Looking at some of our other capital metrics. Total stockholders’ equity remained leveled at $1.2 billion and tangible common equity ratio increased to 10 [Technical Difficulty]. Our first quarter tax rate of 26.8% decreased from 31.9% in the fourth quarter. The first quarter reflected two factors; one was unexpected full year effective tax rate of 29% in 2024 due to higher forecasted business activities with preferential tax treatment under the Puerto Rico tax code. The second item was a $1.1 million discrete benefit for stock vested in the first quarter. To sum up during the first quarter, net interest income continued to grow despite the slight decline in net interest margin. This reflected higher average balances and yields of securities, cash on loans and lower wholesale funding costs partially offset by higher cost of government deposits.
Excluding government deposits, core deposits declined slightly due to commercial withdrawals, reflecting seasonal line of pay downs. While loans remain leveled quarter-over-quarter, we anticipate growth over the balance of the year based on the strength of our pipeline. As I mentioned, net interest margin should gradually improve, credit to continue to look [Technical Difficulty] expenses were in line with our expected range and our expected tax rate should be lower. Now, here’s Jose.
José Rafael Fernández: Thank you, Maritza. Please turn to Page 8. Our outlook is positive for both Puerto Rico and OFG. The flow of federal funds to rebuild the island’s infrastructure continues at a solid pace. Local businesses are expanding. Overall business activity is good. [Technical Difficulty] is doing well. We continue to be vigilant for the big macro uncertainties, interest rate changes, inflation trends, a possible mainland recession, and ongoing global conflicts. Of course we’re always keeping an eye on the competition. We are optimistic about Puerto Rico and the future. We look forward to continuing overall economic and business growth as well as strong levels of employment. Turning to OFG, we’re well-positioned to continue to benefit from a higher for longer interest rate environment as well as loan and client growth.
Consumer credit trends should remain below pre-pandemic levels and digital adoption and customer acquisition should continue to expand. Clearly our strategy is working. So, we will continue to invest in and deploy more customer-friendly technology, adapt to customer needs, and tirelessly work to improve customer experience. Overall, we look forward to another strong year in 2024. In closing, I want to emphasize that our results could not have been achieved without the hard work and dedication of all our team members. We are thankful to them and we’re excited for what’s to come. This year marks our 60th anniversary in business and our 30th [Technical Difficulty] New York Stock Exchange. With this, we end our formal presentation. Operator, let’s start the Q&A.
Operator: Thank you. [Operator Instructions] We’ll go first to Brett Rabatin with Hovde Group.
Brett Rabatin: Hey, good morning everyone. Wanted to start with the margin and my call is breaking up a little bit intermittently. But if I heard correctly the guidance for the full year margin is 5.35% to 5.55%. And if I think about the low end of that guidance that would suggest that the margin only has a few basis points of downside from here. And I wanted to kind of think about that versus the cost of interest-bearing funds increase. And if I think about the past three quarters, that’s gone from 30 to 32 to 43 basis points. And so it seems like the higher for longer, more normal for longer is having somewhat of an impact on the lower funding cost in Puerto Rico in the past quarter or two. Just wanted to make sure I understood that guidance from here and it sounds like Maritza, you think the margin despite the funding cost increase is bottomed out here, is that a fair assessment?
José Rafael Fernández: So, Brett just to correct the guidance that you pointed out is not what Maritza said. She said 545 to 555.
Brett Rabatin: Okay.
José Rafael Fernández: So, it’s actually north of 540, which is what we had this quarter. So, just to clarify that, and I’m sorry that you had that to mid-teen [ph].
Brett Rabatin: Okay. Well, that stick to back again that would come to — go ahead, I’m sorry.
José Rafael Fernández: Yes. And going in the fact that, I just changed the premise of your question, so I don’t know, if you want to add a question again.
Brett Rabatin: Well, maybe to rephrase it given that the margin is expected to be slightly higher from here. I just want to make sure I understood. Obviously, we’ve had margin pressure with the rise in funding costs in the past three quarters. The margin moving higher from here, what would that be a function of? And can you talk maybe about what you expect deposit betas to do from here?
José Rafael Fernández: Yes. So, let me see if I can give you a high level, and if Maritza needs to chime in here on more specifics, she will do so. But remember, when we spoke last time, we were assuming five rate cuts in the second half of the year as part of our guidance on the margin. After what’s going on in the first quarter and a little bit afterwards, we are now modeling three cuts in the second half of the year. So, since we’re asset sensitive and we have been for a while, we’re going to be benefiting from that. That’s number one. And then number two, we have a large government deposit as you alluded and we mentioned in the call. Our expectation for that deposit is to flow out of the balance sheet [Technical Difficulty] not in its entirety but in a significant amount at the end of the second quarter or the beginning of the third quarter.
So, that in itself also has implications on how we’re guiding a range on the margin. Is that — am I answering your question? Is that giving you enough color?
