FBP (2025 - Q3)

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. Ramon Ro

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 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 and then move on to discuss our outlook for the franchise. We're definitely very pleased with the progress on the quarter we delivered 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 earned $100 million in net income during the quarter, including the benefit of certain nonrecurring 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 and well-managed expense base and disciplined loan production. Turning to the balance sheet. Our strong capital position enabled us to continue supporting our clients on the loan production side. We grew total loan by $181 million, of course 5.6% linked quarter annualized surpassing $13 billion in total loans for the first time since 2010. Since the beginning of the second quarter, we do -- 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 tariffs were announced in April, industry-wide sales began trading down, which has negatively impacted overall loan origination in this space during the year and loan mix production. For some additional context, total retail sales in our industry are down 7% year-to-date 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 executing our growth plan within the commercial and construction lending segment, coupled with a steady loan 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 just seeking 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 customer's relationships. In terms of asset quality, credit continues to behave in line with expectations, consumer charge-offs stabilizing, healthy commercial credit trends and a 7% reduction in nonperforming assets. Finally, our earning performance translated into growth across all capital ratios, while expanding our loan book organically and being able to repurchase another $50 million in shares of common stock. Consistent with the strategy of returning 100% of annual earnings 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 additional highlights on the macro. In terms of the macro, the operating background remains, as to stay stable with uncertain 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, tariff-related inflationary pressures are having pressure on businesses and consumers across our regions as everybody is realizing. That said, we are encouraged by the resiliency of the labor markets in Puerto Rico, the continued improving trend of the tourism activity and the recently 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 earmarked 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 our excess capital to continue growing organically our regions. Year-to-date, total originations other than credit card activities are up by 7% when compared to prior year. We're supported by sales discipline, client outreach, well-managed regional and business line diversification, which is really the strength of our franchise. Based on current commercial lending pipelines, development 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 on our -- for 2026, once we report our fourth quarter in January, and also full year forecast for next year. With that, I would like to thank you for your interest in First Bank, I'm definitely very proud of our team's accomplishments to 2023 -- 2025 and 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?

Good morning, everyone. As Aurelio mentioned, we had a strong quarter with 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, and I'm going to touch upon. We had a $16.6 million reversal of valuation allowance on deferred tax assets that are related to net operating losses at the holding company. This quarter, a new legislation was enacted in Puerto Rico allowing limited liability companies to be treated as disregarded entities, based on this change, we now expect that NOLs at 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. We also recorded a $2.8 million valuation allowance for commercial other real estate property in the Virgin Island as a result of an ongoing litigation, which involved potential loss of title of the property. If we were to exclude the DTA valuation allowance and employee retention credit components from results. Non-GAAP adjusted earnings per share were $0.51 and return on 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 an extra day in the quarter. Compared to the third quarter, net interest income the third quarter of 2024, I'm sorry, net interest income, it's 8% higher. Net interest margin for the quarter was 4.57%, 1 basis points higher than last quarter. And over the last 4 quarters, margin has grown 32 basis points. As stated in prior calls, the reinvestment of the cash flows from the investment portfolio resulted in a 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 more accretive to net interest income. Also, we saw increased competitive pricing pressures led to a 15 basis point increase in the cost of government deposits and a 2 basis points increase in the cost of time deposits. The average cost of all other retail and commercial deposits remained flat at 72 basis points as compared to prior quarter. In addition, when we look at the mix of deposits, we see a shift with time deposits growing $166 million at the end of the quarter, while lower cost interest-bearing nonmaturity deposits decreased $45 million. Regarding other loan portfolios, we saw improvements in the quarter with net interest income on commercial loans increasing $3.8 million related to $126 million increase in average balances, 3 basis points increase in yields. And we had an extra day in the quarter, which also improved the net interest income. The average balance on the residential portfolio grew $19 million for the quarter. For the fourth quarter, we will continue to benefit from yield improvements from reinvestment of the cash flows from the investment portfolio, but this will be partially offset by the 2 projected Federal Reserve rate cuts that would result in reduction in yields on the floating commercial loan portfolio as well as the cash balance at the Fed. Remember, we have a floating commercial portfolio, which about half of it is floating with either prime or SOFR, mostly as it's a priced today. In 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 net interest income coming from loan portfolio growth. In terms of other income for the quarter was relatively flat, slight reduction on card processing income due to lower transaction volumes. Expenses for the quarter were $124.9 million, which is $1.6 million higher than last quarter, which is 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 slightly above our guidance, but pretty much in line with the $125 million to $126 million we had 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 still believe our efficiency 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. In the quarter, NPAs decreased $8.6 million basically $3.8 million decrease in nonaccrual loans, mostly residential mortgages and CRE loans and a $5 million reduction in OREO balances. That includes the $2.8 million adjustment on the VI property I mentioned. Inflows to nonaccrual were $32.2 million, which is $2.2 million lower than last quarter. Mostly commercial and residential mortgage inflows of $6.7 million, which are offset by -- I'm sorry, a 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 1 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 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 was 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 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 1.89%, and this was mostly a decrease of 9 basis points in the allowance for credit 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 2 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 charge-offs. As Aurelio mentioned, consumer charge-off levels continue to be normalizing and commercial charge-offs 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 repurchased the $50 million in common stock we had mentioned. Regulatory capital ratios continue to be low, but these capital actions were offset by the earnings generated in the quarter. In addition to all of this, we registered 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 AOCL still represents $2.42 intangible 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 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 interest of our franchise and our shareholders. With that, operator, I would like to open the call for questions.

[Operator Instructions] And our first question comes from Brett Rabatin with Hovde Group.

I wanted to start off. I just want to make sure on the tax situation, that's onetime, 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 stock. So it's not -- that is a 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 has 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, a 5% adjustment coming down. It's actually 7% year-to-date. But obviously, it disrupted by there were increased sales in the second quarter because of the tariff 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 a real stable volume. They have fluctuated between 100 to 120 units, 20,000 units per year for some years. So we expect somewhere on that range probably the second half of the year will determine how we project 2026. Yes, credit demand has been lower. It's been -- on the other hand, unsecured credit demand has been a little bit lower. We remember 3 years ago, 2 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 experienced in credit cards and unsecured are being leveling. So we expect stability on the consumer, but we don't expect portfolio growth as we achieved for some years. So the portfolio growth will come from resi, which is performing excellent and from the commercial portfolio 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 in that segment.

Okay. And then 1 last one, if I can. Just around the margin guidance were flattish in the fourth quarter. Does that assume -- in the face of the rate cuts, does that assume you are able to lower funding costs, deposits, even though the beta in Puerto Rico on the way up was obviously a lot slower than maintenance? Are you expecting the beta on deposits to be better on the way down?

I think 1 element that definitely will come down, we have some index deposits for 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 that we do see some reduction.

Other than time that they happen -- they move with the market. So there will be some reduction on the cost of deposits. Expected to happen during the quarter. Obviously, how much that can offset the mix of the portfolio. Obviously, the margin is very strong. So having less consumer loans at high yield impact the margin directly as well as which segments of the deposits are growing, which this quarter we have growth on the CD 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, yes.

And the next question comes from Timur Braziler with Wells Fargo.

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 are 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 the cycle matters. Some of these are contracted deposits that are indexed. So they are already contracted and they're not necessarily up for bid. So they would buy -- 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 bucket. I think the others in the CD, 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 relationship, not just to get a CD or it really has to add something else to the mix of the products that we sell and the franchise services. Municipalities and other government have a lot of payment services, deposits. So obviously, to complement that, we compare 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 could some of these competitive pressures be to the planned drop in deposit costs?

We do expect some reduction in deposit costs 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 a -- 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, credit results at First Bank in 3Q are really strong. There was a couple, let's say, in-migration inbounds on the NPL 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?

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

Yes. Other than we tend to look at each of our cases individually. And again, as Aurelio mentioned, unless we see something in the industry, it would be more of what we are seeing on our own customer base and what are the results 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 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 deployment priorities are obviously #1 organic growth. As said in the Florida market could be an alternative fit for us is a franchise that enhance our current franchise. It's very easy to originate loans in Florida, if you have the right teams and they move from 1 bank to the other and as long as we have a good discipline of credit, it will perform well. And I think we have a history of that. I think it will be -- definitely have to be complementary to our deposit franchise. That would be the profile. We have the capital, so size will depend, yes.

And our next question comes from Kelly Motta with KBW.

Wanted to circle back to the competitive landscape in Puerto Rico. I appreciate the color on 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?

None of the deposits. It's really -- while we see, it's more aggressive now with the smaller players, as I mentioned. Obviously, in the credit card business, there's always been a lot of entrance and they dominate U.S. banks dominate the card issuance, including the larger bank, so the larger bank so nothing new on that front.

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

Okay. Got it. That's helpful. There's some...

I'm sorry. The only caveat. Kelly, I'm sorry, the only caveat is there is 1 player, big player, which is called the U.S. treasury and so the -- you face that with some of the high-end customers that they could move monies into treasuries.

Yes.

Got it. That's helpful. There's been a lot of news 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 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, give you 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 must flow through the economy other than that impact in the short term. As we -- as we see this expansion 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 of 2026 or further. But the good thing is 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, 1. And then 2, 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 we immediately repriced. 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 due. Obviously, with rates coming down, the reinvestment component, it's a bit lower than what we were -- we're seeing rates somewhere between 50 to 100 basis points lower already in some of the reinvestment options within our policy guidance. 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 7 -- 77%, what the new loan origination yields look like, I guess, in Q3?

You're talking about the overall or you're talking about just the -- that's the average yield -- 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 as 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 1 the adjustments we'll see, but not necessarily on the spreads, 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 stays sort of around those levels, but it's a function of volume more than anything on the consumer.

[Operator Instructions] The next question comes from [ Erin Signaviwith ] Truist Securities.

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 NIM just thinking about what you're thinking there on loan growth?

Yes. We -- I did mention that we -- 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 the primary driver. Some offset has been provided by mortgage and we do have a fairly strong pipeline in the commercial. Obviously, there's always timing issues on those. But the pipelines continue to help.

Okay. 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?

Well, we've -- 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 is prudent. Again, open market is our approach. No ASRs are on schedule or as part of the strategy. So we'll continue monitoring.

Yes. As I mentioned, were our base assumption continues to be around $50 million a quarter. Obviously, with the flexibility or the optionality of saying a little bit more or a little bit less depending on what are the circumstances on the market.

Perfect. All right. And then lastly, just a follow-up on the Mainland M&A question. I mean, 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 side could be more reflected in the U.S., so that could bring opportunities too.

Got it.

These are always a timing opportunity. Thank you.

The next question comes from Steve Moss with Raymond James.

Orlando, just following up -- and maybe just following up, Orlando, on the margin here in terms of the timing of the cash flows from the securities 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 -- 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 cash flow coming in. You saw that last quarter, we had that 16 basis points pickup. So we had about $500 million for the third quarter that those were the cash flows more or less than we're having the big repricing 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 averages out a bit. So we should see a pickup, obviously, with the only difference is what I mentioned that we are seeing rates the options that we have in rates being between 50 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 I 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, over probably the last 12 or maybe 18 months -- just kind of curious here kind of as you think about credit performed 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 is specific, but what I can tell you is that -- on the mortgage side, we have seen the trends with the lower charge-offs that our methodology uses historical loss information that is 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, the unemployment ratios in Puerto Rico reflect on the way the trends are expected on some of the portfolios, especially in when you look at the downside scenarios, we do include in our reserve calculations. So for mortgage, I do expect with the credit expectations we have that it would come down -- 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 at '22, '23 vintage, we've seen more stability now on the charge-offs, 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.

[Operator Instructions] We have a follow-up from Kelly with KBW.

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 like approximation of what the go-forward tax rate looks like here? Is it any materially different after adjusting for some of these onetime time things you had in the quarter? Any help would be appreciated.

The number that we put on the press of effective tax rate of about 22.2%, which is estimated for the full 2025 already reflects some of this expected improvement. So I would say that's a good number to use as a guidance, 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 have 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 number that we should be between that I'm sorry, 22% to 22.5% range. It's what I'm expecting now.

I apologize. I think it's said in the release. 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 in Naples 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 now disconnect. Have a great day.