FirstBank Puerto Rico

We also consider the bank's large unrealized losses on its investment securities and its tangible common equity ratio, which isn't meaningfully above the median for rated U.S. banks, in our capital and earnings assessment. The stable outlook incorporates our view that in the next 12 months, notwithstanding large payouts, FirstBank will maintain strong capital ratios. We also expect the bank to remain firmly profitable and risk-weighted capital ratios to decline modestly over the next few years. We think nonperforming assets and credit losses will exceed most mainland U.S. peers'. However, we don't expect a meaningful deterioration in asset quality absent a significant economic slowdown, which is not in our base case. We could lower the rating in the next 12

...Despite challenging industry conditions, we think FirstBank Puerto Rico (FirstBank) has delivered solid overall financial performance in recent years--better than the financial performance delivered by some mainland U.S. regional banks. We think FirstBank's diversified deposit franchise, elevated net interest margin, and prudent expense management have benefited its financial results. For example, its net earnings and customer deposits have been relatively stable over the past year, which we view positively. Furthermore, its funding and liquidity ratios continue to be better than their pre-pandemic levels, aided by substantially reduced wholesale borrowings over the past decade and more government deposits. However, we expect funding ratios to weaken slightly over the next few years primarily because of expected loan growth....

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