FIRST BANCORP. (FBP): what the price assumes

In the published model solve dated 2026-Q2, anchored at $28.51, FIRST BANCORP. (FBP) is priced for 18.2% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-26.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/FBP

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 10.4% cost of equity; ROE searched up to the 17.9% ROE ceiling.

How unusual the bet is: elevated

Valuation X-Ray

The price is supported by asset-based and earnings-power and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.

Per-Model Detail (n=5)

Solvency

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

• Three lines have moved together for two years and one of them moved backwards deliberately: net income went from 298.7 million dollars in 2024 to 344.9 million in 2025, book equity climbed from 1,669.2 million to 1,967.2 million by March 2026, and the share count fell from 163.9 million to 154.7 million over the same stretch.

• The concentration is the risk and it cannot be diversified away, because the island's own fiscal plan projects "modest near-term GNP growth followed by slight declines" while leaning on federal disaster relief, pandemic recovery funds and infrastructure money that arrive on a schedule and then stop.

• What to watch is the spread, where management has already committed to a number: it expects "quarterly net interest margin expansion of approximately 2 to 3 bps" through 2026, on an assumption of two further central bank rate cuts in the second half of the year.

Bull Case

Start with the direction of travel over the last eight quarters, because on this company the direction is the argument. Net income rose from 298.7 million dollars in 2024 to 344.9 million in 2025. Net interest income, the engine underneath it, went from 807.5 million to 868.9 million, which the annual report attributes to a lower cost of funds and the redeployment of maturing cash flows. The March quarter of 2026 continued both lines, with net interest income of 221.0 million dollars against 212.4 million a year earlier and net income of 88.8 million against 77.1 million.

The third line moved the other way, which is the point. Shares outstanding fell from 163.9 million at the end of 2024 to 154.7 million by March 2026, and treasury holdings rose from 59,794,239 shares to 67,044,120 across 2025 alone. Under the 2024 capital plan the company bought 3,085,582 shares for 138.3 million dollars, then began work against a 2025 authorisation of 200 million. The repurchase programme carries no expiration date.

Put the two together and the compounding shows up where it counts. Book equity grew from 1,669.2 million dollars at the end of 2024 to 1,967.2 million by March 2026 while the count was shrinking, so book value per share rose roughly a quarter across five quarters. That is a bank returning about 78.1% of its earnings as dividends plus repurchases and still building the per-share base underneath. Most lenders have to choose.

Management has also put a number on what comes next rather than gesturing at it. The annual report states that it expects "quarterly net interest margin expansion of approximately 2 to 3 bps" through 2026, on an outlook assuming two further central bank rate cuts in the second half of the year alongside loan growth and a shifting deposit mix. A lender that expands its spread while rates fall is one whose funding reprices faster than its assets, which is the useful side of that relationship to be on.

Credit is behaving. Net charge-offs came to 21.1 million dollars in the March quarter of 2026, an annualised 0.65% of average loans, against 21.4 million and 0.68% in the same quarter of 2025. Reserve coverage strengthened over the same period, with the allowance standing at 279.29% of nonaccrual loans held for investment at March 31, 2026 compared with 269.05% three months earlier. An allowance near 1.9% of loans is a heavy reserve by mainland standards, and it is carried against a portfolio whose losses are running well inside it.

Direct exposure to the government that once defaulted has also been shrinking rather than growing. Loans to the Puerto Rico government, its municipalities and public corporations stood at 193.3 million dollars at the end of 2024, and by the end of 2025 the bulk of what remained was 155.4 million of municipal general obligations supported by assigned property tax revenues. Property taxes are a considerably better claim than a general promise.

Bear Case

Puerto Rico's own fiscal plan does not forecast a boom. The annual report summarises it as incorporating "modest near-term GNP growth followed by slight declines", with stable population resting on positive net migration, and it names what is currently holding the economy up: "the significant role of federal disaster relief, COVID-19 recovery funds, and Bipartisan Infrastructure Law funding". Those three sources have one property in common. They run out.

That is the sector-cycle problem in its cleanest form. A bank's earnings are made of loan demand and credit performance, and both of those are downstream of an economy currently being carried by transfers that were legislated for a period rather than granted in perpetuity. The returns being earned right now are excellent. Whether they are the middle of a range or the top of one is not something the balance sheet can answer, and there is no second geography to average against: the concentration is the business.

The record supplies the uncomfortable context. The return this bank is earning today sits near the top of what any lender sustains, but the seventeen-year history behind it includes long stretches when the same institution earned a small fraction of that. What the current price asks for is not a return to the average. It is for the peak to hold for the better part of two decades.

Set the arithmetic out. At roughly 2.3 times book, what the market is paying for is the elite-tier return of about 17.9% holding for something like eighteen years before it normalises, which is equivalent to about 19.1% sustained indefinitely. The bank has recently been earning about 17.5%, so the gap is not in the rate. It is entirely in the duration. And duration is the fragile part: each percentage point of return is worth roughly three and a half years of that horizon, so a modest fade compresses the whole assumption quickly. Of firms that have earned a return at this level, only about 52% held it even a decade.

The peer group makes the same point from outside. On price relative to book this name sits at the very top of its cohort, above BPOP and OFG, the two lenders that share its island and its economy, and above the mainland names in the same set. Being the most expensively valued bank in a group whose distinguishing feature is a single concentrated economy is a specific position to hold, not a general one.

Nor is the capital return free of tension. Returning about 78.1% of earnings as dividends plus repurchases is excellent while the return on equity is high. It is also the reason the equity base grows slowly, and a bank that has distributed most of its earnings through the good years has less accumulated cushion when the credit cycle turns. The reserve is heavy, near 1.9% of loans, which tells you the company itself does not regard this portfolio as low risk.

None of this is an argument that the shares are expensive against the methods; the standard frames all reach today's level. It is an argument for why a market might reasonably decline to pay more: the earnings are excellent, the geography is singular, the federal support is dated, and the price already assumes the good years last most of a working lifetime.

Valuation

Nothing else in this cohort is priced like this. On book value, First BanCorp sits at the very top of its peer group, above the two other lenders that share its island and above every mainland name in the set. Roughly 2.3 times book is what it costs, and the useful question is what that buys.

It buys duration. Unlike most banks quoted at a premium, this one already earns the return the premium requires: about 17.5% recently, against an elite-tier ceiling near 17.9%. So the assumption embedded in the price is not that profitability improves. It is that today's profitability persists for something like eighteen years before fading, which is arithmetically equivalent to holding about 19.1% forever. That is a bet on durability rather than on recovery, and it is unusually sensitive: each percentage point of return moves the required horizon by roughly three and a half years.

Because the return is already there, the standard methods do not object. Asset-based, earnings-power, peer-multiple and forward-growth approaches all reach today's level, and the bank-specific method that scales tangible book by the ratio of return earned to return required lands above it. That is a genuinely different picture from a name whose price depends on one family of method, and it is why the pressure in this case sits on persistence rather than on arithmetic. The one countable reference that pushes back is history: of firms earning a return at this level, only about 52% sustained it even a decade.

The earnings behind the return are trending the right way and management has said where they go next. Net interest income reached 868.9 million dollars in 2025 against 807.5 million in 2024, and the March quarter of 2026 delivered 221.0 million against 212.4 million. The annual report commits to expecting "quarterly net interest margin expansion of approximately 2 to 3 bps" through 2026 on an outlook assuming two further central bank rate cuts. Those are small increments, which is what makes them credible.

The balance-sheet lens for a lender is capital and payout capacity, not coverage, since deposits fund the assets rather than lever them. On that lens the picture is unusual in both directions. About 78.1% of the latest fiscal year's earnings went back out as dividends plus repurchases, which is a high rate of distribution, and yet book equity still grew from 1,669.2 million dollars at the end of 2024 to 1,967.2 million by March 2026 while the share count fell from 163.9 million to 154.7 million. Credit supports the payout: net charge-offs ran an annualised 0.65% of average loans in the March quarter, with the allowance covering nonaccrual loans held for investment 279.29% over.

What the price is exposed to, then, is not a valuation error in the methods. It is time. Eighteen years of elite returns is a long assumption to carry on an economy the size of one island.

Catalysts

The June quarter, reported July 22, 2026, was the strongest of the recent set. Net income came to about 96 million dollars against 80.2 million a year earlier, and per-share earnings reached 62 cents against 50 cents, the wider gap between those two rates being the buyback doing its work. Management described the period as producing record pre-tax pre-provision income with stable asset quality. For a bank whose price rests on how long the current return persists rather than on whether it improves, a quarter that extends the run is worth more than a quarter that beats a forecast.

Capital return stayed on its established rhythm, with the board declaring the quarterly cash dividend on July 21, 2026. The published targets moved up alongside the print: Benchmark raised its target to 33 dollars from 31 while keeping a Buy rating, and Keefe Bruyette moved to 31 dollars from 27 while staying at Market Perform. Two firms lifting numbers while disagreeing about the recommendation is a fair description of the debate here, which is about duration rather than about direction.

One item sits outside the operating story and belongs in a reader's field of view anyway. In late June 2026 the company said publicly that it categorically denies the claims made against it in a lawsuit filed in federal court relating to Jeffrey Epstein. Litigation of that shape is a reputational and legal exposure rather than a modelled one until a court rules on it, and nothing in the reported financials currently reflects an outcome either way. The next scheduled information event on the operating side is the September quarter, which is the first period in which the two rate cuts management assumed for the second half of 2026 would begin to show up in the spread.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• BPOP (POPULAR, INC.)
• FY2025 10-K: …growth, and the qualitative reserve release recorded in 2024 due to the implementation of a new CRE non-owner occupied model; partially offset by lower NCOs and improvements in credit quality at the consumer portfolios. ● Non-interest income amounted to $166.3 million for the quarter ended December 31, 2025, compared…
• FY2025 10-K: …companies, institutional lenders, and other financial and non-financia l institutions and entities. Credit unions generally provide basic consume r financial services and collectively represent a significant portion of the market with a lower cost structure and fewer regulatory constraints. While our main competition…
• OFG (OFG Bancorp)
• FY2025 10-K: C. Market Area and Competition The main geographic business and service area of OFG is Puerto Rico, where the banking market is competitive. Puerto Rico banks are subject to the same federal laws, regulations and supervision that apply to similar institutions in the U.S. OFG also competes with brokerage firms with…
• FY2025 10-K: …based on the most recent analysis performed, the risk category of loans held-for-investment subject to risk rating by class of loans, and current year gross charge-offs by year of origination are as follows: Term Loans Amortized Cost Basis by Origination Year Revolving Loans Amortized Cost Basis Total 2025 2024 2023…
• PRK (PARK NATIONAL CORPORATION)
• FY2025 10-K: …in economic and political conditions could adversely affect our earnings and capital through declines in deposits, quality of investment securities, loan demand, our borrowers' ability to repay loans, and the value of the collateral securing our loans." and "- Business Operations Risks - Our allowance for credit…
• FY2025 10-K: …(3) factors impacting the performance of our loan portfolio, including real estate values, financial health of borrowers, and loan concentrations; (4) the effects of monetary and fiscal policies, including interest rates, money supply, and inflation; (5) changes in federal, state, or local tax laws; (6) the impact of…
• RBCAA (REPUBLIC BANCORP, INC.)
• FY2025 10-K: ​ COMPETITION ​ I. Traditional Banking segment ​ The Traditional Bank encounters intense competition in its market footprint in originating loans, attracting deposits, and selling other banking-related financial services. The deregulation of the banking industry, the ability to create financial services holding…
• FY2025 10-K: …Executive Officers and Corporate Governance" for information about the Company's executive officers. 16 Table of Contents SEASONALITY OF BUSINESS ​ Core Banking operations are not materially affected by seasonal factors. Demand for the Bank's core products and services-including commercial and consumer lending,…
• TCBK (TriCo Bancshares)
• FY2025 10-K: …to significant environmental liabilities or if our contingency reserve estimates are incorrect, our business, financial condition and results of operations could be materially adversely affected. We face strong competition from financial services companies and other companies that offer similar services, which could…
• FY2025 10-K: The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with…
• TRMK (Trustmark Corporation)
• FY2025 10-K: State Deposit Market Share Alabama 1.87 % Florida 0.17 % Mississippi 12.17 % Tennessee 0.30 % Texas 0.04 % Services provided by the Wealth Management Segment face competition from many national, regional and local financial institutions. Companies that offer broad services similar to those provided by Trustmark, such…
• FY2025 10-K: 8.5 % (1) Revenue is defined as net interest income plus noninterest income (loss). For additional information regarding the general development of Trustmark's business, see Part II. Item 6. - Selected Financial Data and Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations of…
• FULT (FULTON FINANCIAL CORP)
• FY2025 10-K: …and implementation risks with respect to strategic projects and initiatives. If we are not able to adequately identify and manage the risks associated with new activities, our business, financial condition and results of operations could be materially and adversely impacted. RISKS RELATED TO COMPETITION Our ability…
• FY2025 10-K: …losses of $23.4 million for non-PCD Loans, partially offset by an elevated level of provision for credit losses in the same period in 2023 due to a $13.3 million charge-off for a commercial office loan. 50 Non-Interest Income The following table presents the components of non-interest income: Increase (Decrease) 2024…
• VLY (VALLEY NATIONAL BANCORP)
• FY2025 10-K: $11.0 billion and represented 21.9 percent of the total loan portfolio at December 31, 2025. Commercial real estate and construction loans totaled $29.2 billion and represented 58.3 percent of the total loan portfolio at December 31, 2025. Average interest earning assets in Commercial Banking segment decreased $1.6…
• FY2025 10-K: …our lower cost of funding sources. See details in the "Allowance for Credit Losses for Loans" and "Non-Interest Income" sections of this MD&A. The net interest margin for this segment increased 14 basis points to 3.59 percent for the year ended December 31, 2025 as compared to 2024, due to a 49 basis point decrease…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.