regional banks operating in Florida.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, First BanCorp grew its revenue at a solid 8.1% compounded annual growth rate. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. First BanCorp’s recent performance shows its demand has slowed as its annualized revenue growth of 2.9% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, First BanCorp’s revenue grew by 6% year on year to $248.7 million, missing Wall Street’s estimates.

Net interest income made up 86.2% of the company’s total revenue during the last five years, meaning First BanCorp barely relies on non-interest income to drive its overall growth.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Topline growth carries importance, but the overall profitability behind this expansion determines true value creation. For banks, the efficiency ratio captures this relationship by measuring non-interest expenses, including salaries, facilities, technology, and marketing, against total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last five years, First BanCorp’s efficiency ratio has swelled by 7.5 percentage points, going from 59.4% to 49.9%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q3, First BanCorp’s efficiency ratio was 50.2%, falling short of analysts’ expectations by 76 basis points (100 basis points = 1 percentage point). This result was 2.2 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects First BanCorp to maintain its trailing one-year ratio with a projection of 49.1%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

First BanCorp’s EPS grew at an astounding 40.1% compounded annual growth rate over the last five years, higher than its 8.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For First BanCorp, its two-year annual EPS growth of 8.8% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, First BanCorp reported adjusted EPS of $0.51, up from $0.45 in the same quarter last year. This print beat analysts’ estimates by 5%. Over the next 12 months, Wall Street expects First BanCorp’s full-year EPS of $1.94 to grow 8.1%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

First BanCorp’s TBVPS grew at a tepid 3.9% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 28% annually over the last two years from $7.20 to $11.79 per share.

Over the next 12 months, Consensus estimates call for First BanCorp’s TBVPS to grow by 8.5% to $12.80, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, First BanCorp has averaged a Tier 1 capital ratio of 16.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, First BanCorp has averaged an ROE of 18%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows First BanCorp has a strong competitive moat.

We enjoyed seeing First BanCorp beat analysts’ EPS and tangible book value per share expectations this quarter. On the other hand, its net interest income missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this quarter was mixed, but it seems like the company did enough to please the market. The stock traded up 7.1% to $21.98 immediately after reporting.

Updated: December 4, 2025 at 11:43 PM EST

Before making an investment decision, investors should account for First BanCorp’s business fundamentals and valuation in addition to what happened in the latest quarter.

We think First BanCorp is a good business. Although its revenue growth was mediocre over the last five years and analysts expect growth to slow over the next 12 months, its admirable net interest margin a wonderful starting point for the overall profitability of the business. And while its projected EPS for the next year is lacking, its expanding net interest margin shows its loan book is becoming more profitable.

First BanCorp’s P/B ratio based on the next 12 months is 1.6x. Looking at the banking landscape right now, First BanCorp trades at a pretty interesting price. If you trust the business and its direction, this is an ideal time to buy.

Wall Street analysts have a consensus one-year price target of $24.17 on the company (compared to the current share price of $20.37), implying they see 18.6% upside in buying First BanCorp in the short term.