- Net income of $79.5 million, or $0.46 per diluted share, for
the fourth quarter of 2023, compared to $82.0 million, or $0.46 per
diluted share, for the third quarter of 2023. Net income of $302.9
million, or $1.71 per diluted share, for the year ended December
31, 2023, compared to $305.1 million, or $1.59 per diluted share,
for the year ended December 31, 2022. Net income for the quarter
and year ended December 31, 2023 included a one-time Federal
Deposit Insurance Corporation (“FDIC”) special assessment expense
of $6.3 million ($3.9 million after-tax, or a decrease of $0.03 per
diluted share).
- Return on average assets for the fourth quarter of 2023 was
1.70%, compared to 1.72% for the third quarter of 2023. Return on
average assets for the year ended December 31, 2023 was 1.62%,
compared to 1.57% for the year ended December 31, 2022.
- Income before income taxes of $84.9 million for the fourth
quarter of 2023, compared to $109.0 million for the third quarter
of 2023. Income before income taxes of $397.4 million for the year
ended December 31, 2023, compared to $447.6 million for the year
ended December 31, 2022.
- On a non-GAAP basis, adjusted pre-tax, pre-provision income of
$110.0 million for the fourth quarter of 2023, compared to pre-tax,
pre-provision income of $113.4 million for the third quarter of
2023. Adjusted pre-tax, pre-provision income of $459.5 million for
the year ended December 31, 2023, compared to pre-tax,
pre-provision income of $475.3 million for the year ended December
31, 2022.
- Net interest income of $196.7 million for the fourth quarter of
2023, compared to $199.7 million for the third quarter of 2023. The
decrease includes an increase in interest expense, particularly in
time deposits, coupled with a reduction in average interest-earning
assets, partially offset by an increase in the yields of the loan
portfolio. In addition, the third quarter of 2023 included $1.2
million of interest income recognized on the collection of a
previously charged-off construction loan. Net interest margin
remained relatively flat at 4.14% for the fourth quarter of 2023,
compared to 4.15% for the third quarter of 2023.
- Provision for credit losses increased to $18.8 million for the
fourth quarter of 2023, compared to $4.4 million for the third
quarter of 2023. The increase is related to various factors,
including increases in volume across all loan portfolio classes and
higher charge-off levels, particularly in the consumer loan and
finance lease portfolios, partially offset by improvements in the
projection of certain macroeconomic variables, such as the
commercial real estate price index (“CRE price index”). The ratio
of the allowance for credit losses (“ACL”) for loans and finance
leases to total loans held for investment was 2.15% as of December
31, 2023, compared to 2.21% as of September 30, 2023.
- Non-interest income increased to $33.6 million for the fourth
quarter of 2023, compared to $30.3 million for the third quarter of
2023, mainly related to a $3.0 million gain recognized on the sale
of a banking premise in the Florida region.
- Non-interest expenses increased by $10.0 million to $126.6
million for the fourth quarter of 2023, compared to $116.6 million
for the third quarter of 2023, mainly driven by the aforementioned
FDIC deposit special assessment. The efficiency ratio for the
fourth quarter of 2023 was 54.98%, compared to 50.71% for the third
quarter of 2023. On a non-GAAP basis, excluding the aforementioned
FDIC deposit special assessment, the adjusted efficiency ratio for
the fourth quarter of 2023 was 52.24%.
- Income tax expense decreased to $5.4 million for the fourth
quarter of 2023, compared to $27.0 million for the third quarter of
2023. The decrease is mainly related to a lower effective tax rate
and lower pre-tax income.
- Credit quality variances:
- Non-performing assets decreased by $4.3
million to $125.9 million as of December 31, 2023, mainly driven by
the commercial and construction loan portfolios, which includes
$7.7 million in collections and loans returned to accrual status
and $1.5 million in charge-offs, partially offset by a $3.3 million
increase in consumer loans, mainly auto loans and finance leases,
and a $1.1 million increase in other repossessed automobiles.
- Annualized net charge-offs to average loans
ratio increased to 0.69% for the fourth quarter of 2023, compared
to 0.48% for the third quarter of 2023, mainly driven by a $4.6
million increase in consumer loans, a $1.4 million recovery
recorded on a construction loan in the Puerto Rico region during
the third quarter of 2023, and a $1.0 million charge-off recorded
on a nonaccrual commercial mortgage loan transferred to other real
estate owned (“OREO”) during the fourth quarter of 2023.
- Total loans increased by $233.0 million from the prior quarter
to $12.2 billion as of December 31, 2023. On a portfolio basis, the
variance consisted of increases of $156.3 million in commercial and
construction loans, $69.2 million in consumer loans, primarily auto
loans and finance leases, and $7.5 million in residential mortgage
loans. In terms of geography, the total loan growth consisted of
increases of $254.0 million in the Puerto Rico region and $1.4
million in the Virgin Islands region, partially offset by a
decrease of $22.4 million in the Florida region. The increase in
commercial and construction loans in the Puerto Rico region
includes a $150.0 million commercial and industrial participated
loan funded in the fourth quarter in connection with the financial
closing of a private-public private partnership (P3) for
improvement of infrastructure for toll roads.
- Total loan originations, including refinancings, renewals, and
draws from existing commitments (other than credit card utilization
activity), amounted to $1.3 billion in the fourth quarter of 2023,
an increase of $116.5 million compared to the third quarter of
2023. The growth in total loan originations consisted of an
increase of $162.5 million in commercial and construction loans,
which includes the origination of the aforementioned $150.0 million
commercial and industrial participated loan, partially offset by
declines of $27.6 million in residential mortgage loans and $18.4
million in consumer loans.
- Brokered certificates of deposit (“brokered CDs”) increased by
$473.0 million during the fourth quarter of 2023 to $783.3 million
as of December 31, 2023, which represents 4.7% of total
deposits.
- Excluding brokered CDs and government deposits, total deposits
decreased by $261.9 million to $12.6 billion as of December 31,
2023, reflecting declines of $202.8 million in the Puerto Rico
region, $42.8 million in the Florida region, and $16.3 million in
the Virgin Islands region. This decrease is net of a $79.8 million
increase in time deposits.
- Government deposits, which are fully collateralized, decreased
in the fourth quarter of 2023 by $90.4 million and totaled $3.2
billion as of December 31, 2023. The variance reflects reductions
of $57.0 million in the Puerto Rico region, $31.3 million in the
Virgin Islands region, and $2.1 million in the Florida region.
- Cash and cash equivalents increased to $663.2 million as of
December 31, 2023, compared to $584.9 million as of September 30,
2023. When adding $2.2 billion of free high-quality liquid
securities that could be liquidated or pledged within one day,
total core liquidity amounted to $2.8 billion as of December 31,
2023, or 14.93% of total assets, compared to 14.58% as of September
30, 2023. Including the $924.2 million in available lending
capacity at the Federal Home Loan Bank (“FHLB”), available
liquidity amounted to 19.82% of total assets as of December 31,
2023, compared to 19.67% as of September 30, 2023.
- In 2023, the Corporation returned approximately $300 million,
or close to 100%, of 2023 earnings, to its shareholders through
$200 million in repurchases of common stock and the payment of $100
million in common stock dividends.
- Capital ratios exceed required regulatory levels for bank
holding companies and well-capitalized banks. The Corporation’s
estimated total capital, common equity tier 1 (“CET1”) capital,
tier 1 capital, and leverage ratios were 18.57%, 16.10%, 16.10%,
and 10.78%, respectively, as of December 31, 2023. On a non-GAAP
basis, the tangible common equity ratio increased to 7.67% as of
December 31, 2023, from 6.74% as of September 30, 2023 driven by an
increase in the fair value of available-for-sale debt
securities.
First BanCorp. (the “Corporation” or “First BanCorp.”) (NYSE:
FBP), the bank holding company for FirstBank Puerto Rico
(“FirstBank” or “the Bank”), today reported a net income of $79.5
million, or $0.46 per diluted share, for the fourth quarter of
2023, compared to $82.0 million, or $0.46 per diluted share, for
the third quarter of 2023, and $73.2 million, or $0.40 per diluted
share, for the fourth quarter of 2022.
For the year ended December 31, 2023, the Corporation reported
net income of $302.9 million, or $1.71 per diluted share, compared
to $305.1 million, or $1.59 per diluted share, for the year ended
December 31, 2022.
Aurelio Alemán, President and Chief Executive Officer of First
BanCorp., commented: “We closed an unprecedented and challenging
year for the banking industry with another quarter of strong
financial performance and solid loan growth for our franchise. We
delivered a 1.70% return on average assets, grew loans by $233.0
million or 7.8% linked quarter annualized, and decreased
non-performing assets to just 0.67% of total assets. Core deposits,
other than government and brokered, contracted by 2.0% as we
continue to see use of excess liquidity across all market segments.
We are very fortunate to have the support of our loyal client base
and the commitment from all our service-oriented colleagues during
this period and as we continue to capitalize on the stable economic
environment of our main operating markets.”
Alemán continued: “Over the course of 2023, we continued to
deploy our capital wisely while selectively growing the loan
portfolio, proactively managing the acceleration in funding costs,
and executing on multiple franchise investments. Total loans grew
by $627.7 million, or 5.4%, during the year driven by strong
commercial and consumer loan originations, and we expect that a
significant portion of unfunded construction loan originations will
be disbursed during 2024. Franchise investments continue to enable
the achievement of our strategic objectives. We grew digital
banking registered users by 14%, deployed multiple enhancements to
both our physical and information technology infrastructure, and
advanced several process improvement initiatives aimed at
supporting business goals and increase efficiency across the
organization. For the third consecutive year, we distributed close
to 100% of earnings to shareholders in the form of cash dividends
and share repurchases, while maintaining robust regulatory capital
levels and ample liquidity.
“As we look forward to 2024, additional investments will be
geared towards simplifying our commercial lending process and
enhancing the resiliency of the franchise, while continuing to
expand our digital offerings. Although we are seeing an expected
correction in the credit cycle of the consumer lending business
driven by lower levels of excess liquidity and inflationary
pressures, our ample reserve coverage levels and risk management
framework should withstand the impact of any additional credit
deterioration over the next year. That said, we remain confident
that the economic prospects of our primary market, driven by a
strong labor market and an unprecedented level of federal support,
should also serve as a mitigant.
Alemán concluded: “Finally, while we don’t manage the
organization based on short-term stock price fluctuations, we do
believe that our 2023 stock price performance is a clear reflection
of the strength of our balance sheet and our growth prospects for
the coming years. We thank our shareholders for their support and
remain committed to delivering consistent results.”
NON-GAAP DISCLOSURES
This press release contains GAAP financial measures and non-GAAP
financial measures. Non-GAAP financial measures are used when
management believes that the presentation of these non-GAAP
financial measures enhances the ability of analysts and investors
to analyze trends in the Corporation’s business and understand the
performance of the Corporation. The Corporation may utilize these
non-GAAP financial measures as guides in its budgeting and
long-term planning process. Where non-GAAP financial measures are
used, the most comparable GAAP financial measure, as well as the
reconciliation of the non-GAAP financial measure to the most
comparable GAAP financial measure, can be found in the text or in
the tables in or attached to this press release. Any analysis of
these non-GAAP financial measures should be used only in
conjunction with results presented in accordance with GAAP.
Certain non-GAAP financial measures, such as adjusted net
income, adjusted pre-tax, pre-provision income, adjusted
non-interest expenses, and adjusted efficiency ratio, exclude the
effect of items that management believes are not reflective of core
operating performance (the “Special Items”). Other non-GAAP
financial measures include adjusted net interest income and margin,
tangible common equity, tangible book value per common share, and
certain capital ratios. These measures should be read in
conjunction with the accompanying tables (Exhibit A), which are an
integral part of this press release, and the Corporation’s other
financial information that is presented in accordance with
GAAP.
Special Items
The financial results for the third quarter of 2023, fourth
quarter of 2022, and the year ended December 31, 2022 did not
include any significant Special Items. The financial results for
the fourth quarter of 2023 and the year ended December 31, 2023
included the following Special Items:
Quarter ended December 31, 2023
- A one-time FDIC special assessment expense
of $6.3 million ($3.9 million after-tax, calculated based on the
statutory tax rate of 37.5%) recognized as a result of the final
rule approved by the FDIC Board of Directors on November 16, 2023
to recover the loss to the Deposit Insurance Fund associated with
protecting uninsured deposits following certain financial
institution failures during the first half of 2023 by means of a
quarterly special assessment rate of 3.36 basis points to be
applied to the special assessment base during an eight-quarter
collection period. The special assessment base is equal to
estimated uninsured deposits reported as of December 31, 2022,
adjusted to exclude the first $5 billion of such deposits. The FDIC
deposit special assessment is reflected in the condensed
consolidated statements of income as part of “FDIC deposit
insurance” expenses.
Year ended December 31, 2023
- A $6.3 million ($3.9 million after-tax,
calculated based on the statutory tax rate of 37.5%) one-time
expense related to the aforementioned FDIC special assessment.
- A $3.6 million ($2.3 million after-tax,
calculated based on the statutory tax rate of 37.5%) gain
recognized from a legal settlement reflected in the condensed
consolidated statements of income as part of “Other non-interest
income.”
- A $1.6 million gain on the repurchase of
$21.4 million in junior subordinated debentures reflected in the
condensed consolidated statements of income as “Gain on early
extinguishment of debt.” The junior subordinated debentures are
reflected in the condensed consolidated statements of financial
condition as “Other borrowings.” The purchase price equated to
92.5% of the $21.4 million par value. The 7.5% discount resulted in
the gain of $1.6 million. The gain, realized at the holding company
level, had no effect on the income tax expense recorded during
2023.
Non-GAAP Financial Measures
Adjusted Pre-Tax, Pre-Provision Income
Adjusted pre-tax, pre-provision income is a non-GAAP performance
metric that management uses and believes that investors may find
useful in analyzing underlying performance trends, particularly in
times of economic stress, including as a result of natural
catastrophes or health epidemics. Adjusted pre-tax, pre-provision
income, as defined by management, represents income before income
taxes adjusted to exclude the provisions for credit losses on
loans, unfunded loan commitments and debt securities and any gains
or losses on sales of investment securities. In addition, from time
to time, earnings are also adjusted for certain items that
management believes are not reflective of core operating
performance, which are regarded as Special Items.
Tangible Common Equity Ratio and Tangible Book Value per Common
Share
The tangible common equity ratio and tangible book value per
common share are non-GAAP financial measures that management
believes are generally used by the financial community to evaluate
capital adequacy. Tangible common equity is total common equity
less goodwill and other intangibles. Tangible assets are total
assets less goodwill and other intangibles. Management uses and
believes that many stock analysts use the tangible common equity
ratio and tangible book value per common share in conjunction with
other more traditional bank capital ratios to compare the capital
adequacy of banking organizations with significant amounts of
goodwill or other intangible assets, typically stemming from the
use of the purchase method of accounting for mergers and
acquisitions. Accordingly, the Corporation believes that disclosure
of these financial measures may be useful to investors. Neither
tangible common equity nor tangible assets, or the related
measures, should be considered in isolation or as a substitute for
stockholders’ equity, total assets, or any other measure calculated
in accordance with GAAP. Moreover, the manner in which the
Corporation calculates its tangible common equity, tangible assets,
and any other related measures may differ from that of other
companies reporting measures with similar names.
Net Interest Income Excluding Valuations, and on a
Tax-Equivalent Basis
Net interest income, interest rate spread, and net interest
margin are reported excluding the changes in the fair value of
derivative instruments and on a tax-equivalent basis in order to
provide to investors additional information about the Corporation’s
net interest income that management uses and believes should
facilitate comparability and analysis of the periods presented. The
changes in the fair value of derivative instruments have no effect
on interest due or interest earned on interest-bearing liabilities
or interest-earning assets, respectively. The tax-equivalent
adjustment to net interest income recognizes the income tax savings
when comparing taxable and tax-exempt assets and assumes a marginal
income tax rate. Income from tax-exempt earning assets is increased
by an amount equivalent to the taxes that would have been paid if
this income had been taxable at statutory rates. Management
believes that it is a standard practice in the banking industry to
present net interest income, interest rate spread, and net interest
margin on a fully tax-equivalent basis. This adjustment puts all
earning assets, most notably tax-exempt securities and tax-exempt
loans, on a common basis that management believes facilitates
comparison of results to the results of peers.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME
(NON-GAAP)
Net income was $79.5 million for the fourth quarter of 2023, or
$0.46 per diluted share, compared to $82.0 million, or $0.46 per
diluted share, for the third quarter of 2023. The following table
reconciles, for the fourth quarter of 2023 and year ended December
31, 2023, net income to adjusted net income and adjusted earnings
per share, which are non-GAAP financial measures that exclude the
significant Special Items identified above, and shows the net
income and earnings per diluted share for the third quarter of
2023, fourth quarter of 2022, and year ended December 31, 2022.
Quarter Ended
Year Ended
December 31,
2023
September 30,
2023
December 31,
2022
December 31,
2023
December 31,
2022
(In thousands, except per share
information)
Net income, as reported (GAAP)
$
79,489
$
82,022
$
73,174
$
302,864
$
305,072
Adjustments:
FDIC special assessment expense
6,311
-
-
6,311
-
Gain recognized from legal settlement
-
-
-
(3,600
)
-
Gain on early extinguishment of debt
-
-
-
(1,605
)
-
Income tax impact of adjustments (1)
(2,367
)
-
-
(1,017
)
-
Adjusted net income attributable to common
stockholders (non-GAAP)
$
83,433
$
82,022
$
73,174
$
302,953
$
305,072
Weighted-average diluted shares
outstanding
171,351
176,962
184,847
177,180
191,968
Earnings Per Share - diluted (GAAP)
$
0.46
$
0.46
$
0.40
$
1.71
$
1.59
Adjusted Earnings Per Share - diluted
(non-GAAP)
$
0.49
$
0.46
$
0.40
$
1.71
$
1.59
(1) See Special Items discussion above for
the individual tax impact related to the above adjustments.
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED
PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $84.9 million for the fourth
quarter of 2023, compared to $109.0 million for the third quarter
of 2023. For the year ended December 31, 2023, income before income
taxes was $397.4 million, compared to $447.6 million for the same
period in 2022. Adjusted pre-tax, pre-provision income was $110.0
million for the fourth quarter of 2023, compared to pre-tax,
pre-provision income of $113.4 million for the third quarter of
2023. For the year ended December 31, 2023, adjusted pre-tax,
pre-provision income was $459.5 million, compared to pre-tax,
pre-provision income of $475.3 million for the same period in 2022.
The following table reconciles income before income taxes to
adjusted pre-tax, pre-provision income for the last five quarters
and for the years ended December 31, 2023 and 2022:
Quarter Ended
Year Ended
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
(Dollars in thousands)
Income before income taxes
$
84,874
$
108,990
$
100,939
$
102,633
$
106,530
$
397,436
$
447,584
Add: Provision for credit losses
expense
18,812
4,396
22,230
15,502
15,712
60,940
27,696
Add: FDIC special assessment expense
6,311
-
-
-
-
6,311
-
Less: Gain recognized from legal
settlement
-
-
(3,600
)
-
-
(3,600
)
-
Less: Gain on early extinguishment of
debt
-
-
(1,605
)
-
-
(1,605
)
-
Adjusted pre-tax, pre-provision income
(1)
$
109,997
$
113,386
$
117,964
$
118,135
$
122,242
$
459,482
$
475,280
Change from most recent prior period
(amount)
$
(3,389
)
$
(4,578
)
$
(171
)
$
(4,107
)
$
(172
)
$
(15,798
)
$
83,768
Change from most recent prior period
(percentage)
-3.0
%
-3.9
%
-0.1
%
-3.4
%
-0.1
%
-3.3
%
21.4
%
(1)
Non-GAAP financial measure. See Non-GAAP
Disclosures above for the definition and additional information
about this non-GAAP financial measure.
NET INTEREST INCOME
The following table sets forth information concerning net
interest income for the last five quarters:
Quarter Ended
(Dollars in thousands)
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Net Interest Income
Interest income
$
265,481
$
263,405
$
252,204
$
242,396
$
233,452
Interest expense
68,799
63,677
52,389
41,511
27,879
Net interest income
$
196,682
$
199,728
$
199,815
$
200,885
$
205,573
Average Balances
Loans and leases
$
12,004,881
$
11,783,456
$
11,591,516
$
11,519,399
$
11,364,963
Total securities, other short-term
investments and interest-bearing cash balances
6,835,407
7,325,226
7,333,989
7,232,347
7,314,293
Average interest-earning assets
$
18,840,288
$
19,108,682
$
18,925,505
$
18,751,746
$
18,679,256
Average interest-bearing liabilities
$
11,665,459
$
11,671,938
$
11,176,385
$
10,957,892
$
10,683,776
Average Yield/Rate
Average yield on interest-earning assets -
GAAP
5.59
%
5.47
%
5.35
%
5.24
%
4.96
%
Average rate on interest-bearing
liabilities - GAAP
2.34
%
2.16
%
1.88
%
1.54
%
1.04
%
Net interest spread - GAAP
3.25
%
3.31
%
3.47
%
3.70
%
3.92
%
Net interest margin - GAAP
4.14
%
4.15
%
4.23
%
4.34
%
4.37
%
Net interest income amounted to $196.7 million for the fourth
quarter of 2023, a decrease of $3.0 million, compared to $199.7
million for the third quarter of 2023. The decrease in net interest
income reflects the following:
- A $5.4 million increase in interest expense on interest-bearing
deposits, including:
- A $3.7 million increase in interest expense
on brokered CDs, primarily related to a $3.3 million increase
associated with a $253.3 million increase in the average balance of
this portfolio and approximately $0.4 million driven by an increase
in average rates paid in the fourth quarter of 2023.
- A $2.4 million increase in interest expense
on time deposits, excluding brokered CDs, mainly due to
approximately $1.8 million associated with higher rates paid in the
fourth quarter of 2023 on new issuances and renewals, and $0.6
million of additional interest expense associated with an $84.5
million increase in the average balance. The average cost of
non-brokered time deposits in the fourth quarter of 2023 increased
26 basis points to 3.17% when compared to the previous quarter.
Partially offset by:
- A $0.7 million net decrease in interest
expense on interest-bearing checking and saving accounts, of which
$1.7 million is due to a $321.6 million decrease in the average
balance, partially offset by approximately $1.0 million driven by
an increase in average rates paid in the fourth quarter of 2023 on
public sector deposits. The average cost of interest-bearing
checking and saving accounts, excluding public sector deposits,
remained stable at 0.73% in the fourth quarter of 2023, when
compared to 0.74% in the previous quarter.
- A $3.9 million decrease in interest income from
interest-bearing cash balances and investment securities, mainly
due to a $4.1 million decrease in interest income from
interest-bearing cash balances, primarily consisting of cash
balances deposited at the Federal Reserve Bank (“FED”), driven by
the $304.6 million decrease in the average balance. This decrease
was partially offset by a $0.2 million increase in interest income
associated with dividends received on other equity securities
during the fourth quarter of 2023.
Partially offset by:
- A $2.9 million increase in interest income on consumer loans
and finance leases, of which approximately $2.1 million was related
to an increase of $88.2 million in the average balance of this
portfolio, and $0.8 million increase was related to higher yields,
mainly in the auto loans and credit cards portfolios.
- A $2.1 million increase in interest income on commercial and
construction loans, of which approximately $2.5 million was related
to the $121.4 million increase in the average balance of this
portfolio, and $0.8 million was related to the effect of higher
market interest rates on the upward repricing of the variable-rate
loans and new loan originations in the commercial and industrial
loan portfolio. These variances were partially offset by the effect
during the third quarter of 2023 of interest income of $1.2 million
recognized on the collection of a previously charged-off
construction loan in the Puerto Rico region.
- A $1.1 million increase in interest income on residential
mortgage loans, mainly driven by interest income of $0.9 million
mostly associated with higher collections on nonaccrual loans
during the fourth quarter of 2023, including $0.5 million
recognized on the payoff of a nonaccrual loan in the Puerto Rico
region.
- A $0.3 million decrease in interest expense on borrowings,
mainly driven by the $25.3 million decrease in the average balance
of short-term repurchase agreements due to the repayments at
maturity of such borrowings during the third quarter of 2023.
Net interest margin for the fourth quarter of 2023 remained
relatively flat at 4.14% and includes an increase in cost of funds
which offsets the change in mix to higher interest-earning
assets.
NON-INTEREST INCOME
The following table sets forth information concerning
non-interest income for the last five quarters:
Quarter Ended
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
(In thousands)
Service charges and fees on deposit
accounts
$
9,662
$
9,552
$
9,287
$
9,541
$
9,174
Mortgage banking activities
2,094
2,821
2,860
2,812
2,572
Gain on early extinguishment of debt
-
-
1,605
-
-
Insurance commission income
2,379
2,790
2,747
4,847
2,898
Card and processing income
11,015
10,841
11,135
10,918
10,601
Other non-interest income
8,459
4,292
8,637
4,400
4,355
Non-interest income
$
33,609
$
30,296
$
36,271
$
32,518
$
29,600
Non-interest income increased by $3.3 million to $33.6 million
for the fourth quarter of 2023, compared to $30.3 million for the
third quarter of 2023, mainly due to:
- A $4.2 million increase in other non-interest income, mainly
driven by a $3.0 million gain recognized on the sale of a banking
premise in the Florida region, $0.4 million in debit card
incentives collected, and a $0.2 million increase in unrealized
gains on marketable equity securities.
Partially offset by:
- A $0.7 million decrease in revenues from mortgage banking
activities, mainly driven by a decrease in the net realized gain on
sales of residential mortgage loans in the secondary market due to
a lower volume of sales and lower margins, and a $0.3 million
decrease in the fair value of to-be-announced forward contracts.
During the fourth and third quarters of 2023, net realized gains of
$0.4 million and $0.9 million, respectively, were recognized as a
result of Government National Mortgage Association (“GNMA”)
securitization transactions and whole loan sales to U.S.
government-sponsored enterprises amounting to $23.7 million and
$42.3 million, respectively.
NON-INTEREST EXPENSES
The following table sets forth information concerning
non-interest expenses for the last five quarters:
Quarter Ended
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
(In thousands)
Employees' compensation and benefits
$
55,584
$
56,535
$
54,314
$
56,422
$
52,241
Occupancy and equipment
21,847
21,781
21,097
21,186
21,843
Business promotion
6,725
4,759
4,167
3,975
5,590
Professional service fees:
Collections, appraisals and other
credit-related fees
952
930
1,231
848
1,483
Outsourcing technology services
7,003
7,261
7,278
8,141
7,806
Other professional fees
3,295
2,831
3,087
2,984
3,380
Taxes, other than income taxes
5,535
5,465
5,124
5,112
5,211
FDIC deposit insurance
8,454
2,143
2,143
2,133
1,544
Other insurance and supervisory fees
2,308
2,356
2,352
2,368
2,429
Net gain on OREO operations
(1,005
)
(2,153
)
(1,984
)
(1,996
)
(2,557
)
Credit and debit card processing
expenses
7,360
6,779
6,540
5,318
6,362
Communications
2,134
2,219
1,992
2,216
2,322
Other non-interest expenses
6,413
5,732
5,576
6,561
5,277
Total non-interest expenses
$
126,605
$
116,638
$
112,917
$
115,268
$
112,931
Non-interest expenses amounted to $126.6 million in the fourth
quarter of 2023, an increase of $10.0 million, from $116.6 million
in the third quarter of 2023. Non-interest expenses for the fourth
quarter of 2023 include the FDIC special assessment expense of $6.3
million. On a non-GAAP basis, excluding the effect of this Special
Item, adjusted non-interest expenses increased by $3.7 million
mainly due to:
- A $2.0 million increase in business promotion expenses, mainly
as a result of a $1.1 million increase in sponsorship and public
relations activities and a $0.6 million increase in marketing and
advertising expenses.
- A $1.1 million decrease in net gain on OREO operations, mainly
driven by a $0.8 million decrease in net realized gains on sales of
OREO properties, primarily residential properties in Puerto Rico,
and a $0.3 million increase in property values write-downs, mainly
a $0.1 million write-down to the value of a commercial OREO in
Puerto Rico recorded during the fourth quarter of 2023.
- A $0.7 million increase in other non-interest expenses, of
which $0.5 million related to legal and operational losses.
- A $0.6 million increase in credit and debit card processing
expenses, mainly due to higher debit card assessment fees and lower
incentives collected than the previous quarter.
Partially offset by:
- A $1.0 million decrease in employees’ compensation and benefits
expense, mainly driven by a reduction of $1.4 million in Christmas
bonuses and incentives accruals, partially offset by a $0.6 million
increase in salary compensation mainly due to new hires and salary
adjustments.
INCOME TAXES
The Corporation recorded an income tax expense of $5.4 million
for the fourth quarter of 2023, compared to $27.0 million for the
third quarter of 2023. The income tax expense decreased due to a
reduction in the effective tax rate for the year related to higher
than previously forecasted business activities during the fourth
quarter with preferential tax treatment under the Puerto Rico tax
code, coupled with a lower pre-tax income.
The Corporation’s estimated annual effective tax rate, excluding
entities with pre-tax losses from which a tax benefit cannot be
recognized and discrete items, was 23.5% for the fourth quarter of
2023, compared to 28.2% estimated during the third quarter of 2023.
As of December 31, 2023, the Corporation had a deferred tax asset
of $150.1 million, net of a valuation allowance of $139.2 million
against the deferred tax assets.
CREDIT QUALITY
Non-Performing Assets
The following table sets forth information concerning
non-performing assets for the last five quarters:
(Dollars in thousands)
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Nonaccrual loans held for investment:
Residential mortgage
$
32,239
$
31,946
$
33,252
$
36,410
$
42,772
Construction
1,569
1,640
1,677
1,794
2,208
Commercial mortgage
12,205
21,632
21,536
21,598
22,319
Commercial and Industrial
15,250
18,809
9,194
13,404
7,830
Consumer and finance leases
22,444
19,137
16,362
15,936
14,806
Total nonaccrual loans held for
investment
$
83,707
$
93,164
$
82,021
$
89,142
$
89,935
OREO
32,669
28,563
31,571
32,862
31,641
Other repossessed property
8,115
7,063
5,404
4,743
5,380
Other assets (1)
1,415
1,448
2,111
2,203
2,202
Total non-performing assets (2)
$
125,906
$
130,238
$
121,107
$
128,950
$
129,158
Past due loans 90 days and still accruing
(3)
$
59,452
$
62,892
$
63,211
$
74,380
$
80,517
Nonaccrual loans held for investment to
total loans held for investment
0.69
%
0.78
%
0.70
%
0.77
%
0.78
%
Nonaccrual loans to total loans
0.69
%
0.78
%
0.70
%
0.77
%
0.78
%
Non-performing assets to total assets
0.67
%
0.70
%
0.63
%
0.68
%
0.69
%
(1)
Residential pass-through mortgage-backed
securities ("MBS") issued by the Puerto Rico Housing Finance
Authority ("PRHFA") held as part of the available-for-sale debt
securities portfolio.
(2)
Excludes purchased-credit deteriorated
("PCD") loans previously accounted for under Accounting Standards
Codification ("ASC") Subtopic 310-30 for which the Corporation made
the accounting policy election of maintaining pools of loans as
“units of account” both at the time of adoption of current expected
credit losses ("CECL") on January 1, 2020 and on an ongoing basis
for credit loss measurement. These loans will continue to be
excluded from nonaccrual loan statistics as long as the Corporation
can reasonably estimate the timing and amount of cash flows
expected to be collected on the loan pools. The portion of such
loans contractually past due 90 days or more amounted to $8.3
million as of December 31, 2023 (September 30, 2023 - $8.9 million;
June 30, 2023 - $9.5 million; March 31, 2023 - $10.4 million;
December 31, 2022 - $12.0 million).
(3)
These include rebooked loans, which were
previously pooled into GNMA securities, amounting to $7.9 million
as of December 31, 2023 (September 30, 2023 - $8.5 million; June
30, 2023 - $6.5 million; March 31, 2023 - $7.1 million; December
31, 2022 - $10.3 million). Under the GNMA program, the Corporation
has the option but not the obligation to repurchase loans that meet
GNMA’s specified delinquency criteria. For accounting purposes, the
loans subject to the repurchase option are required to be reflected
on the financial statements with an offsetting liability.
Variances in credit quality metrics:
- Total non-performing assets decreased by $4.3 million to $125.9
million as of December 31, 2023, compared to $130.2 million as of
September 30, 2023. Total nonaccrual loans held for investment
decreased by $9.5 million to $83.7 million as of December 31, 2023,
compared to $93.2 million as of September 30, 2023. The decrease in
non-performing assets was driven by the commercial and construction
loan portfolios, which includes the following:
- $7.7 million in collections and loans
returned to accrual status, which include a $2.7 million commercial
mortgage loan that was cured during the quarter; and
- $1.5 million in charge-offs, of which $1.0
million was related to the aforementioned $1.0 million charge-off
recorded on a nonaccrual commercial mortgage loan transferred to
OREO during the fourth quarter of 2023.
Partially offset by:
- A $3.3 million increase in nonaccrual
consumer loans, consisting mainly of auto loans and finance
leases.
- A $1.1 million increase in other
repossessed property, consisting of repossessed automobiles.
- A $0.3 million increase in nonaccrual
residential mortgage loans, mainly related to inflows of $5.3
million, partially offset by $3.0 million in collections and $1.6
million of loans restored to accrual status.
- Inflows to nonaccrual loans held for investment were $34.9
million in the fourth quarter of 2023, a decrease of $5.6 million,
compared to inflows of $40.5 million in the third quarter of 2023.
Inflows to nonaccrual commercial and construction loans were $1.5
million in the fourth quarter of 2023, a decrease of $9.6 million,
compared to inflows of $11.1 million in the third quarter of 2023,
mainly due to the inflow of a $9.5 million commercial and
industrial loan in the Puerto Rico region during the third quarter
of 2023. Inflows to nonaccrual consumer loans were $28.1 million,
an increase of $3.2 million compared to inflows of $24.9 million in
the third quarter of 2023. Inflows to nonaccrual residential
mortgage loans were $5.3 million in the fourth quarter of 2023, an
increase of $0.8 million compared to inflows of $4.5 million in the
third quarter of 2023. See Early Delinquency below for additional
information.
Early Delinquency
Total loans held for investment in early delinquency (i.e.,
30-89 days past due accruing loans, as defined in regulatory
reporting instructions) amounted to $150.8 million as of December
31, 2023, an increase of $13.8 million, compared to $137.0 million
as of September 30, 2023. The variances by major portfolio
categories are as follows:
- Consumer loans in early delinquency increased in the fourth
quarter of 2023 by $15.4 million to $112.0 million, mainly in the
auto loans and finance leases portfolio.
- Residential mortgage loans in early delinquency increased by
$2.4 million to $36.5 million.
- Commercial and construction loans in early delinquency
decreased by $4.0 million to $2.3 million, in part due to a $1.8
million matured construction loan that migrated to 90 days past due
and still accruing that is in the process of renewal but for which
the Corporation continues to receive interest and principal
payments from the borrower.
Allowance for Credit Losses
The following table summarizes the activity of the ACL for
on-balance sheet and off-balance sheet exposures during the fourth
and third quarters of 2023:
Quarter ended December
31,2023
Loans and Finance
Leases
Debt Securities
Residential
Mortgage
Loans
Commercial
and
Construction
Loans
Consumer
Loans and
Finance
Leases
Total Loans
and Finance
Leases
Unfunded
Loans
Commitments
Held-to-
Maturity
Available-
for-Sale
Total ACL
Allowance for Credit Losses
(Dollars in thousands)
Allowance for credit losses, beginning
balance
$
57,200
$
76,875
$
129,540
$
263,615
$
4,761
$
2,250
$
465
$
271,091
Provision for credit losses - (benefit)
expense
(90
)
(4,905
)
23,970
18,975
(123
)
(53
)
13
18,812
Net recoveries (charge-offs)
287
(544
)
(20,490
)
(20,747
)
-
-
33
(20,714
)
Allowance for credit losses, end of
period
$
57,397
$
71,426
$
133,020
$
261,843
$
4,638
$
2,197
$
511
$
269,189
Amortized cost of loans and finance
leases
$
2,821,726
$
5,706,092
$
3,657,665
$
12,185,483
Allowance for credit losses on loans to
amortized cost
2.03
%
1.25
%
3.64
%
2.15
%
Quarter ended September 30,
2023
Loans and Finance
Leases
Debt Securities
Residential
Mortgage
Loans
Commercial
and
Construction
Loans
Consumer
Loans and
Finance
Leases
Total Loans
and Finance
Leases
Unfunded
Loans
Commitments
Held-to-
Maturity
Available-
for-Sale
Total ACL
Allowance for Credit Losses
(Dollars in thousands)
Allowance for credit losses, beginning
balance
$
60,514
$
75,245
$
131,299
$
267,058
$
4,889
$
8,401
$
433
$
280,781
Provision for credit losses - (benefit)
expense
(3,349
)
(55
)
14,047
10,643
(128
)
(6,151
)
32
4,396
Net recoveries (charge-offs)
35
1,685
(15,806
)
(14,086
)
-
-
-
(14,086
)
Allowance for credit losses, end of
period
$
57,200
$
76,875
$
129,540
$
263,615
$
4,761
$
2,250
$
465
$
271,091
Amortized cost of loans and finance
leases
$
2,812,631
$
5,549,841
$
3,588,460
$
11,950,932
Allowance for credit losses on loans to
amortized cost
2.03
%
1.39
%
3.61
%
2.21
%
The main variances of the total ACL by main categories are
discussed below:
Allowance for Credit Losses for Loans and Finance Leases
As of December 31, 2023, the ACL for loans and finance leases
was $261.8 million, a decrease of $1.8 million, from $263.6 million
as of September 30, 2023. The ratio of the ACL for loans and
finance leases to total loans held for investment was 2.15% as of
December 31, 2023, compared to 2.21% as of September 30, 2023. The
ratio of the total ACL for loans and finance leases to nonaccrual
loans held for investment was 312.81% as of December 31, 2023,
compared to 282.96% as of September 30, 2023.
The ACL for commercial and construction loans decreased by $5.5
million to $71.4 million as of December 31, 2023, when compared to
September 30, 2023, mainly due to an improvement on the economic
outlook of certain macroeconomic variables, such as the CRE price
index, which was partially offset by increased volume particularly
in the commercial and industrial loan portfolio. Meanwhile, the ACL
for consumer loans increased by $3.5 million mainly due to
increases in portfolio volumes in the auto loan and finance lease
portfolios and increases in delinquency and historical charge-off
levels. In addition, the ACL for residential mortgage loans
increased by $0.2 million, mainly due to the increase in the size
of the loan portfolio, partially offset by updated macroeconomic
variables, mainly in the projection of unemployment rates across
all regions.
The provision for credit losses on loans and finance leases was
$19.0 million for the fourth quarter of 2023, compared to $10.6
million in the third quarter of 2023.
- Provision for credit losses for the
consumer loan and finance lease portfolios was an expense of $24.0
million for the fourth quarter of 2023, compared to an expense of
$14.0 million in the third quarter of 2023. The increase in
provision expense recorded during the fourth quarter of 2023
reflects increases in portfolio balances across all major consumer
products and higher delinquency and historical charge-off
levels.
- Provision for credit losses for the
residential mortgage loan portfolio was a net benefit of $0.1
million for the fourth quarter of 2023, compared to a net benefit
of $3.3 million in the third quarter of 2023. The net benefit
recorded during the fourth quarter of 2023 was mainly due to
updated macroeconomic variables, partially offset by the increase
in the size of the loan portfolio. Meanwhile, the net benefit
recorded during the third quarter of 2023 was mainly due to an
update in macroeconomic variables and a reduction in qualitative
reserves, partially offset by the increase in the size of the loan
portfolio.
- Provision for credit losses for the
commercial and construction loan portfolio was a net benefit of
$4.9 million for the fourth quarter of 2023, compared to a net
benefit of $0.1 million in the third quarter of 2023. The net
benefit recorded during the fourth quarter of 2023 was mainly
driven by an improvement on the economic outlook of certain
macroeconomic variables, such as the CRE price index, which was
partially offset by increased volume particularly in the commercial
and industrial loan portfolio. Meanwhile, the net benefit recorded
during the third quarter of 2023 was mainly driven by a $1.4
million recovery recorded on a construction loan in the Puerto Rico
region, partially offset by an incremental provision of $1.7
million associated to the aforementioned inflow to nonaccrual of a
$9.5 million commercial and industrial loan in the Puerto Rico
region.
Net Charge-Offs
The following table presents ratios of annualized net
(recoveries) charge-offs to average loans held-in-portfolio for the
last five quarters:
Quarter Ended
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Residential mortgage
-0.04
%
-0.01
%
0.06
%
0.07
%
0.07
%
Construction
0.01
%
-3.18
%
-0.99
%
-0.17
%
-1.82
%
Commercial mortgage
0.09
%
-0.01
%
0.01
%
-0.03
%
0.00
%
Commercial and Industrial
0.00
%
-0.02
%
0.87
%
0.00
%
0.19
%
Consumer loans and finance leases
2.26
%
1.79
%
1.51
%
1.54
%
1.44
%
Total loans
0.69
%
0.48
%
0.67
%
0.46
%
0.46
%
The ratios above are based on annualized net charge-offs and are
not necessarily indicative of the results expected in subsequent
periods.
Net charge-offs were $20.8 million for the fourth quarter of
2023, or an annualized 0.69% of average loans, compared to $14.0
million, or an annualized 0.48% of average loans, in the third
quarter of 2023. The increase of $6.8 million in net charge-offs
was mainly driven by increases of $4.6 million in consumer loans
net charge-offs and $2.2 million in commercial and construction
loans net charge-offs mainly related to the aforementioned $1.4
million recovery recorded on a construction loan in the Puerto Rico
region during the third quarter of 2023 and the aforementioned $1.0
million charge-off recorded on a nonaccrual commercial mortgage
loan transferred to OREO during the fourth quarter of 2023.
Allowance for Credit Losses for Unfunded Loan Commitments
As of December 31, 2023, the ACL for off-balance sheet credit
exposures decreased to $4.6 million, compared to $4.8 million as of
September 30, 2023.
Allowance for Credit Losses for Debt Securities
As of December 31, 2023, the ACL for debt securities was $2.7
million, of which $2.2 million related to Puerto Rico municipal
bonds classified as held-to-maturity, compared to $2.8 million and
$2.3 million, respectively, as of September 30, 2023.
LIQUIDITY
Cash and cash equivalents increased by $78.3 million to $663.2
million as of December 31, 2023. When adding $2.2 billion of free
high-quality liquid securities that could be liquidated or pledged
within one day, total core liquidity amounted to $2.8 billion as of
December 31, 2023, or 14.93% of total assets, compared to $2.7
billion, or 14.58% of total assets as of September 30, 2023. In
addition, as of December 31, 2023, the Corporation had $924.2
million available for credit with the FHLB based on the value of
collateral pledged with the FHLB. As such, the basic liquidity
ratio (which includes cash, free high-quality liquid assets such as
U.S. government and government-sponsored enterprises’ obligations
that could be liquidated or pledged within one day, and available
secured lines of credit with the FHLB to total assets) was
approximately 19.82% as of December 31, 2023, compared to 19.67% as
of September 30, 2023.
In addition to the aforementioned available credit from the
FHLB, the Corporation also maintains borrowing capacity at the FED
Discount Window Program. The Corporation does not consider
borrowing capacity from the FED Discount Window as a primary source
of liquidity but had approximately $1.5 billion available for
funding under the FED’s Borrower-In-Custody (“BIC”) Program as of
December 31, 2023. Also, the Corporation has access to financing
with other counterparties through repurchase agreements and is
enrolled in the FED’s Bank Term Funding Program. Combined, as of
December 31, 2023, the Corporation had $5.2 billion, or 118% of
estimated uninsured deposits (excluding fully collateralized
government deposits), available to meet liquidity needs.
The Corporation’s total deposits, excluding brokered CDs,
amounted to $15.8 billion as of December 31, 2023, which includes
government deposits of $3.2 billion that are fully collateralized.
Excluding fully collateralized government deposits, as of December
31, 2023, $4.4 billion of these deposits are uninsured, which
represent 28.13% of total deposits.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $18.9 billion as of December 31,
2023, up $314.9 million from September 30, 2023.
The following variances within the main components of total
assets are noted:
- A $78.3 million increase in cash and cash equivalents, related
to the increase in brokered CDs and the cash flows from the
investment securities portfolio, partially offset by loan growth,
the repurchases of common stock, and the payment of common stock
dividends.
- A $50.2 million increase in investment securities, mainly
driven by a $212.0 million increase in the fair value of
available-for-sale debt securities attributable to changes in
market interest rates, partially offset by principal repayments of
$161.6 million, which include scheduled repayments of $96.8 million
related to U.S. agencies MBS and maturities of $62.7 million
related to U.S. agencies callable debentures.
- A $233.0 million increase in total loans. The variance
consisted of increases of $254.0 million in the Puerto Rico region
and $1.4 million in the Virgin Islands region, partially offset by
a decrease of $22.4 million in the Florida region. On a portfolio
basis, the variance consisted of increases of $156.3 million in
commercial and construction loans, $69.2 million in consumer loans,
primarily auto loans and finance leases, and $7.5 million in
residential mortgage loans. The growth was mainly due to a $143.3
million increase in commercial and industrial loans, primarily in
the Puerto Rico region, which includes the $150.0 million
commercial and industrial participated loan funded in the fourth
quarter in connection with the financial closing of a
private-public private partnership (P3) for improvement of
infrastructure for toll roads. Total loan originations, including
refinancings, renewals, and draws from existing commitments
(excluding credit card utilization activity), amounted to $1.3
billion in the fourth quarter of 2023, an increase of $116.5
million compared to the third quarter of 2023. The growth in total
loan originations consisted of an increase of $162.5 million in
commercial and construction loans, which includes the origination
of the aforementioned $150.0 million commercial and industrial
participated loan, partially offset by declines of $27.6 million in
residential mortgage loans and $18.4 million in consumer loans.
Total loan originations in the Puerto Rico region amounted to $1.1
billion in the fourth quarter of 2023, an increase of $112.0
million, compared to $939.0 million in the third quarter of 2023.
The $112.0 million growth in total loan originations consisted of
an increase of $142.3 million in commercial and construction loans,
partially offset by decreases of $18.2 million in consumer loans
and $12.1 million in residential mortgage loans. The increase in
commercial and construction loans was mainly in commercial and
industrial loans in the Puerto Rico region, which includes the
origination of the aforementioned $150.0 million commercial and
industrial participated loan. Total loan originations in the Virgin
Islands region amounted to $19.5 million in the fourth quarter of
2023, compared to $31.0 million in the third quarter of 2023. The
$11.5 million decline in total loan originations consisted of
decreases of $10.3 million in commercial and construction loans,
$1.0 million in residential mortgage loans, and $0.2 million in
consumer loans. Total loan originations in the Florida region
amounted to $220.4 million in the fourth quarter of 2023, compared
to $204.4 million in the third quarter of 2023. The $16.0 million
growth in total loan originations consisted of an increase of $30.5
million in commercial and construction loans, partially offset by a
$14.5 million decrease in residential mortgage loans.
Total liabilities were approximately $17.4 billion as of
December 31, 2023, an increase of $120.4 million from September 30,
2023.
The increase in total liabilities was mainly due to:
- A $120.7 million net increase in total deposits consisting of:
- A $473.0 million increase in brokered CDs. The increase
reflects $668.0 million of new issuances with original average
maturities of less than a year and an all-in cost of 5.46%,
partially offset by maturing short-term brokered CDs amounting to
$194.4 million with an all-in cost of 5.25% that were paid off
during the fourth quarter of 2023.
- A $261.9 million decrease in deposits, excluding brokered CDs
and government deposits, reflecting declines of $202.8 million in
the Puerto Rico region, $42.8 million in the Florida region, and
$16.3 million in the Virgin Islands region. The decrease in such
deposits is net of a $79.8 million increase in time deposits.
- A $90.4 million decrease in government deposits, which includes
declines of $57.0 million in the Puerto Rico region, $31.3 million
in the Virgin Islands region, and $2.1 million in the Florida
region.
Total stockholders’ equity amounted to $1.5 billion as of
December 31, 2023, an increase of $194.5 million from September 30,
2023, mainly driven by a $212.0 million increase in the fair value
of available-for-sale debt securities due to changes in market
interest rates recognized as part of accumulated other
comprehensive loss and earnings generated in the fourth quarter of
2023, partially offset by $75.0 million in stock repurchases under
the 2023 capital plan authorization of $225 million and $24.0
million in common stock dividends declared in the fourth quarter of
2023.
As of December 31, 2023, capital ratios exceeded the required
regulatory levels for bank holding companies and well-capitalized
banks. The Corporation’s estimated CET1 capital, tier 1 capital,
total capital and leverage ratios under the Basel III rules were
16.10%, 16.10%, 18.57%, and 10.78%, respectively, as of December
31, 2023, compared to CET1 capital, tier 1 capital, total capital,
and leverage ratios of 16.35%, 16.35%, 18.84%, and 10.57%,
respectively, as of September 30, 2023.
Meanwhile, estimated CET1 capital, tier 1 capital, total capital
and leverage ratios of our banking subsidiary, FirstBank, were
16.33%, 17.11%, 18.36%, and 11.15%, respectively, as of December
31, 2023, compared to CET1 capital, tier 1 capital, total capital
and leverage ratios of 16.41%, 17.20%, 18.45%, and 11.12%,
respectively, as of September 30, 2023.
Tangible Common Equity (Non-GAAP)
On a non-GAAP basis, the Corporation’s tangible common equity
ratio increased to 7.67% as of December 31, 2023, compared to 6.74%
as of September 30, 2023, mainly driven by a $212.0 million
increase in the fair value of available-for-sale debt securities
due to changes in market interest rates recognized as part of
accumulated other comprehensive loss.
The following table presents a reconciliation of the
Corporation’s tangible common equity and tangible assets to the
most comparable GAAP items as of the indicated dates:
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
(In thousands, except ratios and per share
information)
Tangible Equity:
Total common equity - GAAP
$
1,497,609
$
1,303,068
$
1,397,999
$
1,405,593
$
1,325,540
Goodwill
(38,611
)
(38,611
)
(38,611
)
(38,611
)
(38,611
)
Purchased credit card relationship
intangible
-
-
(17
)
(86
)
(205
)
Core deposit intangible
(13,383
)
(15,229
)
(17,075
)
(18,987
)
(20,900
)
Insurance customer relationship
intangible
-
-
-
-
(13
)
Tangible common equity -
non-GAAP
$
1,445,615
$
1,249,228
$
1,342,296
$
1,347,909
$
1,265,811
Tangible Assets:
Total assets - GAAP
$
18,909,549
$
18,594,608
$
19,152,455
$
18,977,114
$
18,634,484
Goodwill
(38,611
)
(38,611
)
(38,611
)
(38,611
)
(38,611
)
Purchased credit card relationship
intangible
-
-
(17
)
(86
)
(205
)
Core deposit intangible
(13,383
)
(15,229
)
(17,075
)
(18,987
)
(20,900
)
Insurance customer relationship
intangible
-
-
-
-
(13
)
Tangible assets - non-GAAP
$
18,857,555
$
18,540,768
$
19,096,752
$
18,919,430
$
18,574,755
Common shares outstanding
169,303
174,386
179,757
179,789
182,709
Tangible common equity ratio -
non-GAAP
7.67
%
6.74
%
7.03
%
7.12
%
6.81
%
Tangible book value per common share -
non-GAAP
$
8.54
$
7.16
$
7.47
$
7.50
$
6.93
Exposure to Puerto Rico Government
As of December 31, 2023, the Corporation had $297.9 million of
direct exposure to the Puerto Rico government, its municipalities,
and public corporations, an increase of $3.0 million when compared
to $294.9 million as of September 30, 2023. As of December 31,
2023, approximately $189.0 million of the exposure consisted of
loans and obligations of municipalities in Puerto Rico that are
supported by assigned property tax revenues and for which, in most
cases, the good faith, credit, and unlimited taxing power of the
applicable municipality have been pledged to their repayment, and
$59.4 million consisted of loans and obligations which are
supported by one or more specific sources of municipal revenues.
The Corporation’s total direct exposure to the Puerto Rico
government also included $8.9 million in a loan extended to an
affiliate of the Puerto Rico Electric Power Authority and $37.4
million in loans to agencies of Puerto Rico public corporations. In
addition, the total direct exposure included obligations of the
Puerto Rico government, specifically a residential pass-through MBS
issued by the PRHFA, at an amortized cost of $3.2 million (fair
value of $1.4 million as of December 31, 2023), included as part of
the Corporation’s available-for-sale debt securities portfolio.
This residential pass-through MBS issued by the PRHFA is
collateralized by certain second mortgages and had an unrealized
loss of $1.7 million as of December 31, 2023, of which $0.4 million
is due to credit deterioration.
The aforementioned exposure to municipalities in Puerto Rico
included $107.0 million of financing arrangements with Puerto Rico
municipalities that were issued in bond form but underwritten as
loans with features that are typically found in commercial loans.
These bonds are accounted for as held-to-maturity debt
securities.
As of December 31, 2023, the Corporation had $2.7 billion of
public sector deposits in Puerto Rico, compared to $2.8 billion as
of September 30, 2023. Approximately 20% of the public sector
deposits as of December 31, 2023, were from municipalities and
municipal agencies in Puerto Rico, and 80% were from public
corporations, the Puerto Rico central government and agencies, and
U.S. federal government agencies in Puerto Rico.
Conference Call / Webcast Information
First BanCorp.’s senior management will host an earnings
conference call and live webcast on Wednesday, January 24, 2024, at
11:00 a.m. (Eastern Time). The call may be accessed via a live
Internet webcast through the Corporation’s investor relations
website, fbpinvestor.com, or through a dial-in telephone number at
(833) 470-1428 or (404) 975-4839 for international callers. The
participant access code is 636165. The Corporation recommends that
listeners go to the web site at least 15 minutes prior to the call
to download and install any necessary software. Following the
webcast presentation, a question and answer session will be made
available to research analysts and institutional investors. A
replay of the webcast will be archived in the Corporation’s
investor relations website, fbpinvestor.com, until January 24,
2025. A telephone replay will be available one hour after the end
of the conference call through February 23, 2024, at (866)
813-9403. The replay access code is 906531.
Safe Harbor
This press release may contain “forward-looking statements”
concerning the Corporation’s future economic, operational, and
financial performance. The words or phrases “expect,” “anticipate,”
“intend,” “should,” “would,” “will,” “plans,” “forecast,”
“believe,” and similar expressions are meant to identify
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to the
safe harbor created by such sections. The Corporation cautions
readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date hereof, and advises
readers that any such forward-looking statements are not guarantees
of future performance and involve certain risks, uncertainties,
estimates, and assumptions by us that are difficult to predict.
Various factors, some of which are beyond our control, including,
but not limited to, the uncertainties more fully discussed in Part
I, Item 1A, “Risk Factors” of the Corporation’s Annual Report on
Form 10-K for the year ended December 31, 2022, as amended on
October 13, 2023 (the “2022 Annual Report on Form 10-K”), and the
following, could cause actual results to differ materially from
those expressed in, or implied by, such forward-looking statements:
the effect of the current interest rate environment or changes in
interest rates and inflation levels or the level or composition of
the Corporation’s assets and liabilities on the Corporation’s net
interest income, net interest margin, loan originations, results of
operations and its liquidity position; volatility in the financial
services industry, including failures or rumored failures of other
depository institutions, and actions taken by governmental agencies
to stabilize the financial system, which could result in, among
other things, bank deposit runoffs, liquidity constraints, and
increased regulatory requirements and costs; the effect of
continued changes in the fiscal and monetary policies and
regulations of the U.S. federal government, the Puerto Rico
government and other governments, including those determined by the
Federal Reserve Board, the Federal Reserve Bank of New York, the
FDIC, government-sponsored housing agencies and regulators in
Puerto Rico, the U.S., and the U.S. and British Virgin Islands,
that may affect the future results of the Corporation; uncertainty
as to the ability of FirstBank to retain its core deposits and
generate sufficient cash flow through its wholesale funding
sources, such as securities sold under agreements to repurchase,
FHLB advances, and brokered CDs, which may require us to sell
investment securities at a loss; adverse changes in general
economic conditions in Puerto Rico, the U.S., and the U.S. and
British Virgin Islands, including in the interest rate environment,
unemployment rates, market liquidity, housing absorption rates,
real estate markets, and U.S. capital markets, which may affect
funding sources, loan portfolio performance and credit quality,
market prices of investment securities, and demand for the
Corporation’s products and services, and which may reduce the
Corporation’s revenues and earnings and the value of the
Corporation’s assets; the impact of government financial assistance
for hurricane recovery and other disaster relief on economic
activity in Puerto Rico, and the timing and pace of disbursements
of funds earmarked for disaster relief; the ability of the
Corporation, FirstBank, and third-party service providers to
identify and prevent cyber-security incidents, such as data
security breaches, ransomware, malware, “denial of service”
attacks, “hacking,” identity theft, and state-sponsored
cyberthreats, and the occurrence of and response to any incidents
that occur, such as an April 2023 security incident at one of our
third-party vendors, which may result in misuse or misappropriation
of confidential or proprietary information, disruption, or damage
to our systems or those of third-party service providers, increased
costs and losses or an adverse effect to our reputation; general
competitive factors and other market risks as well as the
implementation of strategic growth opportunities, including risks,
uncertainties, and other factors or events related to any business
acquisitions or dispositions; uncertainty as to the implementation
of the debt restructuring plan of Puerto Rico and the fiscal plan
for Puerto Rico as certified on April 3, 2023, by the oversight
board established by the Puerto Rico Oversight, Management, and
Economic Stability Act, or any revisions to it, on our clients and
loan portfolios, and any potential impact from future economic or
political developments and tax regulations in Puerto Rico; the
impact of changes in accounting standards, or assumptions in
applying those standards, and of forecasts of economic variables
considered for the determination of the ACL; the ability of
FirstBank to realize the benefits of its net deferred tax assets;
environmental, social, and governance matters, including our
climate-related initiatives and commitments; the impacts of natural
or man-made disasters, the emergence or continuation of widespread
health emergencies, geopolitical conflicts (including the ongoing
conflict in Ukraine, the conflict in Israel and surrounding areas,
the possible expansion of such conflicts and potential geopolitical
consequences), terrorist attacks, or other catastrophic external
events, including impacts of such events on general economic
conditions and on the Corporation’s assumptions regarding forecasts
of economic variables; the effect of changes in the interest rate
environment, including any adverse change in the Corporation’s
ability to attract and retain clients and gain acceptance from
current and prospective customers for new products and services,
including those related to the offering of digital banking and
financial services; the risk that additional portions of the
unrealized losses in the Corporation’s debt securities portfolio
are determined to be credit-related, or the need of additional
credit losses that could emerge from the downgrade of the U.S.’s
Long-Term Foreign-Currency Issuer Rating to ‘AA+’ from ‘AAA’ in
August 2023 and subsequent negative ratings outlooks, resulting in
additional charges to the provision for credit losses on the
Corporation’s debt securities portfolio; the impacts of applicable
legislative, tax, or regulatory changes, as well as of the 2024
U.S. presidential election, on the Corporation’s financial
condition or performance; the risk of possible failure or
circumvention of the Corporation’s internal controls and procedures
and the risk that the Corporation’s risk management policies may
not be adequate; the risk that the FDIC may further increase the
deposit insurance premium and/or require further special
assessments, causing an additional increase in the Corporation’s
non-interest expenses; any need to recognize impairments on the
Corporation’s financial instruments, goodwill, and other intangible
assets; the risk that the impact of the occurrence of any of these
uncertainties on the Corporation’s capital would preclude further
growth of FirstBank and preclude the Corporation’s Board of
Directors from declaring dividends; and uncertainty as to whether
FirstBank will be able to continue to satisfy its regulators
regarding, among other things, its asset quality, liquidity plans,
maintenance of capital levels, and compliance with applicable laws,
regulations and related requirements. The Corporation does not
undertake, and specifically disclaims any obligation to update any
“forward-looking statements” to reflect occurrences or
unanticipated events or circumstances after the date of such
statements, except as required by the federal securities laws.
About First BanCorp.
First BanCorp. is the parent corporation of FirstBank Puerto
Rico, a state-chartered commercial bank with operations in Puerto
Rico, the U.S., and the British Virgin Islands and Florida, and of
FirstBank Insurance Agency. First BanCorp.’s shares of common stock
trade on the New York Stock Exchange under the symbol FBP.
Additional information about First BanCorp. may be found at
www.1firstbank.com.
EXHIBIT A
Table 1 – Condensed Consolidated Statements of Financial
Condition
As of
December 31, 2023
September 30, 2023
December 31, 2022
(In thousands, except for share
information)
ASSETS
Cash and due from banks
$
661,925
$
583,913
$
478,480
Money market investments:
Time deposits with other financial
institutions
300
300
300
Other short-term investments
939
700
1,725
Total money market investments
1,239
1,000
2,025
Debt securities available for sale, at
fair value (ACL of $511 as of December 31, 2023; $465 as of
September 30, 2023; and $458 as of December 31, 2022)
5,229,984
5,175,803
5,599,520
Debt securities held to maturity, at
amortized cost, net of ACL of $2,197 as of December 31, 2023;
$2,250 as of September 30, 2023; and $8,286 as of December 31, 2022
(fair value of $346,132 as of December 31, 2023; $342,851 as of
September 30, 2023; and $427,115 as of December 31, 2022)
351,981
356,919
429,251
Total debt securities
5,581,965
5,532,722
6,028,771
Equity securities
49,675
48,683
55,289
Total investment securities
5,631,640
5,581,405
6,084,060
Loans, net of ACL of $261,843 as of
December 31, 2023; $263,615 as of September 30, 2023; and $260,464
as of December 31, 2022
11,923,640
11,687,317
11,292,361
Loans held for sale, at lower of cost or
market
7,368
8,961
12,306
Total loans, net
11,931,008
11,696,278
11,304,667
Accrued interest receivable on loans and
investments
77,716
68,783
69,730
Premises and equipment, net
142,016
144,611
142,935
OREO
32,669
28,563
31,641
Deferred tax asset, net
150,127
150,805
155,584
Goodwill
38,611
38,611
38,611
Other intangible assets
13,383
15,229
21,118
Other assets
229,215
285,410
305,633
Total assets
$
18,909,549
$
18,594,608
$
18,634,484
LIABILITIES
Deposits:
Non-interest-bearing deposits
$
5,404,121
$
5,440,247
$
6,112,884
Interest-bearing deposits
11,151,864
10,994,990
10,030,583
Total deposits
16,555,985
16,435,237
16,143,467
Securities sold under agreements to
repurchase
-
-
75,133
Advances from the FHLB
500,000
500,000
675,000
Other borrowings
161,700
161,700
183,762
Accounts payable and other liabilities
194,255
194,603
231,582
Total liabilities
17,411,940
17,291,540
17,308,944
STOCKHOLDERSʼ EQUITY
Common stock, $0.10 par value, 223,663,116
shares issued (December 31, 2023 - 169,302,812 shares outstanding;
September 30, 2023 - 174,386,326 shares outstanding; and December
31, 2022 - 182,709,059 shares outstanding)
22,366
22,366
22,366
Additional paid-in capital
965,707
963,791
970,722
Retained earnings
1,846,112
1,790,652
1,644,209
Treasury stock, at cost (December 31, 2023
- 54,360,304 shares; September 30, 2023 - 49,276,790 shares;
December 31, 2022 - 40,954,057 shares)
(697,406
)
(622,378
)
(506,979
)
Accumulated other comprehensive loss
(639,170
)
(851,363
)
(804,778
)
Total stockholdersʼ equity
1,497,609
1,303,068
1,325,540
Total liabilities and stockholdersʼ
equity
$
18,909,549
$
18,594,608
$
18,634,484
Table 2 – Condensed Consolidated Statements of Income
Quarter Ended
Year Ended
December 31, 2023
September 30, 2023
December 31, 2022
December 31, 2023
December 31, 2022
(In thousands, except per share
information)
Net interest income:
Interest income
$
265,481
$
263,405
$
233,452
$
1,023,486
$
862,614
Interest expense
68,799
63,677
27,879
226,376
67,321
Net interest income
196,682
199,728
205,573
797,110
795,293
Provision for credit losses - expense
(benefit):
Loans
18,975
10,643
15,651
66,644
25,679
Unfunded loan commitments
(123
)
(128
)
31
365
2,736
Debt securities
(40
)
(6,119
)
30
(6,069
)
(719
)
Provision for credit losses - expense
18,812
4,396
15,712
60,940
27,696
Net interest income after provision for
credit losses
177,870
195,332
189,861
736,170
767,597
Non-interest income:
Service charges and fees on deposit
accounts
9,662
9,552
9,174
38,042
37,823
Mortgage banking activities
2,094
2,821
2,572
10,587
15,260
Gain on early extinguishment of debt
-
-
-
1,605
-
Card and processing income
11,015
10,841
10,601
43,909
40,416
Other non-interest income
10,838
7,082
7,253
38,551
29,593
Total non-interest income
33,609
30,296
29,600
132,694
123,092
Non-interest expenses:
Employees’ compensation and benefits
55,584
56,535
52,241
222,855
206,038
Occupancy and equipment
21,847
21,781
21,843
85,911
88,277
Business promotion
6,725
4,759
5,590
19,626
18,231
Professional service fees
11,250
11,022
12,669
45,841
47,848
Taxes, other than income taxes
5,535
5,465
5,211
21,236
20,267
FDIC deposit insurance
8,454
2,143
1,544
14,873
6,149
Net gain on OREO operations
(1,005
)
(2,153
)
(2,557
)
(7,138
)
(5,826
)
Credit and debit card processing
expenses
7,360
6,779
6,362
25,997
22,736
Other non-interest expenses
10,855
10,307
10,028
42,227
39,385
Total non-interest expenses
126,605
116,638
112,931
471,428
443,105
Income before income taxes
84,874
108,990
106,530
397,436
447,584
Income tax expense
5,385
26,968
33,356
94,572
142,512
Net income
$
79,489
$
82,022
$
73,174
$
302,864
$
305,072
Net income attributable to common
stockholders
$
79,489
$
82,022
$
73,174
$
302,864
$
305,072
Earnings per common share:
Basic
$
0.47
$
0.47
$
0.40
$
1.72
$
1.60
Diluted
$
0.46
$
0.46
$
0.40
$
1.71
$
1.59
Table 3 – Selected Financial Data
Quarter Ended
Year Ended
December 31, 2023
September 30, 2023
December 31, 2022
December 31, 2023
December 31, 2022
(Shares in thousands)
Per Common Share Results:
Net earnings per share - basic
$
0.47
$
0.47
$
0.40
$
1.72
$
1.60
Net earnings per share - diluted
$
0.46
$
0.46
$
0.40
$
1.71
$
1.59
Cash dividends declared
$
0.14
$
0.14
$
0.12
$
0.56
$
0.46
Average shares outstanding
170,624
176,358
183,649
176,504
190,805
Average shares outstanding diluted
171,351
176,962
184,847
177,180
191,968
Book value per common share
$
8.85
$
7.47
$
7.25
$
8.85
$
7.25
Tangible book value per common share
(1)
$
8.54
$
7.16
$
6.93
$
8.54
$
6.93
Common Stock Price: End of period
$
16.45
$
13.46
$
12.72
$
16.45
$
12.72
Selected Financial Ratios (In
Percent):
Profitability:
Return on Average Assets
1.70
1.72
1.58
1.62
1.57
Return on Average Common Equity
23.69
20.70
22.37
21.86
18.66
Interest Rate Spread (2)
3.34
3.41
4.08
3.53
4.03
Net Interest Margin (2)
4.23
4.24
4.52
4.33
4.29
Efficiency ratio (3)
54.98
50.71
48.02
50.70
48.25
Capital and Other:
Average Total Equity to Average Total
Assets
7.16
8.32
7.05
7.41
8.44
Total capital
18.57
18.84
19.21
18.57
19.21
Common equity Tier 1 capital
16.10
16.35
16.53
16.10
16.53
Tier 1 capital
16.10
16.35
16.53
16.10
16.53
Leverage
10.78
10.57
10.70
10.78
10.70
Tangible common equity ratio (1)
7.67
6.74
6.81
7.67
6.81
Dividend payout ratio
30.05
30.10
30.12
32.64
28.77
Basic liquidity ratio (4)
19.82
19.67
22.48
19.82
22.48
Core liquidity ratio (5)
14.93
14.58
19.02
14.93
19.02
Loan to deposit ratio
73.65
72.77
71.64
73.65
71.64
Asset Quality:
Allowance for credit losses for loans and
finance leases to total loans held for investment
2.15
2.21
2.25
2.15
2.25
Net charge-offs (annualized) to average
loans outstanding
0.69
0.48
0.46
0.58
0.31
Provision for credit losses for loans and
finance leases to net charge-offs
91.46
75.56
119.97
98.91
74.99
Non-performing assets to total assets
0.67
0.70
0.69
0.67
0.69
Nonaccrual loans held for investment to
total loans held for investment
0.69
0.78
0.78
0.69
0.78
Allowance for credit losses for loans and
finance leases to total nonaccrual loans
held for investment
312.81
282.96
289.61
312.81
289.61
Allowance for credit losses for loans and
finance leases to total nonaccrual loans held for investment,
excluding residential estate loans
508.75
430.62
552.26
508.75
552.26
(1)
Non-GAAP financial measures (as defined
above). Refer to Statement of Financial Condition above and Table 4
below for additional information about the components and a
reconciliation of these measures.
(2)
On a tax-equivalent basis and excluding
changes in the fair value of derivative instruments (non-GAAP
financial measure). Refer to Non-GAAP Disclosures above for
additional information and a reconciliation of these measures.
(3)
Non-interest expenses to the sum of net
interest income and non-interest income.
(4)
Defined as the sum of cash and cash
equivalents, free high quality liquid assets that could be
liquidated within one day, and available secured lines of credit
with the FHLB to total assets.
(5)
Defined as the sum of cash and cash
equivalents and free high quality liquid assets that could be
liquidated within one day to total assets.
Table 4 – Reconciliation of Net Interest Income to Net
Interest Income Excluding Valuations and on a Tax-Equivalent
Basis
The following table reconciles net interest income in accordance
with GAAP to net interest income excluding valuations, and net
interest income on a tax-equivalent basis for the fourth and third
quarters of 2023, the fourth quarter of 2022 and for the years
ended December 31, 2023 and 2022, respectively. The table also
reconciles net interest spread and net interest margin to these
items excluding valuations, and on a tax-equivalent basis.
Quarter Ended
Year Ended
(Dollars in thousands)
December 31,2023
September 30, 2023
December 31,2022
December 31,2023
December 31,2022
Net Interest Income
Interest income - GAAP
$
265,481
$
263,405
$
233,452
$
1,023,486
$
862,614
Unrealized loss (gain) on derivative
instruments
8
(3
)
5
8
(30
)
Interest income excluding valuations
non-GAAP
265,489
263,402
233,457
1,023,494
862,584
Tax-equivalent adjustment
4,262
4,690
7,391
20,839
33,149
Interest income on a tax-equivalent basis
and excluding valuations non-GAAP
$
269,751
$
268,092
$
240,848
$
1,044,333
$
895,733
Interest expense - GAAP
$
68,799
$
63,677
$
27,879
$
226,376
$
67,321
Net interest income - GAAP
$
196,682
$
199,728
$
205,573
$
797,110
$
795,293
Net interest income excluding valuations
- non-GAAP
$
196,690
$
199,725
$
205,578
$
797,118
$
795,263
Net interest income on a tax-equivalent
basis and excluding valuations - non-GAAP
$
200,952
$
204,415
$
212,969
$
817,957
$
828,412
Average Balances
Loans and leases
$
12,004,881
$
11,783,456
$
11,364,963
$
11,726,304
$
11,199,013
Total securities, other short-term
investments and interest-bearing cash balances
6,835,407
7,325,226
7,314,293
7,181,048
8,112,842
Average Interest-Earning Assets
$
18,840,288
$
19,108,682
$
18,679,256
$
18,907,352
$
19,311,855
Average Interest-Bearing Liabilities
$
11,665,459
$
11,671,938
$
10,683,776
$
11,370,689
$
11,120,732
Average Assets (1)
$
18,581,625
$
18,895,980
$
18,411,440
$
18,706,423
$
19,378,649
Average Non-Interest-Bearing Deposits
$
5,384,264
$
5,621,233
$
6,207,108
$
5,741,345
$
6,391,171
Average Yield/Rate
Average yield on interest-earning assets -
GAAP
5.59
%
5.47
%
4.96
%
5.41
%
4.47
%
Average rate on interest-bearing
liabilities - GAAP
2.34
%
2.16
%
1.04
%
1.99
%
0.61
%
Net interest spread - GAAP
3.25
%
3.31
%
3.92
%
3.42
%
3.86
%
Net interest margin - GAAP
4.14
%
4.15
%
4.37
%
4.22
%
4.12
%
Average yield on interest-earning assets
excluding valuations - non-GAAP
5.59
%
5.47
%
4.96
%
5.41
%
4.47
%
Average rate on interest-bearing
liabilities
2.34
%
2.16
%
1.04
%
1.99
%
0.61
%
Net interest spread excluding valuations -
non-GAAP
3.25
%
3.31
%
3.92
%
3.42
%
3.86
%
Net interest margin excluding valuations -
non-GAAP
4.14
%
4.15
%
4.37
%
4.22
%
4.12
%
Average yield on interest-earning assets
on a tax-equivalent basis and excluding valuations - non-GAAP
5.68
%
5.57
%
5.12
%
5.52
%
4.64
%
Average rate on interest-bearing
liabilities
2.34
%
2.16
%
1.04
%
1.99
%
0.61
%
Net interest spread on a tax-equivalent
basis and excluding valuations - non-GAAP
3.34
%
3.41
%
4.08
%
3.53
%
4.03
%
Net interest margin on a tax-equivalent
basis and excluding valuations - non-GAAP
4.23
%
4.24
%
4.52
%
4.33
%
4.29
%
(1) Includes, among other things, the ACL
on loans and finance leases and debt securities, as well as
unrealized gains and losses on available-for-sale debt
securities.
Table 5 – Quarterly Statement of Average Interest-Earning
Assets and Average Interest-Bearing Liabilities (On a
Tax-Equivalent Basis)
Average Volume
Interest income (1) /
expense
Average Rate (1)
Quarter Ended
December
31,
September
30,
December
31,
December
31,
September
30,
December
31,
December
31,
September
30,
December
31,
2023
2023
2022
2023
2023
2022
2023
2023
2022
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term
investments
$
503,293
$
807,883
$
394,471
$
6,933
$
10,956
$
3,444
5.47
%
5.38
%
3.46
%
Government obligations (2)
2,738,478
2,817,646
2,910,733
9,161
9,415
10,386
1.33
%
1.33
%
1.42
%
MBS
3,543,423
3,650,737
3,973,307
15,481
15,677
20,838
1.73
%
1.70
%
2.08
%
FHLB stock
34,745
34,666
22,292
830
768
284
9.48
%
8.79
%
5.05
%
Other investments
15,468
14,294
13,490
232
61
48
5.95
%
1.69
%
1.41
%
Total investments (3)
6,835,407
7,325,226
7,314,293
32,637
36,877
35,000
1.89
%
2.00
%
1.90
%
Residential mortgage loans
2,812,428
2,800,675
2,839,268
40,711
39,640
39,225
5.74
%
5.62
%
5.48
%
Construction loans
211,641
183,507
128,845
4,295
4,937
2,227
8.05
%
10.67
%
6.86
%
C&I and commercial mortgage loans
5,355,145
5,261,849
5,127,028
96,299
93,711
81,464
7.13
%
7.07
%
6.30
%
Finance leases
844,780
808,480
691,585
16,584
15,802
12,769
7.79
%
7.75
%
7.33
%
Consumer loans
2,780,887
2,728,945
2,578,237
79,225
77,125
70,163
11.30
%
11.21
%
10.80
%
Total loans (4) (5)
12,004,881
11,783,456
11,364,963
237,114
231,215
205,848
7.84
%
7.78
%
7.19
%
Total interest-earning assets
$
18,840,288
$
19,108,682
$
18,679,256
$
269,751
$
268,092
$
240,848
5.68
%
5.57
%
5.12
%
Interest-bearing liabilities:
Time deposits
$
2,792,843
$
2,708,297
$
2,180,928
$
22,304
$
19,852
$
6,055
3.17
%
2.91
%
1.10
%
Brokered CDs
572,105
318,831
47,304
7,452
3,830
286
5.17
%
4.77
%
2.40
%
Other interest-bearing deposits
7,635,223
7,956,856
7,909,759
29,918
30,616
14,696
1.55
%
1.53
%
0.74
%
Securities sold under agreements to
repurchase
925
26,254
139,740
13
359
1,408
5.58
%
5.43
%
4.00
%
Advances from the FHLB
502,446
500,000
220,652
5,709
5,675
2,469
4.51
%
4.50
%
4.44
%
Other borrowings
161,917
161,700
185,393
3,403
3,345
2,965
8.34
%
8.21
%
6.35
%
Total interest-bearing liabilities
$
11,665,459
$
11,671,938
$
10,683,776
$
68,799
$
63,677
$
27,879
2.34
%
2.16
%
1.04
%
Net interest income
$
200,952
$
204,415
$
212,969
Interest rate spread
3.34
%
3.41
%
4.08
%
Net interest margin
4.23
%
4.24
%
4.52
%
(1)
On a tax-equivalent basis. The
tax-equivalent yield was estimated by dividing the interest rate
spread on exempt assets by 1 less the Puerto Rico statutory tax
rate of 37.5% and adding to it the cost of interest-bearing
liabilities. When adjusted to a tax-equivalent basis, yields on
taxable and exempt assets are comparable. Changes in the fair value
of derivative instruments are excluded from interest income because
the changes in valuation do not affect interest paid or received.
Refer to Non-GAAP Disclosures and Table 4 above for additional
information and a reconciliation of these measures.
(2)
Government obligations include debt issued
by government-sponsored agencies.
(3)
Unrealized gains and losses on
available-for-sale debt securities are excluded from the average
volumes.
(4)
Average loan balances include the average
of non-performing loans.
(5)
Interest income on loans includes $3.0
million, $2.9 million, and $2.7 million, for the quarters ended
December 31, 2023, September 31, 2023, and December 31, 2022, of
income from prepayment penalties and late fees related to the
Corporation’s loan portfolio.
Table 6 – Year-to-Date Statement of Average Interest-Earning
Assets and Average Interest-Bearing Liabilities (On a
Tax-Equivalent Basis)
Average Volume
Interest income (1) /
expense
Average Rate (1)
Year Ended
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term
investments
$
584,083
$
1,156,127
$
30,419
$
11,791
5.21
%
1.02
%
Government obligations (2)
2,843,284
2,870,889
40,314
39,033
1.42
%
1.36
%
MBS
3,702,908
4,052,660
67,641
85,090
1.83
%
2.10
%
FHLB stock
36,606
20,419
2,799
1,114
7.65
%
5.46
%
Other investments
14,167
12,747
490
126
3.46
%
0.99
%
Total investments (3)
7,181,048
8,112,842
141,663
137,154
1.97
%
1.69
%
Residential mortgage loans
2,814,102
2,886,594
160,009
160,359
5.69
%
5.56
%
Construction loans
172,952
121,642
14,811
7,350
8.56
%
6.04
%
C&I and commercial mortgage loans
5,244,503
5,092,638
365,185
281,486
6.96
%
5.53
%
Finance leases
789,870
636,507
60,909
46,842
7.71
%
7.36
%
Consumer loans
2,704,877
2,461,632
301,756
262,542
11.16
%
10.67
%
Total loans (4) (5)
11,726,304
11,199,013
902,670
758,579
7.70
%
6.77
%
Total interest-earning assets
$
18,907,352
$
19,311,855
$
1,044,333
$
895,733
5.52
%
4.64
%
Interest-bearing liabilities:
Time deposits
$
2,590,313
$
2,213,145
$
68,605
$
18,102
2.65
%
0.82
%
Brokered CDs
348,829
69,694
16,630
1,500
4.77
%
2.15
%
Other interest-bearing deposits
7,664,793
8,279,320
100,226
26,759
1.31
%
0.32
%
Securities sold under agreements to
repurchase
54,570
194,948
2,769
7,555
5.07
%
3.88
%
Advances from the FHLB
541,000
179,452
24,608
5,136
4.55
%
2.86
%
Other borrowings
171,184
184,173
13,538
8,269
7.91
%
4.49
%
Total interest-bearing liabilities
$
11,370,689
$
11,120,732
$
226,376
$
67,321
1.99
%
0.61
%
Net interest income
$
817,957
$
828,412
Interest rate spread
3.53
%
4.03
%
Net interest margin
4.33
%
4.29
%
(1)
On a tax-equivalent basis. The
tax-equivalent yield was estimated by dividing the interest rate
spread on exempt assets by 1 less the Puerto Rico statutory tax
rate of 37.5% and adding to it the cost of interest-bearing
liabilities. When adjusted to a tax-equivalent basis, yields on
taxable and exempt assets are comparable. Changes in the fair value
of derivative instruments are excluded from interest income because
the changes in valuation do not affect interest paid or received.
Refer to Non-GAAP Disclosures and Table 4 above for additional
information and a reconciliation of these measures.
(2)
Government obligations include debt issued
by government-sponsored agencies.
(3)
Unrealized gains and losses on
available-for-sale debt securities are excluded from the average
volumes.
(4)
Average loan balances include the average
of non-performing loans.
(5)
Interest income on loans includes $11.9
million and $11.2 million for the years ended December 31, 2023 and
2022, respectively, of income from prepayment penalties and late
fees related to the Corporation's loan portfolio.
Table 7 – Loan Portfolio by Geography
As of December 31,2023
Puerto Rico
Virgin Islands
United States
Consolidated
(In thousands)
Residential mortgage loans
$
2,187,875
$
168,131
$
465,720
$
2,821,726
Commercial loans:
Construction loans
111,664
3,737
99,376
214,777
Commercial mortgage loans
1,725,325
65,312
526,446
2,317,083
Commercial and Industrial loans
2,130,368
119,040
924,824
3,174,232
Commercial loans
3,967,357
188,089
1,550,646
5,706,092
Finance leases
856,815
-
-
856,815
Consumer loans
2,726,457
68,498
5,895
2,800,850
Loans held for investment
9,738,504
424,718
2,022,261
12,185,483
Loans held for sale
7,368
-
-
7,368
Total loans
$
9,745,872
$
424,718
$
2,022,261
$
12,192,851
As of September 30,
2023
Puerto Rico
Virgin Islands
United States
Consolidated
(In thousands)
Residential mortgage loans
$
2,182,882
$
170,797
$
458,952
$
2,812,631
Commercial loans:
Construction loans
98,565
3,762
100,447
202,774
Commercial mortgage loans
1,714,974
65,034
536,105
2,316,113
Commercial and Industrial loans
1,971,686
116,588
942,680
3,030,954
Commercial loans
3,785,225
185,384
1,579,232
5,549,841
Finance leases
831,540
-
-
831,540
Consumer loans
2,683,277
67,184
6,459
2,756,920
Loans held for investment
9,482,924
423,365
2,044,643
11,950,932
Loans held for sale
8,961
-
-
8,961
Total loans
$
9,491,885
$
423,365
$
2,044,643
$
11,959,893
As of December 31,
2022
Puerto Rico
Virgin Islands
United States
Consolidated
(In thousands)
Residential mortgage loans
$
2,237,983
$
179,917
$
429,390
$
2,847,290
Commercial loans:
Construction loans
30,529
4,243
98,181
132,953
Commercial mortgage loans
1,768,890
65,314
524,647
2,358,851
Commercial and Industrial loans
1,791,235
68,874
1,026,154
2,886,263
Commercial loans
3,590,654
138,431
1,648,982
5,378,067
Finance leases
718,230
-
-
718,230
Consumer loans
2,537,840
61,419
9,979
2,609,238
Loans held for investment
9,084,707
379,767
2,088,351
11,552,825
Loans held for sale
12,306
-
-
12,306
Total loans
$
9,097,013
$
379,767
$
2,088,351
$
11,565,131
Table 8 – Non-Performing Assets by Geography
As of December 31,2023
(In thousands)
Puerto Rico
Virgin Islands
United States
Total
Nonaccrual loans held for investment:
Residential mortgage
$
18,324
$
6,688
$
7,227
$
32,239
Construction
595
974
-
1,569
Commercial mortgage
3,106
9,099
-
12,205
Commercial and Industrial
13,414
1,169
667
15,250
Consumer and finance leases
21,954
419
71
22,444
Total nonaccrual loans held for
investment
57,393
18,349
7,965
83,707
OREO
28,382
4,287
-
32,669
Other repossessed property
7,857
252
6
8,115
Other assets (1)
1,415
-
-
1,415
Total non-performing assets (2)
$
95,047
$
22,888
$
7,971
$
125,906
Past due loans 90 days and still accruing
(3)
$
53,308
$
6,005
$
139
$
59,452
As of September 30,
2023
(In thousands)
Puerto Rico
Virgin Islands
United States
Total
Nonaccrual loans held for investment:
Residential mortgage
$
19,378
$
5,871
$
6,697
$
31,946
Construction
669
971
-
1,640
Commercial mortgage
13,220
8,412
-
21,632
Commercial and Industrial
15,779
1,094
1,936
18,809
Consumer and finance leases
18,564
475
98
19,137
Total nonaccrual loans held for
investment
67,610
16,823
8,731
93,164
OREO
23,547
4,638
378
28,563
Other repossessed property
6,799
264
-
7,063
Other assets (1)
1,448
-
-
1,448
Total non-performing assets (2)
$
99,404
$
21,725
$
9,109
$
130,238
Past due loans 90 days and still accruing
(3)
$
57,834
$
4,678
$
380
$
62,892
As of December 31,
2022
(In thousands)
Puerto Rico
Virgin Islands
United States
Total
Nonaccrual loans held for investment:
Residential mortgage
$
28,857
$
6,614
$
7,301
$
42,772
Construction
831
1,377
-
2,208
Commercial mortgage
14,341
7,978
-
22,319
Commercial and Industrial
5,859
1,179
792
7,830
Consumer and finance leases
14,142
469
195
14,806
Total nonaccrual loans held for
investment
64,030
17,617
8,288
89,935
OREO
28,135
3,475
31
31,641
Other repossessed property
5,275
76
29
5,380
Other assets (1)
2,202
-
-
2,202
Total non-performing assets (2)
$
99,642
$
21,168
$
8,348
$
129,158
Past due loans 90 days and still accruing
(3)
$
76,417
$
4,100
$
-
$
80,517
(1)
Residential pass-through MBS issued by the
PRHFA held as part of the available-for-sale debt securities
portfolio.
(2)
Excludes PCD loans previously accounted
for under ASC Subtopic 310-30 for which the Corporation made the
accounting policy election of maintaining pools of loans as “units
of account” both at the time of adoption of CECL on January 1, 2020
and on an ongoing basis for credit loss measurement. These loans
will continue to be excluded from nonaccrual loan statistics as
long as the Corporation can reasonably estimate the timing and
amount of cash flows expected to be collected on the loan pools.
The portion of such loans contractually past due 90 days or more
amounted to $8.3 million as of December 31, 2023 (September 30,
2023 - $8.9 million; December 31, 2022 - $12.0 million).
(3)
These include rebooked loans, which were
previously pooled into GNMA securities, amounting to $7.9 million
as of December 31, 2023 (September 30, 2023 - $8.5 million;
December 31, 2022 - $10.3 million). Under the GNMA program, the
Corporation has the option but not the obligation to repurchase
loans that meet GNMA's specified delinquency criteria. For
accounting purposes, the loans subject to the repurchase option are
required to be reflected on the financial statements with an
offsetting liability.
Table 9 – Allowance for Credit Losses on Loans and Finance
Leases
Quarter Ended
Year Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2023
2023
2022
2023
2022
(Dollars in thousands)
Allowance for credit losses on loans and
finance leases, beginning of period
$
263,615
$
267,058
$
257,859
$
260,464
$
269,030
Impact of adoption of ASU 2022-02
-
-
-
2,116
-
Provision for credit losses on loans and
finance leases expense
18,975
10,643
15,651
66,644
25,679
Net recoveries (charge-offs) of loans and
finance leases:
Residential mortgage
287
35
(498
)
(553
)
(3,343
)
Construction
(4
)
1,459
587
1,889
602
Commercial mortgage
(539
)
74
10
(347
)
1,287
Commercial and Industrial
(1
)
152
(1,360
)
(6,095
)
392
Consumer loans and finance leases
(20,490
)
(15,806
)
(11,785
)
(62,275
)
(33,183
)
Net charge-offs
(20,747
)
(14,086
)
(13,046
)
(67,381
)
(34,245
)
Allowance for credit losses on loans and
finance leases, end of period
$
261,843
$
263,615
$
260,464
$
261,843
$
260,464
Allowance for credit losses on loans and
finance leases to period end total
loans held for investment
2.15
%
2.21
%
2.25
%
2.15
%
2.25
%
Net charge-offs (annualized) to average
loans outstanding during the period
0.69
%
0.48
%
0.46
%
0.58
%
0.31
%
Provision for credit losses on loans and
finance leases to net charge-offs during the period
0.91x
0.76x
1.20x
0.99x
0.75x
Table 10 – Annualized Net (Recoveries) Charge-Offs to Average
Loans
Quarter Ended
Year Ended
December 31,2023
September 30, 2023
December 31,2022
December 31,2023
December 31,2022
Residential mortgage
-0.04
%
-0.01
%
0.07
%
0.02
%
0.12
%
Construction
0.01
%
-3.18
%
-1.82
%
-1.09
%
-0.49
%
Commercial mortgage
0.09
%
-0.01
%
0.00
%
0.01
%
-0.06
%
Commercial and Industrial
0.00
%
-0.02
%
0.19
%
0.21
%
-0.01
%
Consumer loans and finance leases
2.26
%
1.79
%
1.44
%
1.78
%
1.07
%
Total loans
0.69
%
0.48
%
0.46
%
0.58
%
0.31
%
Table 11 – Deposits
As of
December 31, 2023
September 30, 2023
December 31, 2022
(In thousands)
Time deposits
$
2,833,730
$
2,754,776
$
2,250,876
Interest-bearing saving and checking
accounts
7,534,800
7,929,875
7,673,881
Non-interest-bearing deposits
5,404,121
5,440,247
6,112,884
Total deposits, excluding brokered CDs
(1)
15,772,651
16,124,898
16,037,641
Brokered CDs
783,334
310,339
105,826
Total deposits
$
16,555,985
$
16,435,237
$
16,143,467
Total deposits, excluding brokered CDs and
government deposits
$
12,600,719
$
12,862,616
$
13,268,585
(1)
As of December 31,2023, September 30,
2023, and December 31, 2022, government deposits amounted to $3.2
billion, $3.3 billion, and $2.8 billion, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240124697206/en/
First BanCorp. Ramon Rodriguez Senior Vice President
Corporate Strategy and Investor Relations
ramon.rodriguez@firstbankpr.com (787) 729-8200 Ext. 82179
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