- Net income of $70.7 million, or $0.39 per diluted share, for
the second quarter of 2023, consistent with the first quarter of
2023. Return on average assets for the second quarter of 2023 at
1.51%, compared to 1.55% for the first quarter of 2023.
- Income before income taxes of $101.0 million for the second
quarter of 2023, compared to $102.6 million for the first quarter
of 2023.
- On a non-GAAP basis, adjusted pre-tax, pre-provision income of
$118.0 million for the second quarter of 2023, relatively flat
compared to $118.1 million for the first quarter of 2023.
- Net interest income of $199.8 million for the second quarter of
2023, compared to $200.9 million for the first quarter of 2023,
while the net interest margin decreased to 4.23% for the second
quarter of 2023 from 4.34% for the first quarter of 2023. The
decrease in net interest income and margin primarily reflects
higher interest expense on deposits that exceeded the benefit of
higher loan yields and portfolio growth.
- Provision for credit losses increased to $22.2 million for the
second quarter of 2023, compared to $15.5 million for the first
quarter of 2023, mainly due to a deterioration in the forecasted
commercial real estate price index (“CRE price index”), as well as
the growth in the consumer and the commercial and construction loan
portfolios. The ratio of the ACL for loans and finance leases to
total loans held for investment was 2.28% as of June 30, 2023,
compared to 2.29% as of March 31, 2023.
- Non-interest income increased to $36.3 million for the second
quarter of 2023, compared to $32.5 million for the first quarter of
2023, mainly driven by a $3.6 million gain recognized from a legal
settlement and a $1.6 million gain on the repurchase of $21.4
million in junior subordinated debentures, partially offset by $2.3
million in seasonal contingent insurance commissions recorded in
the first quarter of 2023.
- Non-interest expenses decreased by $2.4 million to $112.9
million for the second quarter of 2023, compared to $115.3 million
for the first quarter of 2023, mainly driven by lower payroll taxes
and bonuses as a result of employees reaching maximum taxable
amounts. The efficiency ratio for the second quarter of 2023 was
47.83%, compared to 49.39% for the first quarter of 2023. On a
non-GAAP basis, excluding the aforementioned gains, the efficiency
ratio for the second quarter of 2023 was 48.91%.
- Income tax expense decreased to $30.3 million for the second
quarter of 2023, compared to $31.9 million for the first quarter of
2023, mainly related to lower pre-tax income and a lower estimated
effective tax rate when compared to the prior quarter.
- Credit quality variances:
- Non-performing assets decreased by $7.9 million to $121.1
million as of June 30, 2023, driven by a $6.2 million charge-off
recorded on a commercial and industrial participated loan in the
Florida region in the power generation industry and a $3.1 million
decrease in nonaccrual residential mortgage loans mainly due to
loans restored to accrual status.
- Annualized net charge-offs to average loans ratio increased to
0.67% for the second quarter of 2023, compared to 0.46% for the
first quarter of 2023, mainly driven by the aforementioned
charge-off recorded in the second quarter of 2023.
- Total loans increased by $140.4 million from the prior quarter
to $11.7 billion as of June 30, 2023. On a portfolio basis, the
total loan growth consisted of increases of $88.2 million in
consumer loans, primarily auto loans and leases, and $70.8 million
in commercial and construction loans, partially offset by a
decrease of $18.6 million in residential mortgage loans. In terms
of geography, the total loan growth consisted of increases of $79.3
million in the Puerto Rico region, $42.5 million in the Virgin
Islands region, and $18.6 million in the Florida region.
- Total loan originations, including refinancings, renewals, and
draws from existing commitments (other than credit card utilization
activity), amounted to $1.1 billion in the second quarter of 2023,
an increase of $8.9 million compared to the first quarter of 2023.
The growth in total loan originations consisted of increases of
$37.9 million in residential mortgage loan originations and $11.1
million in consumer loan originations, partially offset by a $40.1
million decrease in commercial and construction loan
originations.
- Total deposits increased by $767.7 million to $16.8 billion.
Excluding brokered certificates of deposit (“brokered CDs”) and
government deposits, total deposits decreased by $104.3 million to
$13.0 billion as of June 30, 2023, consisting of reductions of
$77.3 million in the Puerto Rico region, $22.5 million in the
Florida region, and $4.5 million in the Virgin Islands region. The
decrease in total deposits, excluding brokered CDs and government
deposits, is net of a $149.4 million increase in time
deposits.
- Government deposits, which are fully collateralized, increased
in the second quarter of 2023 by $761.3 million and totaled $3.4
billion as of June 30, 2023. The increase in government deposits
reflected growth of $698.0 million in the Puerto Rico region, $62.5
million in the Virgin Islands region, and $0.8 million in the
Florida region.
- Brokered CDs increased by $110.7 million during the second
quarter of 2023 to $363.6 million as of June 30, 2023, or 2.2% of
total deposits.
- Borrowings decreased by $546.1 million during the second
quarter of 2023 to $0.7 billion as of June 30, 2023, driven by
repayments of $425.0 million in short-term Federal Home Loan Bank
(“FHLB”) advances, a $99.0 million decline in short-term securities
sold under agreements to repurchase (“repurchase agreements”), and
the repurchase of $21.4 million in junior subordinated
debentures.
- Cash and cash equivalents increased by $223.9 million to $1.0
billion as of June 30, 2023 even after the $546.1 million decrease
in borrowings. 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 $3.2 billion as of June 30, 2023,
or 16.70% of total assets, compared to 16.77% as of March 31, 2023.
Including the $980.9 million in available lending capacity at the
FHLB, available liquidity increased to 21.82% of total assets as of
June 30, 2023, compared to 21.42% as of March 31, 2023.
- 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 19.15%, 16.64%, 16.64%,
and 10.73%, respectively, as of June 30, 2023. On a non-GAAP basis,
the tangible common equity ratio was 7.03% as of June 30, 2023,
compared to 7.12% as of March 31, 2023.
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 $70.7
million, or $0.39 per diluted share, for the second quarter of
2023, compared to $70.7 million, or $0.39 per diluted share, for
the first quarter of 2023, and $74.7 million, or $0.38 per diluted
share, for the second quarter of 2022.
Aurelio Alemán, President and Chief Executive Officer of First
BanCorp., commented: “We continue to focus on our strategic
imperatives as we deliver another strong quarter of profitable
growth for the franchise. We generated $70.7 million in net income,
or $0.39 per share, which translated into a strong Return on
Average Assets of 1.51% for the quarter. Our well diversified loan
portfolio expanded for the sixth consecutive quarter, credit
quality metrics remained stable, and our enduring expense
management discipline is evidenced by an industry-low efficiency
ratio of approximately 47.83%. Our organization is well positioned
to continue gaining market share in the markets we serve by
employing our long-standing client-centric omnichannel sales and
service approach.
Loan origination activity during the quarter was positive and
in-line with our expectations and forward guidance. Total loans
increased by $140.4 million during the quarter driven by strong
growth in commercial and consumer loans in Puerto Rico,
particularly in the auto lending segment. Total core deposits,
which exclude brokered and government deposits, decreased by $104.3
million or 0.8%. Deposit reductions continue to be driven by a
combination of rate-sensitive customers looking for higher-yielding
non-bank options and the gradual reduction of excess liquidity,
particularly in our main market. In terms of the franchise, during
the second quarter we expanded our small business digital lending
offering to our other regional operations and relaunched our new
corporate portal, www.1firstbank.com, which serves as an important
tool for expanding our self-service distribution channels and
enhancing the digital experience of our customers.
Despite higher rates and inflationary pressures, economic trends
in our main market remain positive driven by the unprecedented
inflow of federal funds that are expected to support economic
activity over the next decade coupled with new investors coming
into our market. Credit demand remains solid, labor market trends
continue to improve, and strong consumer sentiment is evidenced by
the rise in auto and retail sales. We are highly encouraged by the
economic prospects in Puerto Rico and its potential for continued
growth.
Finally, we resumed the previously authorized share buyback
program in July 2023 and expect to complete the pending $75 million
authorization during the third quarter. In addition, we completed
our capital planning process during the second quarter, and we are
very pleased to announce that our Board approved a new $225 million
common share repurchase program that we expect to execute by the
third quarter of 2024. Our ample capital position remains
significantly above “well capitalized” thresholds which allows us
to continue growing the franchise under any operating environment
and supporting our people and the communities we serve while
enhancing shareholder value."
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 income, 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 first quarter of 2023 and second
quarter of 2022 did not include any significant Special Items. The
financial results for the second quarter of 2023 included the
following Special Items:
Quarter ended June 30, 2023
- A $3.6 million ($2.3 million after-tax) 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 in the second quarter of
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 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 $70.7 million for the second quarter of 2023, or
$0.39 per diluted share, consistent with the first quarter of 2023.
The following table reconciles, for the second quarter of 2023 and
six-month period ended June 30, 2023, the 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 first quarter of 2023, the second quarter of 2022,
and six-month period ended June 30, 2022.
Quarter Ended
Six Month-Period Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
(In thousands, except per share
information)
Net income, as reported (GAAP)
$
70,655
$
70,698
$
74,695
$
141,353
$
157,295
Adjustments:
Gain recognized from legal settlement
(3,600
)
-
-
(3,600
)
-
Gain on early extinguishment of debt
(1,605
)
-
-
(1,605
)
-
Income tax impact of adjustments
1,350
-
-
1,350
-
Adjusted net income attributable to common
stockholders (non-GAAP)
$
66,800
$
70,698
$
74,695
$
137,498
$
157,295
Weighted-average diluted shares
outstanding
179,277
181,236
195,366
180,253
197,441
Earnings Per Share - diluted (GAAP)
$
0.39
$
0.39
$
0.38
$
0.78
$
0.80
Adjusted Earnings Per Share - diluted
(Non-GAAP)
$
0.37
$
0.39
$
0.38
$
0.76
$
0.80
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED
PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $101.0 million for the second
quarter of 2023, compared to $102.6 million for the first quarter
of 2023. For the six-month period ended June 30, 2023, income
before income taxes was $203.6 million, compared to $234.4 million
for the same period in 2022. Adjusted pre-tax, pre-provision income
was $118.0 million for the second quarter of 2023, compared to
$118.1 million for the first quarter of 2023. For the six-month
period ended June 30, 2023, adjusted pre-tax, pre-provision income
was $236.1 million, compared to $230.6 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 six-month periods ended June 30, 2023 and
2022:
Quarter Ended
Six-Month Period Ended
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30, 2022
June 30, 2023
June 30, 2022
(Dollars in thousands)
Income before income taxes
$
100,939
$
102,633
$
106,530
$
106,631
$
108,798
$
203,572
$
234,423
Add/Less: Provision for credit losses
expense (benefit)
22,230
15,502
15,712
15,783
10,003
37,732
(3,799
)
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)
$
117,964
$
118,135
$
122,242
$
122,414
$
118,801
$
236,099
$
230,624
Change from most recent prior period
(amount)
$
(171
)
$
(4,107
)
$
(172
)
$
3,613
$
6,978
$
5,475
$
47,581
Change from most recent prior period
(percentage)
-0.1
%
-3.4
%
-0.1
%
3.0
%
6.2
%
2.4
%
26.0
%
(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)
June 30,2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30,2022
Net Interest Income
Interest income
$
252,204
$
242,396
$
233,452
$
222,683
$
208,625
Interest expense
52,389
41,511
27,879
14,773
12,439
Net interest income
$
199,815
$
200,885
$
205,573
$
207,910
$
196,186
Average Balances
Loans and leases
$
11,591,516
$
11,519,399
$
11,364,963
$
11,218,864
$
11,102,310
Total securities, other short-term
investments and interest-bearing cash balances
7,333,989
7,232,347
7,314,293
7,938,530
8,568,022
Average interest-earning assets
$
18,925,505
$
18,751,746
$
18,679,256
$
19,157,394
$
19,670,332
Average interest-bearing liabilities
$
11,176,385
$
10,957,892
$
10,683,776
$
11,026,975
$
11,567,228
Average Yield/Rate
Average yield on interest-earning assets -
GAAP
5.35%
5.24%
4.96%
4.61%
4.25%
Average rate on interest-bearing
liabilities - GAAP
1.88%
1.54%
1.04%
0.53%
0.43%
Net interest spread - GAAP
3.47%
3.70%
3.92%
4.08%
3.82%
Net interest margin - GAAP
4.23%
4.34%
4.37%
4.31%
4.00%
Net interest income amounted to $199.8 million for the second
quarter of 2023, a decrease of $1.1 million, compared to $200.9
million for the first quarter of 2023. The decrease in net interest
income reflects the following:
- An $11.7 million increase in interest expense on
interest-bearing deposits, including:
- A $4.9 million increase in interest expense on time deposits,
excluding brokered CDs, mainly due to approximately $3.9 million
associated with higher rates paid in the second quarter of 2023 on
new issuances and renewals; the $169.1 million increase in the
average balance that resulted in approximately $0.8 million of
additional interest expense; and approximately a $0.2 million
increase associated with an additional day in the second quarter of
2023. The average cost of non-brokered time deposits in the second
quarter of 2023 increased 63 basis points to 2.50% when compared to
the previous quarter.
- A $4.7 million increase in interest expense on interest-bearing
checking and saving accounts, of which approximately $4.3 million
was driven by the increase in average rates paid in the second
quarter of 2023, primarily in public funds accounts, and $0.2
million was related to an additional day in the second quarter of
2023. The average cost of interest-bearing checking and saving
accounts increased by 24 basis points to 1.18% as compared to 0.94%
in the previous quarter. Excluding public sector deposits, the
average cost of interest-bearing checking and saving accounts for
the second quarter of 2023 was 0.67%, as compared to 0.58% in the
previous quarter.
- A $2.1 million increase in interest expense on brokered CDs,
mainly driven by an increase of $166.9 million in the average
balance, which resulted in additional interest expense of
approximately $1.8 million and, to a lesser extent, the effect of
higher rates paid in the second quarter of 2023.
Partially offset by:
- A $3.9 million increase in interest income on consumer loans
and finance leases, of which approximately $1.6 million was related
to an increase of $71.8 million in the average balance of this
portfolio; $1.3 million was due to higher yields, mainly in the
auto loans and finance leases portfolios; and $1.0 million was
related to an additional day in the second quarter of 2023.
- A $3.4 million increase in interest income on commercial and
construction loans, of which approximately $1.9 million was mainly
related to higher interest rates in the upward repricing of
variable-rate loans and new loan originations, $1.0 million was
related to an additional day in the second quarter of 2023, and
approximately $0.6 million was related to the $27.1 million
increase in the average balance of this portfolio.
- A $2.4 million increase in interest income from
interest-bearing cash balances and investment securities, mainly
due to a $3.2 million increase in interest income from
interest-bearing cash balances, primarily consisting of cash
balances deposited at the Federal Reserve Bank (“FED”), mainly
driven by the $213.1 million increase in the average balance; and a
$0.4 million increase in dividends received from the FHLB.
Partially offsetting these increases was a $1.1 million decrease in
interest income on the debt securities portfolio, mainly due to
higher U.S. agencies’ mortgage-backed securities (“MBS”) premium
amortization expense associated with changes in anticipated
prepayments, and the decrease of $107.5 million in the average
balance.
- A $0.8 million decrease in interest expense on borrowings,
mainly driven by approximately $1.1 million associated with the
$94.9 million decrease in the average balance of FHLB advances,
driven by the precautionary liquidity measures taken at the end of
the first quarter of 2023, partially offset by a higher average
cost of funds in the second quarter.
- A $0.1 million increase in interest income on residential
mortgage loans.
Net interest margin for the second quarter of 2023 decreased to
4.23%, compared to 4.34% for the first quarter of 2023, mainly
reflecting the effect of higher rates paid on deposits and an
increasing migration from non-interest-bearing and other low cost
deposits to higher cost time deposits that exceeded the increase in
earning asset yields over the quarter.
NON-INTEREST INCOME
The following table sets forth information concerning
non-interest income for the last five quarters:
Quarter Ended
June 30,2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30,2022
(In thousands)
Service charges and fees on deposit
accounts
$
9,287
$
9,541
$
9,174
$
9,820
$
9,466
Mortgage banking activities
2,860
2,812
2,572
3,400
4,082
Insurance commission income
2,747
4,847
2,898
2,624
2,946
Card and processing income
11,135
10,918
10,601
9,834
10,300
Gain on early extinguishment of debt
1,605
-
-
-
-
Other non-interest income
8,637
4,400
4,355
4,015
4,147
Non-interest income
$
36,271
$
32,518
$
29,600
$
29,693
$
30,941
Non-interest income amounted to $36.3 million for the second
quarter of 2023, compared to $32.5 million for the first quarter of
2023. Non-interest income for the second quarter of 2023 includes
the $3.6 million gain recognized from a legal settlement included
as part of other non-interest income and the $1.6 million gain on
the repurchase of $21.4 million in junior subordinated debentures
included as part of gain on early extinguishment of debt. On a
non-GAAP basis, excluding the effect of these Special Items,
adjusted non-interest income decreased by $1.4 million mainly due
to:
- A $2.1 million decrease in insurance commission income mainly
driven by $2.3 million in seasonal contingent commissions recorded
in the first quarter of 2023 based on the prior year’s production
of insurance policies.
Partially offset by:
- A $0.6 million increase in adjusted other non-interest income
mainly driven by the effect during the second quarter of 2023 of
$0.3 million in debit card incentives collected during the second
quarter of 2023 and a $0.2 million gain recognized from the sale of
a fixed asset in the Florida region.
NON-INTEREST EXPENSES
The following table sets forth information concerning
non-interest expenses for the last five quarters:
Quarter Ended
June 30,2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30,2022
(In thousands)
Employees' compensation and benefits
$
54,314
$
56,422
$
52,241
$
52,939
$
51,304
Occupancy and equipment
21,097
21,186
21,843
22,543
21,505
Business promotion
4,167
3,975
5,590
5,136
4,042
Professional service fees:
Collections, appraisals and other
credit-related fees
1,231
848
1,483
1,261
1,075
Outsourcing technology services
7,278
8,141
7,806
7,564
7,636
Other professional fees
3,087
2,984
3,380
3,724
3,325
Taxes, other than income taxes
5,124
5,112
5,211
5,349
4,689
FDIC deposit insurance
2,143
2,133
1,544
1,466
1,466
Other insurance and supervisory fees
2,352
2,368
2,429
2,387
2,303
Net gain on OREO operations
(1,984
)
(1,996
)
(2,557
)
(1,064
)
(1,485
)
Credit and debit card processing
expenses
6,540
5,318
6,362
6,410
5,843
Communications
1,992
2,216
2,322
2,272
1,978
Other non-interest expenses
5,576
6,561
5,277
5,202
4,645
Total non-interest expenses
$
112,917
$
115,268
$
112,931
$
115,189
$
108,326
Non-interest expenses amounted to $112.9 million in the second
quarter of 2023, a decrease of $2.4 million from $115.3 million in
the first quarter of 2023. The $2.4 million decrease reflects the
following significant variances:
- A $2.1 million decrease in employees’ compensation and benefits
expense, mainly driven by a decrease in bonuses and payroll taxes
due to employees reaching maximum taxable amounts.
- A $1.0 million decrease in other non-interest expenses, mainly
due to reserve releases of legal and operational reserves recorded
during the second quarter of 2023.
- A $0.4 million decrease in professional service fees, mainly
due to a $0.9 million decrease in outsourcing technology service
fees, partially offset by a $0.4 million increase in collections,
appraisals, and other credit-related fees.
- A $0.2 million decrease in communication expenses.
Partially offset by:
- A $1.2 million increase in credit and debit card processing
expenses, mainly as a result of incentives received during the
first quarter of 2023.
- A $0.2 million increase in business promotion expenses, mainly
as a result of higher advertising and sponsorship expenses incurred
during the second quarter of 2023 associated with the commemoration
of the 75th anniversary of the Bank and an increase in donations,
partially offset by a $0.6 million decrease in credit card loyalty
reward program expense associated with lower historical trends of
customer redemptions.
INCOME TAXES
The Corporation recorded an income tax expense of $30.3 million
for the second quarter of 2023, compared to $31.9 million for the
first quarter of 2023. The decrease was mainly related to lower
pre-tax income and a lower estimated effective tax rate when
compared to the previous quarter.
The Corporation’s estimated effective tax rate, excluding
entities with pre-tax losses from which a tax benefit cannot be
recognized and discrete items, was 30.1% for the second quarter of
2023, compared to 31.2% for the first quarter of 2023. As of June
30, 2023, the Corporation had a deferred tax asset of $153.9
million, net of a valuation allowance of $184.2 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)
June 30, 2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30,2022
Nonaccrual loans held for investment:
Residential mortgage
$
33,252
$
36,410
$
42,772
$
43,036
$
44,588
Commercial mortgage
21,536
21,598
22,319
23,741
24,753
Commercial and Industrial
9,194
13,404
7,830
15,715
17,079
Construction
1,677
1,794
2,208
2,237
2,375
Consumer and finance leases
16,362
15,936
14,806
12,787
10,315
Total nonaccrual loans held for
investment
$
82,021
$
89,142
$
89,935
$
97,516
$
99,110
OREO
31,571
32,862
31,641
38,682
41,706
Other repossessed property
5,404
4,743
5,380
4,936
3,840
Other assets (1)
2,111
2,203
2,202
2,193
2,809
Total non-performing assets (2)
$
121,107
$
128,950
$
129,158
$
143,327
$
147,465
Past due loans 90 days and still accruing
(3)
$
63,211
$
74,380
$
80,517
$
81,790
$
94,485
Nonaccrual loans held for investment to
total loans held for investment
0.70
%
0.77
%
0.78
%
0.86
%
0.88
%
Nonaccrual loans to total loans
0.70
%
0.77
%
0.78
%
0.86
%
0.88
%
Non-performing assets to total assets
0.63
%
0.68
%
0.69
%
0.78
%
0.76
%
(1)
Residential pass-through 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
$9.5 million as of June 30, 2023 (March 31, 2023 - $10.4 million;
December 31, 2022 - $12.0 million; September 30, 2022 - $12.8
million; June 30, 2022 - $15.3 million).
(3)
These include rebooked loans,
which were previously pooled into Government National Mortgage
Association ("GNMA") securities, amounting to $6.5 million as of
June 30, 2023 (March 31, 2023 - $7.1 million; December 31, 2022 -
$10.3 million; September 30, 2022 - $8.0 million; June 30, 2022 -
$10.8 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 $7.9 million to $121.1
million as of June 30, 2023, compared to $129.0 million as of March
31, 2023. Total nonaccrual loans held for investment decreased by
$7.1 million to $82.0 million as of June 30, 2023, compared to
$89.1 million as of March 31, 2023. The decrease in non-performing
assets was mainly driven by:
- A $4.4 million decrease in nonaccrual commercial and
construction loans, mainly related to the aforementioned $6.2
million charge-off recorded during the second quarter of 2023,
partially offset by the inflow of a $1.5 million commercial and
industrial loan in the Puerto Rico region.
- A $3.1 million decrease in nonaccrual residential mortgage
loans, mainly related to $2.7 million of loans restored to accrual
status.
- A $1.3 million decrease in the other real estate owned (“OREO”)
portfolio balance, mainly attributable to the sale of residential
properties in the Puerto Rico region. Partially offset by:
- A $0.7 million increase in other repossessed property, mainly
consisting of repossessed automobiles.
- A $0.4 million increase in nonaccrual consumer loans, mainly
auto loans and finance leases.
- Inflows to nonaccrual loans held for investment were $24.9
million in the second quarter of 2023, a decrease of $4.8 million
compared to inflows of $29.7 million in the first quarter of 2023.
Inflows to nonaccrual commercial and construction loans were $3.1
million in the second quarter of 2023, a decrease of $5.0 million
compared to inflows of $8.1 million in the first quarter of 2023
mainly due to the inflow of a $7.1 million commercial and
industrial participated loan in the Florida region during the first
quarter of 2023. Inflows to nonaccrual consumer loans were $18.8
million, a decrease of $0.7 million compared to inflows of $19.5
million in the first quarter of 2023. Inflows to nonaccrual
residential mortgage loans were $3.0 million in the second quarter
of 2023, an increase of $0.9 million compared to inflows of $2.1
million in the first quarter of 2023. See Early Delinquency below
for additional information.
- Adversely classified commercial and construction loans
decreased by $4.3 million to $65.7 million as of June 30, 2023,
mainly driven by the aforementioned $6.2 million charge-off
recorded in the second quarter of 2023.
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 $118.5 million as of June 30,
2023, an increase of $24.0 million, compared to $94.5 million as of
March 31, 2023. The variances by major portfolio categories are as
follows:
- Consumer loans in early delinquency increased in the second
quarter of 2023 by $12.0 million to $78.4 million, mainly in the
auto loan portfolio.
- Commercial and construction loans in early delinquency
increased by $6.3 million to $9.2 million, mainly due to a $4.5
million commercial mortgage loan in the Puerto Rico region that
matured and is in the process of renewal but for which the
Corporation continues to receive interest and principal payments
from the borrower.
- Residential mortgage loans in early delinquency increased by
$5.7 million to $30.9 million.
Allowance for Credit Losses
The following table summarizes the activity of the allowance for
credit losses (“ACL”) for on-balance sheet and off-balance sheet
exposures during the second and first quarters of 2023:
Quarter ended June 30,
2023
Loans and Finance
Leases
Debt Securities
Residential
Mortgage
Commercial and
Construction
Consumer Loans and
Finance
Total Loans and
Finance
Unfunded Loans
Held-to
Available-
Allowance for Credit Losses
Loans
Loans
Leases
Leases
Commitments
Maturity
for-Sale
Total ACL
(Dollars in thousands)
Allowance for credit losses, beginning
balance
$
64,403
$
70,926
$
130,238
$
265,567
$
4,168
$
7,646
$
449
$
277,830
Provision for credit losses - (benefit)
expense
(3,500
)
10,198
14,072
20,770
721
755
(16
)
22,230
Net charge-offs
(389
)
(5,879
)
(13,011
)
(19,279
)
-
-
-
(19,279
)
Allowance for credit losses, end of
period
$
60,514
$
75,245
$
131,299
$
267,058
$
4,889
$
8,401
$
433
$
280,781
Amortized cost of loans and finance
leases
$
2,793,790
$
5,430,268
$
3,495,257
$
11,719,315
Allowance for credit losses on loans to
amortized cost
2.17
%
1.39
%
3.76
%
2.28
%
Quarter ended March 31,
2023
Loans and Finance
Leases
Debt Securities
Residential
Mortgage
Commercial and
Construction
Consumer Loans and
Finance
Total Loans and
Finance
Unfunded Loans
Held-to
Available-
Allowance for Credit Losses
Loans
Loans
Leases
Leases
Commitments
-Maturity
for-Sale
Total ACL
(Dollars in thousands)
Allowance for credit losses, beginning
balance
$
62,760
$
70,278
$
127,426
$
260,464
$
4,273
$
8,286
$
458
$
273,481
Impact of adoption of ASU 2022-02 (1)
2,056
7
53
2,116
-
-
-
2,116
Provision for credit losses - expense
(benefit)
73
456
15,727
16,256
(105
)
(640
)
(9
)
15,502
Net (charge-offs) recoveries
(486
)
185
(12,968
)
(13,269
)
-
-
-
(13,269
)
Allowance for credit losses, end of
period
$
64,403
$
70,926
$
130,238
$
265,567
$
4,168
$
7,646
$
449
$
277,830
Amortized cost of loans and finance
leases
$
2,811,528
$
5,359,512
$
3,406,945
$
11,577,985
Allowance for credit losses on loans to
amortized cost
2.29
%
1.32
%
3.82
%
2.29
%
(1)
Related to the adoption on
January 1, 2023 of Accounting Standards Update (“ASU”) 2022-02,
“Financial Instruments – Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures,” for which the Corporation
elected to discontinue the use of a discounted cash flow
methodology for restructured accruing loans.
The main variances of the total ACL by main categories are
discussed below:
Allowance for Credit Losses for Loans and Finance Leases
As of June 30, 2023, the ACL for loans and finance leases was
$267.1 million, an increase of $1.5 million, from $265.6 million as
of March 31, 2023. The ACL for commercial and construction loans
increased by $4.3 million, mainly due to a deterioration in the
forecasted CRE Price Index to account for an increased uncertainty
in the CRE market at a national level that could potentially impact
the markets we serve coupled with the growth in the commercial and
construction loan portfolios, partially offset by the
aforementioned charge-off recorded during the second quarter of
2023. The ACL for consumer loans increased by $1.1 million,
primarily reflecting the effect of the increase in the size of the
consumer loan portfolios, partially offset by updated macroeconomic
variables, such as the unemployment rate, which are now forecasted
to deteriorate at a slower pace than previously expected. The ACL
for residential mortgage loans decreased by $3.9 million, mainly
due to a more favorable economic outlook in the projection of
certain forecasted macroeconomic variables, such as the Regional
Home Price Index.
- The provision for credit losses on loans and finance leases was
$20.8 million for the second quarter of 2023, compared to $16.3
million in the first quarter of 2023.
- Provision for credit losses for the commercial and construction
loan portfolio was $10.2 million for the second quarter of 2023,
compared to $0.5 million in the first quarter of 2023, mainly due
to an increased uncertainty in the CRE price index and, to a lesser
extent, the effect of the increase in the size of the loan
portfolio. The results for the second quarter of 2023 also reflect
a $1.2 million incremental provision associated to the
aforementioned commercial and industrial participated loan in the
Florida region in the power generation industry.
- Provision for credit losses for the residential mortgage loan
portfolio was a net benefit of $3.5 million for the second quarter
of 2023, compared to an expense of $0.1 million in the first
quarter of 2023. The net benefit recognized during the second
quarter of 2023 was mainly due to a more favorable economic outlook
in the projection of certain forecasted macroeconomic variables,
such as the Regional Home Price Index.
- Provision for credit losses for the consumer loans and finance
leases portfolio was $14.1 million for the second quarter of 2023,
compared to $15.7 million in the first quarter of 2023. The
decrease in provision expense is primarily related to the
previously mentioned updates in macroeconomic variables.
- The ratio of the ACL for loans and finance leases to total
loans held for investment was 2.28% as of June 30, 2023, compared
to 2.29% as of March 31, 2023. The ratio of the total ACL for loans
and finance leases to nonaccrual loans held for investment was 326%
as of June 30, 2023, compared to 298% as of March 31, 2023.
Net Charge-Offs
The following table presents ratios of annualized net
charge-offs (recoveries) to average loans held-in-portfolio for the
last five quarters:
Quarter Ended
June 30,2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30,2022
Residential mortgage
0.06%
0.07%
0.07%
0.13%
0.11%
Commercial mortgage
0.01%
-0.03%
0.00%
-0.01%
-0.22%
Commercial and Industrial
0.87%
0.00%
0.19%
-0.07%
-0.07%
Construction
-0.99%
-0.17%
-1.82%
0.07%
-0.09%
Consumer loans and finance leases
1.51%
1.54%
1.44%
1.05%
0.91%
Total loans
0.67%
0.46%
0.46%
0.31%
0.21%
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 $19.3 million for the second quarter of
2023, or an annualized 0.67% of average loans, compared to $13.3
million, or an annualized 0.46% of average loans, in the first
quarter of 2023. The increase of $6.0 million in net charge-offs
was driven by a $6.1 million increase in commercial and
construction loans net charge-offs mainly related to the
aforementioned $6.2 million charge-off recorded during the second
quarter of 2023.
Allowance for Credit Losses for Unfunded Loan Commitments
As of June 30, 2023, the ACL for off-balance sheet credit
exposures increased to $4.9 million, compared to $4.2 million as of
March 31, 2023, mainly in the construction loan portfolio, due to a
deterioration in the forecasted CRE Price Index.
Allowance for Credit Losses for Debt Securities
As of June 30, 2023, the ACL for debt securities was $8.8
million, of which $8.4 million is related to Puerto Rico municipal
bonds classified as held-to-maturity, compared to $8.0 million and
$7.6 million, respectively, as of March 31, 2023. The increase in
the ACL of held-to-maturity debt securities was mostly driven by
higher exposure risk associated to the rising interest rate
environment.
LIQUIDITY
Cash and cash equivalents increased by $223.9 million to $1.0
billion as of June 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 $3.2 billion as of
June 30, 2023, or 16.70% of total assets, compared to $3.2 billion,
or 16.77% of total assets as of March 31, 2023. In addition, as of
June 30, 2023, the Corporation had $980.9 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 entities’ obligations that could be liquidated
or pledged within one day, and available secured lines of credit
with the FHLB to total assets) was approximately 21.82% as of June
30, 2023, compared to 21.42% as of March 31, 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 $1.4 billion available for
funding under the FED’s Borrower-In-Custody (“BIC”) Program as of
June 30, 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 June 30,
2023, the Corporation had $5.6 billion available to meet liquidity
needs.
The Corporation’s total deposits, excluding brokered CDs,
amounted to $16.5 billion as of June 30, 2023, compared to $15.8
billion as of March 31, 2023, including government deposits
amounting to $3.4 billion and $2.7 billion, respectively, which are
fully collateralized. As of June 30, 2023, $4.7 billion of these
deposits are uninsured, which represent 28.79% of total deposits,
compared to $4.8 billion, or 30.13% of total deposits, as of March
31, 2023. Brokered CDs amounted to $363.6 million as of June 30,
2023, compared to $252.9 million as of March 31, 2023. Refer to
Table 11 for additional information about the deposits
composition.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $19.2 billion as of June 30,
2023, up $175.4 million from March 31, 2023.
The following variances within the main components of total
assets are noted:
- A $223.9 million increase in cash and cash equivalents mainly
related to the $767.7 million net increase in deposits, partially
offset by the $546.1 million decrease in borrowings.
- A $181.9 million decrease in investment securities, mainly
driven by principal repayments of approximately $111.7 million
primarily on U.S. agencies MBS, a $54.8 million decrease in the
fair value of available-for-sale debt securities attributable to
changes in market interest rates and a $19.5 million decrease in
investments on FHLB stock tied to the decline in short-term
advances from the FHLB.
- A $140.4 million increase in total loans. The variance
consisted of increases of $79.3 million in the Puerto Rico region,
$42.5 million in the Virgin Islands region, and $18.6 million in
the Florida region. On a portfolio basis, the variance consisted of
increases of $88.2 million in consumer loans, primarily auto loans
and finance leases, and $70.8 million in commercial and
construction loans, partially offset by a decrease of $18.6 million
in residential mortgage loans. The increase in commercial and
construction loans was mainly associated with a $33.2 million
increase in the balance of floor plan lines of credit in the Puerto
Rico region and the origination of a $47.0 million line of credit
facility extended to a public corporation in the Virgin Islands
region. Total loan originations, including refinancings, renewals,
and draws from existing commitments (excluding credit card
utilization activity), amounted to $1.1 billion in the second
quarter of 2023, an increase of $8.9 million compared to the first
quarter of 2023. The growth in total loan originations consisted of
increases of $37.9 million in residential mortgage loan
originations and $11.1 million in consumer loan originations,
partially offset by a $40.1 million decrease in commercial and
construction loan originations. Total loan originations in the
Puerto Rico region amounted to $834.7 million in the second quarter
of 2023, a decrease of $75.0 million, compared to $909.7 million in
the first quarter of 2023. The $75.0 million decline in total loan
originations consisted of: (i) a $112.3 million decrease in
commercial and construction loan originations mainly due to three
commercial and industrial loans over $20 million originated in the
previous quarter, partially offset by increases of $27.0 million in
residential mortgage loan originations and $10.3 million in
consumer loan originations. Total loan originations in the Virgin
Islands region amounted to $79.7 million in the second quarter of
2023, compared to $19.0 million in the first quarter of 2023. The
$60.7 million growth in total loan originations consisted of
increases of $59.7 million in commercial and construction loan
originations driven by the aforementioned $47.0 million origination
of a line of credit facility to a public corporation, and $1.1
million in consumer loan originations, partially offset by a $0.1
million decrease in residential mortgage loan originations. Total
loan originations in the Florida region amounted to $168.9 million
in the second quarter of 2023, compared to $145.7 million in the
first quarter of 2023. The $23.2 million growth in total loan
originations consisted of increases of $12.5 million in commercial
and construction loan originations and $11.0 million in residential
mortgage loan originations, partially offset by a $0.3 million
decrease in consumer loan originations.
Total liabilities were approximately $17.8 billion as of June
30, 2023, an increase of $183.0 million from March 31, 2023.
The increase in total liabilities was mainly due to:
- A $767.7 million increase in total deposits driven by a $917.8
million increase in interest-bearing deposits, partially offset by
a $150.1 million decrease in non-interest-bearing deposits. As of
June 30, 2023, non-interest-bearing deposits represented 35% of
total deposits, compared to 38% as of March 31, 2023. The increase
in total deposits included the following significant variances:
- A $761.3 million increase in government deposits, consisting of
growth of $698.0 million in the Puerto Rico region, $62.5 million
in the Virgin Islands region, and $0.8 million in the Florida
region. Most of the increase in the Puerto Rico region was related
to higher balances of interest-bearing transactional accounts.
- A $110.7 million increase in brokered CDs. The increase
reflects the effect of new issuances amounting to $264.4 million
with an all-in cost of 5.14%, partially offset by approximately
$153.7 million of maturing brokered CDs, with an all-in cost of
4.80%, that were paid off during the second quarter of 2023.
- A $104.3 million decrease in deposits, excluding brokered CDs
and government deposits, reflecting reductions of $77.3 million in
the Puerto Rico region, $22.5 million in the Florida region, and
$4.5 million in the Virgin Islands region. The decrease in total
deposits, excluding brokered CDs and government deposits, is net of
a $149.4 million increase in time deposits.
Partially offset by:
- A $546.1 million decrease in borrowings, reflecting repayments
of $425.0 million in short-term FHLB advances at an average cost of
5.04%, a $99.0 million decline in short-term repurchase agreements,
and the repurchase of $21.4 million in junior subordinated
debentures.
Total stockholders’ equity amounted to $1.4 billion as of June
30, 2023, a decrease of $7.6 million from March 31, 2023, mainly
driven by the $54.8 million decrease 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 $25.3 million in common stock dividends
declared in the second quarter of 2023, partially offset by
earnings generated in the second quarter of 2023.
As of June 30, 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
16.64%, 16.64%, 19.15%, and 10.73%, respectively, as of June 30,
2023, compared to CET1 capital, tier 1 capital, total capital, and
leverage ratios of 16.33%, 16.33%, 19.02%, and 10.57%,
respectively, as of March 31, 2023.
Meanwhile, estimated CET1 capital, tier 1 capital, total capital
and leverage ratios of our banking subsidiary, FirstBank, were
16.54%, 17.34%, 18.59%, and 11.18%, respectively, as of June 30,
2023, compared to CET1 capital, tier 1 capital, total capital and
leverage ratios of 16.65%, 17.45%, 18.71%, and 11.29%,
respectively, as of March 31, 2023.
Tangible Common Equity (Non-GAAP)
On a non-GAAP basis, the Corporation’s tangible common equity
ratio decreased to 7.03% as of June 30, 2023, compared to 7.12% as
of March 31, 2023.
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:
June 30,2023
March 31, 2023
December 31, 2022
September 30, 2022
June 30,2022
(In thousands, except ratios and per share
information)
Tangible Equity:
Total common equity - GAAP
$
1,397,999
$
1,405,593
$
1,325,540
$
1,265,333
$
1,557,916
Goodwill
(38,611
)
(38,611
)
(38,611
)
(38,611
)
(38,611
)
Purchased credit card relationship
intangible
(17
)
(86
)
(205
)
(376
)
(599
)
Core deposit intangible
(17,075
)
(18,987
)
(20,900
)
(22,818
)
(24,736
)
Insurance customer relationship
intangible
-
-
(13
)
(51
)
(89
)
Tangible common equity -
non-GAAP
$
1,342,296
$
1,347,909
$
1,265,811
$
1,203,477
$
1,493,881
Tangible Assets:
Total assets - GAAP
$
19,152,455
$
18,977,114
$
18,634,484
$
18,442,034
$
19,531,635
Goodwill
(38,611
)
(38,611
)
(38,611
)
(38,611
)
(38,611
)
Purchased credit card relationship
intangible
(17
)
(86
)
(205
)
(376
)
(599
)
Core deposit intangible
(17,075
)
(18,987
)
(20,900
)
(22,818
)
(24,736
)
Insurance customer relationship
intangible
-
-
(13
)
(51
)
(89
)
Tangible assets - non-GAAP
$
19,096,752
$
18,919,430
$
18,574,755
$
18,380,178
$
19,467,600
Common shares outstanding
179,757
179,789
182,709
186,258
191,626
Tangible common equity ratio -
non-GAAP
7.03
%
7.12
%
6.81
%
6.55
%
7.67
%
Tangible book value per common share -
non-GAAP
$
7.47
$
7.50
$
6.93
$
6.46
$
7.80
Exposure to Puerto Rico Government
As of June 30, 2023, the Corporation had $344.3 million of
direct exposure to the Puerto Rico government, its municipalities,
and public corporations, an increase of $4.3 million when compared
to $340.0 million as of March 31, 2023. As of June 30, 2023,
approximately $186.2 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 $113.2
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 $9.5 million in a loan extended to an affiliate of
the Puerto Rico Electric Power Authority and $32.1 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 $3.3 million (fair value of $2.1
million as of June 30, 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 $1.1 million as of
June 30, 2023, of which $0.3 million is due to credit
deterioration.
The aforementioned exposure to municipalities in Puerto Rico
included $166.1 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 June 30, 2023, the ACL for these securities was $8.4 million,
compared to $7.6 million as of March 31, 2023.
As of June 30, 2023, the Corporation had $2.9 billion of public
sector deposits in Puerto Rico, compared to $2.2 billion as of
March 31, 2023. Approximately 21% of the public sector deposits as
of June 30, 2023, were from municipalities and municipal agencies
in Puerto Rico, and 79% 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 Thursday, July 27, 2023, at
10:00 a.m. (Eastern Time). The call may be accessed via a live
Internet webcast through the investor relations section of the
Corporation’s web site, 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 640793. 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 investor relations section of First BanCorp.’s website,
fbpinvestor.com, until July 27, 2024. A telephone replay will be
available one hour after the end of the conference call through
August 26, 2023, at (866) 813-9403. The replay access code is
486480.
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, Part II, Item 1A,
“Risk Factors” of the Corporation’s Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2023, and the following,
could cause actual results to differ materially from those
expressed in, or implied by, such forward-looking statements: the
impacts of rising interest rates and inflation on the Corporation,
including a decrease in demand for new loan originations and
refinancings, increased competition for borrowers, attrition in
deposits, a reduction in the fair value of the Corporation’s debt
securities portfolio, and an increase in non-interest expenses
which would impact the Corporation’s earnings and may adversely
impact origination volumes, liquidity, and financial performance;
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 and
liquidity constraints; 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 Federal Deposit Insurance
Corporation (“FDIC”), government-sponsored housing agencies and
regulators in Puerto Rico and the U.S. and British Virgin Islands;
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 in turn affects
its ability to make dividend payments to the Corporation and could
result in selling certain investment securities portfolio 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, on 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, widespread health emergencies, geopolitical
conflicts (including the ongoing conflict in Ukraine), 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, resulting in additional charges to
the provision for credit losses on the Corporation’s
available-for-sale debt securities portfolio; the impacts of
applicable legislative, tax, or regulatory changes 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
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. Among the subsidiaries of FirstBank
Puerto Rico are First Federal Finance Corp. and First Express, both
small loan companies. 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
June 30, 2023
March 31, 2023
December 31, 2022
(In thousands, except for share
information)
ASSETS
Cash and due from banks
$
1,046,534
$
822,542
$
478,480
Money market investments:
Time deposits with other financial
institutions
300
300
300
Other short-term investments
700
759
1,725
Total money market investments
1,000
1,059
2,025
Debt securities available for sale, at
fair value (ACL of $433 as of June 30, 2023; $449 as of March 31,
2023; and $458 as of December 31, 2022)
5,433,369
5,589,256
5,599,520
Debt securities held to maturity, at
amortized cost, net of ACL of $8,401 as of June 30, 2023; $7,646 as
of March 31, 2023; and $8,286 as of December 31, 2022 (fair value
of $410,181 as of June 30, 2023; $419,752 as of March 31, 2023; and
$427,115 as of December 31, 2022)
416,325
423,749
429,251
Total debt securities
5,849,694
6,013,005
6,028,771
Equity securities
48,101
66,714
55,289
Total investment securities
5,897,795
6,079,719
6,084,060
Loans, net of ACL of $267,058 as of June
30, 2023; $265,567 as of March 31, 2023; and $260,464 as of
December 31, 2022
11,452,257
11,312,418
11,292,361
Loans held for sale, at lower of cost or
market
14,295
15,183
12,306
Total loans, net
11,466,552
11,327,601
11,304,667
Accrued interest receivable on loans and
investments
70,368
63,841
69,730
Premises and equipment, net
146,640
137,580
142,935
OREO
31,571
32,862
31,641
Deferred tax asset, net
153,925
154,780
155,584
Goodwill
38,611
38,611
38,611
Other intangible assets
17,092
19,073
21,118
Other assets
282,367
299,446
305,633
Total assets
$
19,152,455
$
18,977,114
$
18,634,484
LIABILITIES
Deposits:
Non-interest-bearing deposits
$
5,874,261
$
6,024,304
$
6,112,884
Interest-bearing deposits
10,945,431
10,027,661
10,030,583
Total deposits
16,819,692
16,051,965
16,143,467
Securities sold under agreements to
repurchase
73,934
172,982
75,133
Advances from the FHLB
500,000
925,000
675,000
Other borrowings
161,700
183,762
183,762
Accounts payable and other liabilities
199,130
237,812
231,582
Total liabilities
17,754,456
17,571,521
17,308,944
STOCKHOLDERSʼ EQUITY
Common stock, $0.10 par value, 223,663,116
shares issued (June 30, 2023 - 179,756,622 shares outstanding;
March 31, 2023 - 179,788,698 shares outstanding; and December 31,
2022 - 182,709,059 shares outstanding)
22,366
22,366
22,366
Additional paid-in capital
962,229
959,912
970,722
Retained earnings
1,733,497
1,688,176
1,644,209
Treasury stock, at cost (June 30, 2023 -
43,906,494 shares; March 31, 2023 - 43,874,418 shares; December 31,
2022 - 40,954,057 shares)
(547,706
)
(547,311
)
(506,979
)
Accumulated other comprehensive loss
(772,387
)
(717,550
)
(804,778
)
Total stockholdersʼ equity
1,397,999
1,405,593
1,325,540
Total liabilities and stockholdersʼ
equity
$
19,152,455
$
18,977,114
$
18,634,484
Table 2 – Condensed Consolidated
Statements of Income
Quarter Ended
Six-Month Period Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
(In thousands, except per share
information)
Net interest income:
Interest income
$
252,204
$
242,396
$
208,625
$
494,600
$
406,479
Interest expense
52,389
41,511
12,439
93,900
24,669
Net interest income
199,815
200,885
196,186
400,700
381,810
Provision for credit losses - expense
(benefit):
Loans
20,770
16,256
12,665
37,026
(4,324
)
Unfunded loan commitments
721
(105
)
812
616
634
Debt securities
739
(649
)
(3,474
)
90
(109
)
Provision for credit losses - expense
(benefit)
22,230
15,502
10,003
37,732
(3,799
)
Net interest income after provision for
credit losses
177,585
185,383
186,183
362,968
385,609
Non-interest income:
Service charges and fees on deposit
accounts
9,287
9,541
9,466
18,828
18,829
Mortgage banking activities
2,860
2,812
4,082
5,672
9,288
Card and processing income
11,135
10,918
10,300
22,053
19,981
Gain on early extinguishment of debt
1,605
-
-
1,605
-
Other non-interest income
11,384
9,247
7,093
20,631
15,701
Total non-interest income
36,271
32,518
30,941
68,789
63,799
Non-interest expenses:
Employees’ compensation and benefits
54,314
56,422
51,304
110,736
100,858
Occupancy and equipment
21,097
21,186
21,505
42,283
43,891
Business promotion
4,167
3,975
4,042
8,142
7,505
Professional service fees
11,596
11,973
12,036
23,569
22,630
Taxes, other than income taxes
5,124
5,112
4,689
10,236
9,707
Insurance and supervisory fees
4,495
4,501
3,769
8,996
7,677
Net gain on OREO operations
(1,984
)
(1,996
)
(1,485
)
(3,980
)
(2,205
)
Credit and debit card processing
expenses
6,540
5,318
5,843
11,858
9,964
Other non-interest expenses
7,568
8,777
6,623
16,345
14,958
Total non-interest expenses
112,917
115,268
108,326
228,185
214,985
Income before income taxes
100,939
102,633
108,798
203,572
234,423
Income tax expense
30,284
31,935
34,103
62,219
77,128
Net income
$
70,655
$
70,698
$
74,695
$
141,353
$
157,295
Net income attributable to common
stockholders
$
70,655
$
70,698
$
74,695
$
141,353
$
157,295
Earnings per common share:
Basic
$
0.39
$
0.39
$
0.38
$
0.79
$
0.80
Diluted
$
0.39
$
0.39
$
0.38
$
0.78
$
0.80
Table 3 – Selected Financial
Data
Quarter Ended
Six-Month Period Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
(Shares in thousands)
Per Common Share Results:
Net earnings per share - basic
$
0.39
$
0.39
$
0.38
$
0.79
$
0.80
Net earnings per share - diluted
$
0.39
$
0.39
$
0.38
$
0.78
$
0.80
Cash dividends declared
$
0.14
$
0.14
$
0.12
$
0.28
$
0.22
Average shares outstanding
178,926
180,215
194,405
179,567
196,257
Average shares outstanding diluted
179,277
181,236
195,366
180,253
197,441
Book value per common share
$
7.78
$
7.82
$
8.13
$
7.78
$
8.13
Tangible book value per common share
(1)
$
7.47
$
7.50
$
7.80
$
7.47
$
7.80
Common Stock Price: End of period
$
12.22
$
11.42
$
12.91
$
12.22
$
12.91
Selected Financial Ratios (In
Percent):
Profitability:
Return on Average Assets
1.51
1.55
1.52
1.53
1.59
Return on Average Common Equity
19.66
21.00
17.82
20.31
17.18
Interest Rate Spread (2)
3.58
3.84
4.01
3.71
3.89
Net Interest Margin (2)
4.35
4.48
4.19
4.42
4.08
Efficiency ratio (3)
47.83
49.39
47.69
48.60
48.25
Capital and Other:
Average Total Equity to Average Total
Assets
7.67
7.36
8.52
7.52
9.24
Total capital
19.15
19.02
19.98
19.15
19.98
Common equity Tier 1 capital
16.64
16.33
17.23
16.64
17.23
Tier 1 capital
16.64
16.33
17.23
16.64
17.23
Leverage
10.73
10.57
10.18
10.73
10.18
Tangible common equity ratio (1)
7.03
7.12
7.67
7.03
7.67
Dividend payout ratio
35.45
35.69
31.23
35.57
27.45
Basic liquidity ratio (4)
21.82
21.42
28.84
21.82
28.84
Core liquidity ratio (5)
16.70
16.77
23.11
16.70
23.11
Loan to deposit ratio
69.76
72.22
65.52
69.76
65.52
Uninsured deposits, excluding fully
collateralized deposits, to total deposits
28.79
30.13
31.89
28.79
31.89
Asset Quality:
Allowance for credit losses for loans and
finance leases to total loans held for investment
2.28
2.29
2.25
2.28
2.25
Net charge-offs (annualized) to average
loans outstanding
0.67
0.46
0.21
0.56
0.23
Provision for credit losses for loans and
finance leases - expense (benefit) to net charge-offs
107.73
122.51
212.50
113.76
(34.44
)
Non-performing assets to total assets
0.63
0.68
0.76
0.63
0.76
Nonaccrual loans held for investment to
total loans held for investment
0.70
0.77
0.88
0.70
0.88
Allowance for credit losses for loans and
finance leases to total nonaccrual loans held for investment
325.60
297.91
254.42
325.60
254.42
Allowance for credit losses for loans and
finance leases to total nonaccrual loans held for investment,
excluding residential estate loans
547.60
503.62
462.48
547.60
462.48
(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 second and first quarters of 2023, the second quarter
of 2022 and the six-month periods ended June 30, 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
Six-Month Period Ended
(Dollars in thousands)
June 30, 2023
March 31, 2023
June 30,2022
June 30,2023
June 30,2022
Net Interest Income
Interest income - GAAP
$
252,204
$
242,396
$
208,625
$
494,600
$
406,479
Unrealized (gain) loss on derivative
instruments
(3
)
6
(9
)
3
(24
)
Interest income excluding valuations
non-GAAP
252,201
242,402
208,616
494,603
406,455
Tax-equivalent adjustment
5,540
6,347
9,389
11,887
16,608
Interest income on a tax-equivalent basis
and excluding valuations non-GAAP
$
257,741
$
248,749
$
218,005
$
506,490
$
423,063
Interest expense - GAAP
$
52,389
$
41,511
$
12,439
$
93,900
$
24,669
Net interest income - GAAP
$
199,815
$
200,885
$
196,186
$
400,700
$
381,810
Net interest income excluding valuations
- non-GAAP
$
199,812
$
200,891
$
196,177
$
400,703
$
381,786
Net interest income on a tax-equivalent
basis and excluding valuations - non-GAAP
$
205,352
$
207,238
$
205,566
$
412,590
$
398,394
Average Balances
Loans and leases
$
11,591,516
$
11,519,399
$
11,102,310
$
11,555,659
$
11,104,571
Total securities, other short-term
investments and interest-bearing cash balances
7,333,989
7,232,347
8,568,022
7,283,450
8,607,337
Average Interest-Earning Assets
$
18,925,505
$
18,751,746
$
19,670,332
$
18,839,109
$
19,711,908
Average Interest-Bearing Liabilities
$
11,176,385
$
10,957,892
$
11,567,228
$
11,067,741
$
11,390,486
Average Yield/Rate
Average yield on interest-earning assets -
GAAP
5.35
%
5.24
%
4.25
%
5.29
%
4.16
%
Average rate on interest-bearing
liabilities - GAAP
1.88
%
1.54
%
0.43
%
1.71
%
0.44
%
Net interest spread - GAAP
3.47
%
3.70
%
3.82
%
3.58
%
3.72
%
Net interest margin - GAAP
4.23
%
4.34
%
4.00
%
4.29
%
3.91
%
Average yield on interest-earning assets
excluding valuations - non-GAAP
5.35
%
5.24
%
4.25
%
5.29
%
4.16
%
Average rate on interest-bearing
liabilities excluding valuations - non-GAAP
1.88
%
1.54
%
0.43
%
1.71
%
0.44
%
Net interest spread excluding valuations -
non-GAAP
3.47
%
3.70
%
3.82
%
3.58
%
3.72
%
Net interest margin excluding valuations -
non-GAAP
4.23
%
4.34
%
4.00
%
4.29
%
3.91
%
Average yield on interest-earning assets
on a tax-equivalent basis and excluding valuations - non-GAAP
5.46
%
5.38
%
4.45
%
5.42
%
4.33
%
Average rate on interest-bearing
liabilities
1.88
%
1.54
%
0.43
%
1.71
%
0.44
%
Net interest spread on a tax-equivalent
basis and excluding valuations - non-GAAP
3.58
%
3.84
%
4.01
%
3.71
%
3.89
%
Net interest margin on a tax-equivalent
basis and excluding valuations - non-GAAP
4.35
%
4.48
%
4.19
%
4.42
%
4.08
%
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
June 30,
March 31,
June 30,
June 30,
March 31,
June 30,
June 30,
March 31,
June 30,
2023
2023
2022
2023
2023
2022
2023
2023
2022
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term
investments
$
617,356
$
404,249
$
1,530,353
$
7,880
$
4,650
$
2,873
5.12
%
4.67
%
0.75
%
Government obligations (2)
2,909,204
2,909,976
2,922,226
10,973
10,765
10,090
1.51
%
1.50
%
1.38
%
Mortgage-backed securities
3,757,425
3,864,145
4,081,573
17,087
19,396
22,804
1.82
%
2.04
%
2.24
%
FHLB stock
36,265
40,838
21,275
780
421
251
8.63
%
4.18
%
4.73
%
Other investments
13,739
13,139
12,595
58
139
12
1.69
%
4.29
%
0.38
%
Total investments (3)
7,333,989
7,232,347
8,568,022
36,778
35,371
36,030
2.01
%
1.98
%
1.69
%
Residential mortgage loans
2,808,465
2,835,240
2,891,403
39,864
39,794
40,573
5.69
%
5.69
%
5.63
%
C&I and commercial mortgage loans
5,191,040
5,167,727
5,054,223
89,290
85,885
64,500
6.90
%
6.74
%
5.12
%
Construction loans
149,783
146,041
124,070
2,903
2,676
1,768
7.77
%
7.43
%
5.72
%
Finance leases
769,316
735,500
617,399
14,714
13,809
11,410
7.67
%
7.61
%
7.41
%
Consumer loans
2,672,912
2,634,891
2,415,215
74,192
71,214
63,724
11.13
%
10.96
%
10.58
%
Total loans (4) (5)
11,591,516
11,519,399
11,102,310
220,963
213,378
181,975
7.65
%
7.51
%
6.57
%
Total interest-earning assets
$
18,925,505
$
18,751,746
$
19,670,332
$
257,741
$
248,749
$
218,005
5.46
%
5.38
%
4.45
%
Interest-bearing liabilities:
Time deposits
$
2,511,504
$
2,342,360
$
2,202,228
$
15,667
$
10,782
$
3,838
2.50
%
1.87
%
0.70
%
Brokered CDs
333,557
166,698
76,790
3,761
1,587
404
4.52
%
3.86
%
2.11
%
Other interest-bearing deposits
7,517,995
7,544,901
8,704,448
22,176
17,516
3,452
1.18
%
0.94
%
0.16
%
Securities sold under agreements to
repurchase
101,397
91,004
200,000
1,328
1,069
1,972
5.25
%
4.76
%
3.95
%
Advances from the FHLB
534,231
629,167
200,000
6,048
7,176
1,075
4.54
%
4.63
%
2.16
%
Other borrowings
177,701
183,762
183,762
3,409
3,381
1,698
7.69
%
7.46
%
3.71
%
Total interest-bearing liabilities
$
11,176,385
$
10,957,892
$
11,567,228
$
52,389
$
41,511
$
12,439
1.88
%
1.54
%
0.43
%
Net interest income
$
205,352
$
207,238
$
205,566
Interest rate spread
3.58
%
3.84
%
4.01
%
Net interest margin
4.35
%
4.48
%
4.19
%
(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
$2.9 million, $3.1 million, and $3.0 million for the quarters ended
June 30, 2023, March 31, 2023, and June 30, 2022, respectively, 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)
Six-Month Period Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
(Dollars in thousands)
Interest-earning assets:
Money market and other short-term
investments
$
511,392
$
1,682,216
$
12,530
$
3,693
4.94
%
0.44
%
Government obligations (2)
2,909,587
2,829,675
21,738
18,322
1.51
%
1.31
%
Mortgage-backed securities
3,810,491
4,061,883
36,483
42,224
1.93
%
2.10
%
FHLB stock
38,539
21,370
1,201
538
6.28
%
5.08
%
Other investments
13,441
12,193
197
33
2.96
%
0.55
%
Total investments (3)
7,283,450
8,607,337
72,149
64,810
2.00
%
1.52
%
Residential mortgage loans
2,821,779
2,926,236
79,658
81,260
5.69
%
5.60
%
C&I and commercial mortgage loans
5,179,448
5,078,910
175,175
126,504
6.82
%
5.02
%
Construction loans
147,923
119,427
5,579
3,292
7.61
%
5.56
%
Finance leases
752,501
602,880
28,523
22,322
7.64
%
7.47
%
Consumer loans
2,654,008
2,377,118
145,406
124,875
11.05
%
10.59
%
Total loans (4) (5)
11,555,659
11,104,571
434,341
358,253
7.58
%
6.51
%
Total interest-earning assets
$
18,839,109
$
19,711,908
$
506,490
$
423,063
5.42
%
4.33
%
Interest-bearing liabilities:
Time deposits
$
2,427,399
$
2,282,192
$
26,449
$
8,259
2.20
%
0.73
%
Brokered CDs
250,588
84,210
5,348
881
4.30
%
2.11
%
Other interest-bearing deposits
7,531,374
8,419,880
39,692
6,206
1.06
%
0.15
%
Securities sold under agreements to
repurchase
96,229
220,442
2,397
4,154
5.02
%
3.80
%
Advances from the FHLB
581,436
200,000
13,224
2,138
4.59
%
2.16
%
Other borrowings
180,715
183,762
6,790
3,031
7.58
%
3.33
%
Total interest-bearing liabilities
$
11,067,741
$
11,390,486
$
93,900
$
24,669
1.71
%
0.44
%
Net interest income
$
412,590
$
398,394
Interest rate spread
3.71
%
3.89
%
Net interest margin
4.42
%
4.08
%
(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
$6.0 million and $5.6 million for the six-month periods ended June
30, 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 June 30,2023
Puerto Rico
Virgin Islands
United States
Consolidated
(In thousands)
Residential mortgage loans
$
2,179,539
$
172,771
$
441,480
$
2,793,790
Commercial loans:
Commercial mortgage loans
1,734,514
65,775
519,780
2,320,069
Commercial and Industrial loans
1,902,803
108,971
934,427
2,946,201
Construction loans
65,427
3,792
94,779
163,998
Commercial loans
3,702,744
178,538
1,548,986
5,430,268
Finance leases
790,711
-
-
790,711
Consumer loans
2,630,665
66,078
7,803
2,704,546
Loans held for investment
9,303,659
417,387
1,998,269
11,719,315
Loans held for sale
14,094
201
-
14,295
Total loans
$
9,317,753
$
417,588
$
1,998,269
$
11,733,610
As of March 31, 2023
Puerto Rico
Virgin Islands
United States
Consolidated
(In thousands)
Residential mortgage loans
$
2,205,659
$
176,123
$
429,746
$
2,811,528
Commercial loans:
Commercial mortgage loans
1,766,479
62,694
524,486
2,353,659
Commercial and Industrial loans
1,872,215
69,013
920,961
2,862,189
Construction loans
44,297
3,898
95,469
143,664
Commercial loans
3,682,991
135,605
1,540,916
5,359,512
Finance leases
755,482
-
-
755,482
Consumer loans
2,579,532
63,231
8,700
2,651,463
Loans held for investment
9,223,664
374,959
1,979,362
11,577,985
Loans held for sale
14,830
-
353
15,183
Total loans
$
9,238,494
$
374,959
$
1,979,715
$
11,593,168
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:
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
Construction loans
30,529
4,243
98,181
132,953
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 June 30,2023
(In thousands)
Puerto Rico
Virgin Islands
United States
Total
Nonaccrual loans held for investment:
Residential mortgage
$
20,047
$
5,767
$
7,438
$
33,252
Commercial mortgage
13,337
8,199
-
21,536
Commercial and Industrial
5,808
1,119
2,267
9,194
Construction
703
974
-
1,677
Consumer and finance leases
15,874
379
109
16,362
Total nonaccrual loans held for
investment
55,769
16,438
9,814
82,021
OREO
27,107
4,464
-
31,571
Other repossessed property
5,226
168
10
5,404
Other assets (1)
2,111
-
-
2,111
Total non-performing assets (2)
$
90,213
$
21,070
$
9,824
$
121,107
Past due loans 90 days and still accruing
(3)
$
60,964
$
2,108
$
139
$
63,211
As of March 31, 2023
(In thousands)
Puerto Rico
Virgin Islands
United States
Total
Nonaccrual loans held for investment:
Residential mortgage
$
22,924
$
6,069
$
7,417
$
36,410
Commercial mortgage
13,677
7,921
-
21,598
Commercial and Industrial
4,589
1,163
7,652
13,404
Construction
737
1,057
-
1,794
Consumer and finance leases
15,483
306
147
15,936
Total nonaccrual loans held for
investment
57,410
16,516
15,216
89,142
OREO
28,323
4,539
-
32,862
Other repossessed property
4,620
112
11
4,743
Other assets (1)
2,203
-
-
2,203
Total non-performing assets (2)
$
92,556
$
21,167
$
15,227
$
128,950
Past due loans 90 days and still accruing
(3)
$
72,000
$
2,380
$
-
$
74,380
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
Commercial mortgage
14,341
7,978
-
22,319
Commercial and Industrial
5,859
1,179
792
7,830
Construction
831
1,377
-
2,208
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 $9.5 million as
of June 30, 2023 (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
$6.5 million as of June 30, 2023 (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.
Table 9 – Allowance for Credit Losses
on Loans and Finance Leases
Quarter Ended
Six-Month Period Ended
June 30,
March 31,
June 30,
June 30,
June 30,
2023
2023
2022
2023
2022
(Dollars in thousands)
Allowance for credit losses on loans and
finance leases, beginning of period
$
265,567
$
260,464
$
245,447
$
260,464
$
269,030
Impact of adoption of ASU 2022-02
-
2,116
-
2,116
-
Provision for credit losses on loans and
finance leases expense (benefit)
20,770
16,256
12,665
37,026
(4,324
)
Net (charge-offs) recoveries of loans and
finance leases:
Residential mortgage
(389
)
(486
)
(792
)
(875
)
(1,938
)
Commercial mortgage
(32
)
150
1,216
118
1,223
Commercial and Industrial
(6,218
)
(28
)
521
(6,246
)
1,266
Construction
371
63
27
434
35
Consumer loans and finance leases
(13,011
)
(12,968
)
(6,932
)
(25,979
)
(13,140
)
Net charge-offs
(19,279
)
(13,269
)
(5,960
)
(32,548
)
(12,554
)
Allowance for credit losses on loans and
finance leases, end of period
$
267,058
$
265,567
$
252,152
$
267,058
$
252,152
Allowance for credit losses on loans and
finance leases to period end total loans held for investment
2.28
%
2.29
%
2.25
%
2.28
%
2.25
%
Net charge-offs (annualized) to average
loans outstanding during the period
0.67
%
0.46
%
0.21
%
0.56
%
0.23
%
Provision for credit losses on loans and
finance leases expense (benefit) to net charge-offs during the
period
1.08x
1.23x
2.13x
1.14x
-0.34x
Table 10 – Annualized Net Charge-Offs
(Recoveries) to Average Loans
Quarter Ended
Six-Month Period Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Residential mortgage
0.06
%
0.07
%
0.11
%
0.06
%
0.13
%
Commercial mortgage
0.01
%
-0.03
%
-0.22
%
-0.01
%
-0.11
%
Commercial and Industrial
0.87
%
0.00
%
-0.07
%
0.44
%
-0.09
%
Construction
-0.99
%
-0.17
%
-0.09
%
-0.59
%
-0.06
%
Consumer loans and finance leases
1.51
%
1.54
%
0.91
%
1.53
%
0.88
%
Total loans
0.67
%
0.46
%
0.21
%
0.56
%
0.23
%
Table 11 – Deposits
As of
June 30, 2023
March 31, 2023
December 31, 2022
(In thousands)
Time deposits
$
2,680,250
$
2,418,611
$
2,250,876
Interest-bearing saving and checking
accounts
7,901,599
7,356,145
7,673,881
Non-interest-bearing deposits
5,874,261
6,024,304
6,112,884
Total deposits, excluding brokered CDs
(1)
16,456,110
15,799,060
16,037,641
Brokered CDs
363,582
252,905
105,826
Total deposits
$
16,819,692
$
16,051,965
$
16,143,467
Total deposits, excluding brokered CDs and
government deposits
$
13,021,598
$
13,125,868
$
13,268,585
(1)
As of June 30, 2023, March 31,
2023, and December 31, 2022, government deposits amounted to $3.4
billion, $2.7 billion, and $2.8 billion, respectively.
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version on businesswire.com: https://www.businesswire.com/news/home/20230727121116/en/
First BanCorp. Ramon Rodriguez Senior Vice President
Corporate Strategy and Investor Relations
ramon.rodriguez@firstbankpr.com (787) 729-8200 Ext. 82179
First Bancorp (NYSE:FBP)
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