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If you have a question at this time, please press 1 on your telephone keypad. Press 2. Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad. We'll take our first question from Kelly Motta of KBW. Please go ahead. Your line is open.

So the charge-offs that you're looking at in the quarter are the result of a sale that we performed that released $17 million in nonperforming loans during the quarter. And that release triggered charge-offs, etcetera. But the result at the end of the day was a gain of $3.9 million. We reported. Offset, of course, by the entry of a telecommunications loan that was recorded as nonaccrual nonperforming during this quarter. So that's basically the movement in nonperforming during the quarter in commercial. So, only one loan, and it's not something that it's across the portfolio. We just see this as very idiosyncratic.

Yeah. And just to add, and I shared a little bit on prepared remarks. There was a charge-off related to the sale, of about $4.8 million, and a big portion of it was already reserved. It was about $3.1 million that was already set.

Got it. Last question, if I can just sneak it in, is on your expenses. $380 to $385, you know, relative to your operating is relatively flat year over year. Can you provide like your confidence in that and the drivers of those increased efficiencies?

Our next question comes from Arren Cyganovich of Turist. Please go ahead. Your line is open.

Thank you. We will move next with Brett Rabatin of Hovde Group. Please go ahead. Your line is open.

Hey. Good morning, everyone. Wanted to start on the margin and just on the fourth quarter, wanted to get a little better color on the linked quarter change in the loan yields. Which had been fairly stable up until this quarter. So this the 17 basis point linked quarter change, was just hoping to figure out how much of that was the large nonaccrual loan and any other comments on the loan portfolio yield change linked quarter?

Yep. My name is Alex. Yeah. You. Thank you, Brett, for your question. And you know, remember that we are asset sensitive and we continue to be asset sensitive and this quarter, as I mentioned in my prepared remarks, the loan yield went down basically because of first, 50 basis point cost during the quarter, but also we have the full effect of the September 25 basis cost. So that's one of the main drivers for the reduction in the NIM, and we were able to compensate that to our government deposit variable rate because it also got a reduction there. But it reflects our asset-sensitive positioning. Yep. I think also, you're also on the loan side. You're starting to see since we have moved our auto originations to higher significantly higher quality, we have been able to we are also seeing a slight decrease in the yield coming in on the auto lending side. And that's just a testament to the credit quality that we're bringing in, better credit quality.

Okay. That's helpful. And then just thinking about the margin guidance for '26, it was nice to see that the funding cost which were up a little bit in 3Q, moved back down in the fourth quarter. Is the margin guidance for 26%, does that reflect some additional leverage to lower funding costs from here? You know, one of the key things that's always been a question is Puerto Rico has lower cost deposits. The mainland, you know, how much can those go down? As rates go down given they're already fairly competitively priced?

Yeah. The reality is when you look forward for this year, 2026, we will have a change in our funding mix because the $500 million exit, $500 million exiting the bank, you know, moving to the wealth management business. And we will replace that with wholesale funding, and that carries a higher cost of about 25 basis point to 40 basis point depends on the term of that wholesale funding, but the reality is that we will have that change. And that's part of the impact of the NIM. But when you look at 2026, 2026 will have the full effect of the 75 basis point cut that happened in the last part of 2025. Will have all that full effect, plus we are also foreseeing two additional cuts during 2025. And we are sensitive. We have more assets repricing than the deposit side. And that's why we are giving that indicative in the margin. Okay? That guidance. And when you look at 2024 basis 2025, it reflects that. You know, we had a margin in 2024 of 5.43%. This year, it was 5.27%. It was about 16 basis points reduction, and it's related to the rate cuts that 100 basis point late 2024. And this year, 75 basis point end of 2025. Brett, and could also add as you saw this quarter and you saw throughout 2025, core deposits, excluding government, went up. On the retail side as well as on the commercial side. And that is also something that we expect to help mitigate what Maritza just said. Right? Because the more core funding that we bring in, it's gonna be cheaper than wholesale funding. So you know, our margin guidance is the margin guidance, and that's how we see it. But we're gonna be working hard to beat that margin guidance as you guys can expect. So we'll update everybody on the first quarter when we talk again.

Okay. If I could ask one last one, the other thing I was hoping to figure out was if you look at slide 20, it has the auto portfolio net charge-off rate. It was a little bit higher in the fourth quarter as were NPLs. And just wanted to see if the higher level in 4Q, if that seems to be an anomaly, a year-end cleanup of the portfolio or what have you. You know, versus something maybe you're seeing with the book?

Okay. So it's That's helpful. Central and lower.

I'm sorry. The year is no. It's just end of the year seasonality. And we'll keep on keep you guys updated in the first part of the year and see if that turns around again. But that's what we've seen in the last three years. We'll be watching closely in the part of this year to see if that replicates again.

Thank you. Our next question comes from Timur Braziler with Wells Fargo. Please go ahead. Your line is open.

Here. One second. How about now? Can you hear me?

Hello.

Can you hear me now?

Timur, we are able to hear you. One moment, please. Sure.

Perfect. Sorry about that. Maybe just a bigger picture on credit. You know, if we look at kind of 1% full-year charge-off rate, is that kind of a good proxy for where we are in this post-pandemic cycle? And then if you look at the allowance ratio, you know, year over year, you added a little bit over $25 million to allowance. You built that to almost, you know, 2.46% of loans. I guess, how do we think about the allowance build in 2025, what that might portend for charge-off activity in 2026, and then you know, what does a stabilized level of credit activity look like going forward here?

Well, I think that the 1% range that you mentioned is within what we can expect here in the in HR two. If you look at 2025 without any specifics of the sales or any particular case, that should be a good run rate. When we think about how we build the reserve, please be mindful that there's some specific reserve at the end of this year related to the telecommunication loan. So that's a very isolated case, very specific. So setting that aside, I think that we could continue monitoring credit and building this stuff as needed, but 1% net charge-off delinquency remaining this the level that we're managing this year. Maybe we won't be reserved at the same level because of the specific that we have this quarter, but definitely it could be about flat from what we have right now. Excluding any specific case that we have managed during the year. Okay?

Got it. And then the telecom credit this quarter, was there anything incremental that happened in 4Q that drove the activity? Or is this just really recalibration of maybe what the other banks were talking about in the third quarter and you guys kind of catching up to that same level of reserving in the fourth quarter?

No. It's basically, we receive financials every period. So last period, you know, they didn't, you know, warranted right away, you know, no closed out. But this period, it repeated the deterioration of the on the financials. So basically, we decided, yeah, this is a situation that merits the no approved status.

Yeah. And at the end, this is a loan that is continuing to pay. You know, it stays paying. So what we're doing is being prudent on giving the specific situation of the company that comes from the outcome of a merger we decided to put it in.

Thank you. We will move next with Manuel Navas with Piper Sandler. Please go ahead. Your line is open.

Thank you. Yeah. Thank you.

And once again, if you would like to ask a question, please press star then the number one on your telephone keypad. And at this time, there are no further questions. I will now turn the call back over to management for closing remarks.