First BanCorp. (the "Corporation") (NYSE: FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported net income of $46.3 million, or $0.21 per diluted share, for the third quarter of 2019, compared to $41.3 million, or $0.19 per diluted share, for the second quarter of 2019, and $36.3 million, or $0.16 per diluted share, for the third quarter of 2018.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: "We achieved another strong quarter of core earnings with net income of $46.3 million or $0.21 per diluted share. Pre-tax, pre-provision income remained healthy at $70 million this quarter, while franchise metrics continue to move in a positive direction.
Third quarter origination activity was strong at $1.0 billion. While we experienced a reduction in our loan portfolio this quarter by $137 million due in large part to payoffs of two large criticized commercial loans and the repayment of a large non-performing loan, on a year-over-year basis the loan portfolio has grown over $225 million, or 2.6%, reflecting a 19% increase in the consumer portfolio, an over 2% increase in the commercial and construction loans portfolio, and, consistent with our strategic plan, the residential loan book decreased by 6%.
We continue achieving impressive organic reductions in non-performing assets, down $52 million this quarter, a 14% reduction, which resulted in an NPA to asset ratio of 2.65%. Year-over-year we have reduced our NPAs by $191 million, or 36%. All of this has been done through organic reductions with minimal impact to our earnings.
Our capital continues to grow with tangible book value now at $9.79 per share and our CET1 ratio is 21.6%.
We are excited about the strategic transaction that we announced last night. This is a transformational deal for our Company. It is an excellent use of our capital generating fully phased-in 2020 consensus EPS accretion of 35% and strengthening our franchise in areas of retail, commercial and small business banking while maintaining capital ratios significantly above well-capitalized guidelines. This deal will significantly improve our branch network and retail footprint, improve our funding profile and brings with it a very talented bench of bankers and a new great client base. The transaction is subject to receipt of all necessary regulatory approvals."
SPECIAL ITEMS
The financial results for the third and second quarters of 2019 and the third quarter of 2018 include the following items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts (the "Special Items"):
Quarter ended September 30, 2019
- A $3.0 million ($1.8 million after-tax) positive effect in earnings related to the accelerated discount accretion from the payoff of an acquired commercial mortgage loan.
- A $0.4 million ($0.2 million after-tax) benefit resulting from hurricane-related insurance recoveries related to repairs and maintenance costs incurred on facilities in the U.S. Virgin Islands.
- A $0.5 million OTTI charge on private label MBS recorded in the tax-exempt international banking entity subsidiary.
Quarter ended June 30, 2019
- A $0.8 million ($0.5 million after-tax) benefit resulting from hurricane-related insurance recoveries related to impairments, repairs and maintenance costs incurred on facilities in the British Virgin Islands.
Quarter ended September 30, 2018
- A $2.7 million ($1.7 million after-tax) positive effect in earnings related to a $2.8 million net loan loss reserve release resulting from revised estimates of the hurricane-related qualitative reserves associated with the effects of Hurricanes Irma and Maria, primarily related to consumer loans, and a $0.5 million gain from hurricane-related insurance proceeds resulting from insurance recoveries in excess of fixed assets impairment charges, partially offset by $0.5 million of hurricane-related expenses recorded in the third quarter of 2018.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)
This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted pre-tax, pre-provision income, adjusted net interest income and margin, tangible common equity, tangible book value per common share, certain capital ratios, and certain other financial measures that exclude the effect of items that management identifies as Special Items because they are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts, and should be read in conjunction with the discussion below in Basis of Presentation ? Use of Non-GAAP Financial Measures and the accompanying tables (Exhibit A), which are an integral part of this press release.
Net income amounted to $46.3 million for the third quarter of 2019, compared to $41.3 million for the second quarter of 2019. Adjusted net income amounted to $44.7 million, or $0.20 per diluted share, for the third quarter of 2019, compared to adjusted net income of $40.8 million for the second quarter of 2019, or $0.18 per diluted share. The following table reconciles for the third and second quarters of 2019 and the third quarter of 2018 the reported net income to adjusted net income and adjusted earnings per share, non-GAAP financial measures that exclude the Special Items identified above:
Quarter Ended | Quarter Ended | Quarter Ended | |||||||||||
(In thousands, except per share information) | September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||||
Net income, as reported (GAAP) | $ |
46,327 |
|
$ |
41,287 |
|
$ |
36,323 |
|
||||
Adjustments: | |||||||||||||
Accelerated discount accretion due to early payoff of acquired loan |
|
(2,953 |
) |
|
- |
|
|
- |
|
||||
OTTI on debt securities |
|
497 |
|
|
- |
|
|
- |
|
||||
Hurricane-related loan loss reserve release |
|
- |
|
|
- |
|
|
(2,781 |
) |
||||
Hurricane-related expenses |
|
- |
|
|
- |
|
|
533 |
|
||||
Benefit from hurricane-related insurance recoveries |
|
(379 |
) |
|
(820 |
) |
|
(478 |
) |
||||
Income tax impact of adjustments (1) |
|
1,250 |
|
|
308 |
|
|
1,063 |
|
||||
Adjusted net income (Non-GAAP) | $ |
44,742 |
|
$ |
40,775 |
|
$ |
34,660 |
|
||||
Preferred stock dividends |
|
(669 |
) |
|
(669 |
) |
|
(669 |
) |
||||
Adjusted net income attributable to common stockholders (Non-GAAP) | $ |
44,073 |
|
$ |
40,106 |
|
$ |
33,991 |
|
||||
Weighted-average diluted shares outstanding | $ |
217,227 |
|
|
216,978 |
|
|
216,775 |
|
||||
Earnings Per Share - diluted (GAAP) | $ |
0.21 |
|
$ |
0.19 |
|
$ |
0.16 |
|
||||
Adjusted Earnings Per Share - diluted (Non-GAAP) | $ |
0.20 |
|
$ |
0.18 |
|
$ |
0.16 |
|
||||
(1) See Basis of Presentation for the individual tax impact related to each reconciling item. | |||||||||||||
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes amounted to $65.6 million for the third quarter of 2019, compared to $59.3 million for the second quarter of 2019. Adjusted pre-tax, pre-provision income amounted to $70.2 million for the third quarter of 2019, down $0.9 million from the second quarter of 2019. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:
(Dollars in thousands) | Quarter Ended | |||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
2019 |
2019 |
2019 |
2018 |
2018 |
||||||||||||||||
Income before income taxes | $ |
65,595 |
|
$ |
59,298 |
|
$ |
60,932 |
|
$ |
59,886 |
|
$ |
48,655 |
|
|||||
Add: Provision for loan and lease losses |
|
7,398 |
|
|
12,534 |
|
|
11,820 |
|
|
7,649 |
|
|
11,524 |
|
|||||
Add/(Less): Net loss (gain) on investments and impairments |
|
497 |
|
|
- |
|
|
- |
|
|
84 |
|
|
- |
|
|||||
Less: Accelerated discount accretion due to early payoff of acquired loan |
|
(2,953 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|||||
Less: Employee retention benefit - Disaster Tax Relief | ||||||||||||||||||||
and Airport Extension Act of 2017 |
|
- |
|
|
- |
|
|
(2,317 |
) |
|
- |
|
|
- |
|
|||||
Less: Benefit from hurricane-related insurance recoveries |
|
(379 |
) |
|
(820 |
) |
|
- |
|
|
- |
|
|
(478 |
) |
|||||
Add: Hurricane-related expenses |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
533 |
|
|||||
Adjusted pre-tax, pre-provision income (1) | $ |
70,158 |
|
$ |
71,012 |
|
$ |
70,435 |
|
$ |
67,619 |
|
$ |
60,234 |
|
|||||
Change from most recent prior quarter (amount) | $ |
(854 |
) |
$ |
577 |
|
$ |
2,816 |
|
$ |
7,385 |
|
$ |
(1,147 |
) |
|||||
Change from most recent prior quarter (percentage) |
|
-1.2 |
% |
|
0.8 |
% |
|
4.2 |
% |
|
12.3 |
% |
|
-1.9 |
% |
|||||
(1) See Basis of Presentation for additional information. | ||||||||||||||||||||
Adjusted pre-tax, pre-provision income is a non-GAAP financial measure that management believes is useful to investors in analyzing the Corporation's performance and trends. This metric is income before income taxes adjusted to exclude the provision for loan and lease losses and any gains or losses on sales of investment securities and impairments. In addition, from time to time, earnings are also adjusted for certain items regarded as Special Items, such as the accelerated discount from the early payoff of an acquired commercial mortgage loan, a one-time employee retention benefit, and hurricane-related expenses and insurance recoveries reflected above, because management believes these items are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts. (See Basis of Presentation ? Use of Non-GAAP Financial Measures - Adjusted Pre-Tax, Pre-Provision Income for additional information about this non-GAAP financial measure).
NET INTEREST INCOME
Net interest income, excluding fair value adjustments on derivatives ("valuations"), and net interest income on a tax-equivalent basis are non-GAAP financial measures. See Basis of Presentation ? Use of Non-GAAP Financial Measures - Net Interest Income, Excluding Valuations, and on a Tax-Equivalent Basis below for additional information. 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 last five quarters. The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations, and on a tax-equivalent basis.
(Dollars in thousands) | ||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||
September 30, 2019 | June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | ||||||||||||||||
Net Interest Income | ||||||||||||||||||||
Interest income - GAAP | $ |
172,295 |
|
$ |
169,510 |
|
$ |
166,472 |
|
$ |
162,424 |
|
$ |
157,492 |
|
|||||
Unrealized loss (gain) on derivative instruments |
|
1 |
|
|
1 |
|
|
4 |
|
|
(22 |
) |
|
- |
|
|||||
Interest income excluding valuations |
|
172,296 |
|
|
169,511 |
|
|
166,476 |
|
|
162,402 |
|
|
157,492 |
|
|||||
Tax-equivalent adjustment |
|
4,964 |
|
|
4,929 |
|
|
5,322 |
|
|
6,135 |
|
|
5,413 |
|
|||||
Interest income on a tax-equivalent basis and excluding valuations | $ |
177,260 |
|
$ |
174,440 |
|
$ |
171,798 |
|
$ |
168,537 |
|
$ |
162,905 |
|
|||||
Interest expense - GAAP |
|
27,870 |
|
|
26,964 |
|
|
26,291 |
|
|
24,726 |
|
|
24,971 |
|
|||||
Net interest income - GAAP | $ |
144,425 |
|
$ |
142,546 |
|
$ |
140,181 |
|
$ |
137,698 |
|
$ |
132,521 |
|
|||||
Net interest income excluding valuations | $ |
144,426 |
|
$ |
142,547 |
|
$ |
140,185 |
|
$ |
137,676 |
|
$ |
132,521 |
|
|||||
Net interest income on a tax-equivalent basis and excluding valuations | $ |
149,390 |
|
$ |
147,476 |
|
$ |
145,507 |
|
$ |
143,811 |
|
$ |
137,934 |
|
|||||
Average Balances | ||||||||||||||||||||
Loans and leases | $ |
9,026,725 |
|
$ |
9,035,618 |
|
$ |
8,912,874 |
|
$ |
8,761,306 |
|
$ |
8,676,620 |
|
|||||
Total securities, other short-term investments and interest-bearing cash balances |
|
2,691,584 |
|
|
2,641,185 |
|
|
2,634,055 |
|
|
2,685,654 |
|
|
2,892,148 |
|
|||||
Average interest-earning assets | $ |
11,718,309 |
|
$ |
11,676,803 |
|
$ |
11,546,929 |
|
$ |
11,446,960 |
|
$ |
11,568,768 |
|
|||||
Average interest-bearing liabilities | $ |
7,819,008 |
|
$ |
7,714,393 |
|
$ |
7,615,212 |
|
$ |
7,654,622 |
|
$ |
7,830,063 |
|
|||||
Average Yield/Rate | ||||||||||||||||||||
Average yield on interest-earning assets - GAAP |
|
5.83 |
% |
|
5.82 |
% |
|
5.85 |
% |
|
5.63 |
% |
|
5.40 |
% |
|||||
Average rate on interest-bearing liabilities - GAAP |
|
1.41 |
% |
|
1.40 |
% |
|
1.40 |
% |
|
1.28 |
% |
|
1.27 |
% |
|||||
Net interest spread - GAAP |
|
4.42 |
% |
|
4.42 |
% |
|
4.45 |
% |
|
4.35 |
% |
|
4.13 |
% |
|||||
Net interest margin - GAAP |
|
4.89 |
% |
|
4.90 |
% |
|
4.92 |
% |
|
4.77 |
% |
|
4.54 |
% |
|||||
Average yield on interest-earning assets excluding valuations |
|
5.83 |
% |
|
5.82 |
% |
|
5.85 |
% |
|
5.63 |
% |
|
5.40 |
% |
|||||
Average rate on interest-bearing liabilities excluding valuations |
|
1.41 |
% |
|
1.40 |
% |
|
1.40 |
% |
|
1.28 |
% |
|
1.27 |
% |
|||||
Net interest spread excluding valuations |
|
4.42 |
% |
|
4.42 |
% |
|
4.45 |
% |
|
4.35 |
% |
|
4.13 |
% |
|||||
Net interest margin excluding valuations |
|
4.89 |
% |
|
4.90 |
% |
|
4.92 |
% |
|
4.77 |
% |
|
4.54 |
% |
|||||
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations |
|
6.00 |
% |
|
5.99 |
% |
|
6.03 |
% |
|
5.84 |
% |
|
5.59 |
% |
|||||
Average rate on interest-bearing liabilities excluding valuations |
|
1.41 |
% |
|
1.40 |
% |
|
1.40 |
% |
|
1.28 |
% |
|
1.27 |
% |
|||||
Net interest spread on a tax-equivalent basis and excluding valuations |
|
4.59 |
% |
|
4.59 |
% |
|
4.63 |
% |
|
4.56 |
% |
|
4.32 |
% |
|||||
Net interest margin on a tax-equivalent basis and excluding valuations |
|
5.06 |
% |
|
5.07 |
% |
|
5.11 |
% |
|
4.99 |
% |
|
4.73 |
% |
|||||
Net interest income amounted to $144.4 million for the third quarter of 2019, an increase of $1.9 million compared to net interest income of $142.5 million for the second quarter of 2019. The increase in net interest income was mainly due to:
Partially offset by:
Net interest margin was 4.89%, compared to 4.90% for the second quarter of 2019. The decrease was primarily attributable to pressure on commercial loan yields from lower short-term market interest rates combined with the increase in the average cost of time deposits and higher cash balances maintained during the third quarter. These effects were almost entirely offset by the aforementioned $3.0 million accelerated discount accretion from the payoff of a commercial mortgage loan, which increased the net interest margin by approximately 10 basis points in the third quarter, and the increase in the proportion of consumer loans to total interest-earning assets.
PROVISION FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses for the third quarter of 2019 was $7.4 million, compared to $12.5 million for the second quarter of 2019. The $5.1 million decrease in the provision for loan and lease losses, as compared to the 2019 second quarter, was driven by the following factors:
Partially offset by:
See Credit Quality ? Allowance for Loan and Lease Losses below for additional information regarding the allowance for loan and lease losses, including variances in net charge-offs.
NON-INTEREST INCOME
The following table sets forth information concerning non-interest income during the periods indicated:
Quarter Ended | ||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||
(In thousands) | 2019 |
2019 |
2019 |
2018 |
2018 |
|||||||||||||
Service charges on deposit accounts | $ |
6,108 |
|
$ |
5,887 |
$ |
5,716 |
$ |
5,666 |
|
$ |
5,581 |
||||||
Mortgage banking activities |
|
4,396 |
|
|
4,395 |
|
3,627 |
|
3,677 |
|
|
4,551 |
||||||
Net (loss) gain on investments and impairments |
|
(497 |
) |
|
- |
|
- |
|
(84 |
) |
|
- |
||||||
Other operating income |
|
11,394 |
|
|
11,941 |
|
13,200 |
|
11,272 |
|
|
8,391 |
||||||
Non-interest income | $ |
21,401 |
|
$ |
22,223 |
$ |
22,543 |
$ |
20,531 |
|
$ |
18,523 |
||||||
Non-interest income amounted to $21.4 million for the third quarter of 2019, compared to $22.2 million for the second quarter of 2019. The $0.8 million decrease in non-interest income was primarily due to:
Partially offset by:
Revenues from mortgage banking activities, remained relatively flat as compared to the second quarter of 2019, reflecting a $0.2 million decrease in unrealized losses on marked-to-market fair value adjustments on To-Be-Announced ("TBA") hedges not yet settled at the end of the period, offset by a $0.1 million adjustment in the third quarter to increase the mortgage servicing rights valuation allowance and a $0.1 million decrease in realized gains from sales of residential mortgage loans. Total loans sold in the secondary market to U.S. government-sponsored agencies amounted to $92.4 million with a related net gain of $3.2 million, net of realized losses of $0.5 million on TBA hedges settled during the third quarter of 2019, compared to total loans sold in the secondary market of $97.6 million with a related net gain of $3.3 million, net of realized losses of $0.5 million on TBA hedges settled during the second quarter of 2019.
NON-INTEREST EXPENSES
The following table sets forth information concerning non-interest expenses during the periods indicated:
Quarter Ended | ||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||
(In thousands) | 2019 |
2019 |
2019 |
2018 |
2018 |
|||||||||||
Employees' compensation and benefits | $ |
41,409 |
$ |
40,813 |
$ |
39,296 |
$ |
40,012 |
$ |
39,243 |
||||||
Occupancy and equipment |
|
15,129 |
|
15,834 |
|
16,055 |
|
14,431 |
|
14,660 |
||||||
Deposit insurance premium |
|
1,465 |
|
1,482 |
|
1,698 |
|
1,750 |
|
2,067 |
||||||
Other insurance and supervisory fees |
|
960 |
|
547 |
|
1,170 |
|
996 |
|
1,143 |
||||||
Taxes, other than income taxes |
|
3,904 |
|
3,737 |
|
3,820 |
|
3,680 |
|
3,534 |
||||||
Professional fees: | ||||||||||||||||
Collections, appraisals and other credit-related fees |
|
1,797 |
|
1,946 |
|
1,717 |
|
2,106 |
|
2,150 |
||||||
Outsourcing technology services |
|
6,206 |
|
5,798 |
|
5,520 |
|
5,610 |
|
5,215 |
||||||
Other professional fees |
|
4,464 |
|
3,927 |
|
3,073 |
|
4,026 |
|
4,137 |
||||||
Credit and debit card processing expenses |
|
4,764 |
|
3,820 |
|
4,154 |
|
4,096 |
|
4,147 |
||||||
Business promotion |
|
4,004 |
|
3,940 |
|
3,706 |
|
4,356 |
|
3,860 |
||||||
Communications |
|
1,834 |
|
1,714 |
|
1,752 |
|
1,666 |
|
1,642 |
||||||
Net loss on OREO operations |
|
2,578 |
|
5,043 |
|
3,743 |
|
4,247 |
|
4,360 |
||||||
Other |
|
4,319 |
|
4,336 |
|
4,268 |
|
3,718 |
|
4,707 |
||||||
Total | $ |
92,833 |
$ |
92,937 |
$ |
89,972 |
$ |
90,694 |
$ |
90,865 |
||||||
Non-interest expenses amounted to $92.8 million in the third quarter of 2019, a decrease of $0.1 million from $92.9 million in the second quarter of 2019. The $0.1 million decrease in non-interest expenses was primarily due to:
Partially offset by:
INCOME TAXES
The Corporation recorded an income tax expense of $19.3 million for the third quarter of 2019, compared to $18.0 million for the second quarter of 2019.
The Corporation's effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, was 29% as of the end of the third quarter of 2019, relatively flat compared to the second quarter of 2019. As of September 30, 2019, the Corporation had a deferred tax asset of $273.8 million (net of a valuation allowance of $87.2 million, including a valuation allowance of $56.2 million against the deferred tax assets of the Corporation's banking subsidiary, FirstBank).
CREDIT QUALITY
Non-Performing Assets
(Dollars in thousands) | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||
2019 |
2019 |
2019 |
2018 |
2018 |
|||||||||||||||||
Nonaccrual loans held for investment: | |||||||||||||||||||||
Residential mortgage | $ |
127,040 |
|
$ |
129,501 |
|
$ |
132,049 |
|
$ |
147,287 |
|
$ |
156,685 |
|
||||||
Commercial mortgage |
|
42,525 |
|
|
77,495 |
|
|
93,192 |
|
|
109,536 |
|
|
117,397 |
|
||||||
Commercial and Industrial |
|
20,725 |
|
|
21,327 |
|
|
22,507 |
|
|
30,382 |
|
|
34,551 |
|
||||||
Construction |
|
6,358 |
|
|
6,936 |
|
|
7,700 |
|
|
8,362 |
|
|
9,071 |
|
||||||
Consumer and Finance leases |
|
19,579 |
|
|
17,846 |
|
|
17,330 |
|
|
20,406 |
|
|
21,664 |
|
||||||
Total nonaccrual loans held for investment |
|
216,227 |
|
|
253,105 |
|
|
272,778 |
|
|
315,973 |
|
|
339,368 |
|
||||||
OREO |
|
103,033 |
|
|
118,081 |
|
|
129,716 |
|
|
131,402 |
|
|
135,218 |
|
||||||
Other repossessed property |
|
5,932 |
|
|
5,744 |
|
|
5,032 |
|
|
3,576 |
|
|
3,992 |
|
||||||
Total non-performing assets, excluding nonaccrual loans held for sale | $ |
325,192 |
|
$ |
376,930 |
|
$ |
407,526 |
|
$ |
450,951 |
|
$ |
478,578 |
|
||||||
Nonaccrual loans held for sale |
|
6,906 |
|
|
7,144 |
|
|
7,381 |
|
|
16,111 |
|
|
44,177 |
|
||||||
Total non-performing assets, including nonaccrual loans held for sale (1) | $ |
332,098 |
|
$ |
384,074 |
|
$ |
414,907 |
|
$ |
467,062 |
|
$ |
522,755 |
|
||||||
Past-due loans 90 days and still accruing (2) | $ |
144,787 |
|
$ |
142,113 |
|
$ |
148,625 |
|
$ |
158,527 |
|
$ |
165,432 |
|
||||||
Nonaccrual loans held for investment to total loans held for investment |
|
2.41 |
% |
|
2.78 |
% |
|
3.03 |
% |
|
3.57 |
% |
|
3.89 |
% |
||||||
Nonaccrual loans to total loans |
|
2.48 |
% |
|
2.85 |
% |
|
3.10 |
% |
|
3.73 |
% |
|
4.37 |
% |
||||||
Non-performing assets, excluding nonaccrual loans held for sale, | |||||||||||||||||||||
to total assets, excluding nonaccrual loans held for sale |
|
2.60 |
% |
|
3.01 |
% |
|
3.29 |
% |
|
3.69 |
% |
|
3.93 |
% |
||||||
Non-performing assets to total assets |
|
2.65 |
% |
|
3.06 |
% |
|
3.35 |
% |
|
3.81 |
% |
|
4.28 |
% |
(1) | Purchased credit impaired ("PCI") loans of $139.3 million accounted for under Accounting Standards Codification ("ASC") 310-30 as of September 30, 2019, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, are excluded and not considered nonaccrual loans due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis. | ||||||||||
(2) |
Amount includes PCI loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2019 of approximately $27.7 million, primarily related to the loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014. |
Variances in credit quality metrics:
- A $15.0 million decrease in the OREO portfolio balance. The decrease was driven by sales of $20.7 million, including the sale of a $10.8 million commercial OREO property in the Puerto Rico region, and write-down adjustments to the OREO value of $3.8 million, partially offset by additions of $9.5 million.
- A $2.5 million decrease in nonaccrual residential mortgage loans, driven by collections, foreclosures, charge-offs, and, to a lesser extent, loans brought current that, in the aggregate, offset the inflows in the third quarter.
Partially offset by:
- A $1.7 million increase in nonaccrual consumer loans, primarily auto loans and finance leases.
Early Delinquency
Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory report instructions) amounted to $190.5 million as of September 30, 2019, an increase of $43.6 million, compared to $146.9 million as of June 30, 2019. The variances by major portfolio categories were as follow:
- Commercial and construction loans in early delinquency increased in the third quarter by $44.2 million to $50.3 million as of September 30, 2019, primarily related to loans that were contractually current as to principal and interest payments but have final balloon payments that are over 30 days past due and are in the process of refinancing.
- Residential mortgage loans in early delinquency decreased in the third quarter by $2.0 million to $78.1 million as of September 30, 2019, and consumer loans in early delinquency increased in the third quarter by $1.4 million to $62.1 million as of September 30, 2019.
Allowance for Loan and Lease Losses
The following table sets forth information concerning the allowance for loan and lease losses during the periods indicated:
Quarter Ended | |||||||||||||||||||||||||||||
(Dollars in thousands) | September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||||||||
2019 |
2019 |
2019 |
2018 |
2018 |
|||||||||||||||||||||||||
Allowance for loan and lease losses, beginning of period | $ |
172,011 |
|
$ |
183,732 |
|
$ |
196,362 |
|
$ |
200,563 |
|
$ |
222,035 |
|
||||||||||||||
Provision for loan and lease losses |
|
7,398 |
|
|
12,534 |
|
|
11,820 |
|
(1) |
|
7,649 |
|
(2) |
|
11,524 |
|
(3) |
|||||||||||
Net (charge-offs) recoveries of loans: | |||||||||||||||||||||||||||||
Residential mortgage |
|
(4,414 |
) |
|
(4,188 |
) |
|
(5,547 |
) |
|
(6,009 |
) |
|
(7,483 |
) |
||||||||||||||
Commercial mortgage |
|
(717 |
) |
|
(11,598 |
) |
|
(2,272 |
) |
|
4,193 |
|
|
(9,559 |
) |
||||||||||||||
Commercial and Industrial |
|
1,439 |
|
|
(83 |
) |
|
(5,216 |
) |
|
(168 |
) |
|
(2,115 |
) |
||||||||||||||
Construction |
|
211 |
|
|
237 |
|
|
(166 |
) |
|
60 |
|
|
(2,178 |
) |
||||||||||||||
Consumer and finance leases |
|
(10,353 |
) |
|
(8,623 |
) |
|
(11,249 |
) |
|
(9,926 |
) |
|
(11,661 |
) |
||||||||||||||
Net charge-offs |
|
(13,834 |
) |
|
(24,255 |
) |
|
(24,450 |
) |
|
(11,850 |
) |
|
(32,996 |
) |
||||||||||||||
Allowance for loan and lease losses, end of period | $ |
165,575 |
|
$ |
172,011 |
|
$ |
183,732 |
|
$ |
196,362 |
|
$ |
200,563 |
|
||||||||||||||
Allowance for loan and lease losses to period end total loans held for investment |
|
1.85 |
% |
|
1.89 |
% |
|
2.04 |
% |
|
2.22 |
% |
|
2.30 |
% |
||||||||||||||
Net charge-offs (annualized) to average loans outstanding during the period |
|
0.61 |
% |
|
1.07 |
% |
|
1.10 |
% |
|
0.54 |
% |
|
1.52 |
% |
||||||||||||||
Provision for loan and lease losses to net charge-offs during the period | 0.53x | 0.52x | 0.48x | 0.65x | 0.35x | ||||||||||||||||||||||||
Provision for loan and lease losses to net charge-offs during the period, | |||||||||||||||||||||||||||||
excluding effect of the hurricane-related qualitative reserve releases | |||||||||||||||||||||||||||||
in the first quarter of 2019 and the fourth and third quarters of 2018 | 0.53x | 0.52x | 0.75x | 1.13x | 0.43x | ||||||||||||||||||||||||
(1) Net of a $6.4 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria. | |||||||||||||||||||||||||||||
(2) Net of a $5.7 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria. | |||||||||||||||||||||||||||||
(3) Net of a $2.8 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria. |
The following table sets forth information concerning the composition of the Corporation's allowance for loan and lease losses as of September 30, 2019 and June 30, 2019, by loan category and by whether the allowance and related provisions were calculated individually for impairment purposes or through a general valuation allowance:
(Dollars in thousands) | Residential Mortgage Loans |
Commercial Loans (including Commercial Mortgage, C&I, and Construction) |
Consumer and Finance Leases |
Total | ||||||||||||
As of September 30, 2019 | ||||||||||||||||
Impaired loans: | ||||||||||||||||
Principal balance of loans, net of charge-offs | $ |
381,868 |
|
$ |
164,746 |
|
$ |
26,756 |
|
$ |
573,370 |
|
||||
Allowance for loan and lease losses |
|
17,411 |
|
|
15,026 |
|
|
4,561 |
|
|
36,998 |
|
||||
Allowance for loan and lease losses to principal balance |
|
4.56 |
% |
|
9.12 |
% |
|
17.05 |
% |
|
6.45 |
% |
||||
PCI loans: | ||||||||||||||||
Carrying value of PCI loans |
|
135,922 |
|
|
3,330 |
|
|
- |
|
|
139,252 |
|
||||
Allowance for PCI loans |
|
11,063 |
|
|
371 |
|
|
- |
|
|
11,434 |
|
||||
Allowance for PCI loans to carrying value |
|
8.14 |
% |
|
11.14 |
% |
|
- |
|
|
8.21 |
% |
||||
Loans with general allowance: | ||||||||||||||||
Principal balance of loans |
|
2,480,163 |
|
|
3,602,644 |
|
|
2,172,991 |
|
|
8,255,798 |
|
||||
Allowance for loan and lease losses |
|
17,558 |
|
|
50,128 |
|
|
49,457 |
|
|
117,143 |
|
||||
Allowance for loan and lease losses to principal balance |
|
0.71 |
% |
|
1.39 |
% |
|
2.28 |
% |
|
1.42 |
% |
||||
Total loans held for investment: | ||||||||||||||||
Principal balance of loans | $ |
2,997,953 |
|
$ |
3,770,720 |
|
$ |
2,199,747 |
|
$ |
8,968,420 |
|
||||
Allowance for loan and lease losses |
|
46,032 |
|
|
65,525 |
|
|
54,018 |
|
|
165,575 |
|
||||
Allowance for loan and lease losses to principal balance |
|
1.54 |
% |
|
1.74 |
% |
|
2.46 |
% |
|
1.85 |
% |
||||
As of June 30, 2019 | ||||||||||||||||
Impaired loans: | ||||||||||||||||
Principal balance of loans, net of charge-offs | $ |
391,016 |
|
$ |
293,675 |
|
$ |
27,137 |
|
$ |
711,828 |
|
||||
Allowance for loan and lease losses |
|
18,788 |
|
|
13,477 |
|
|
4,570 |
|
|
36,835 |
|
||||
Allowance for loan and lease losses to principal balance |
|
4.80 |
% |
|
4.59 |
% |
|
16.84 |
% |
|
5.17 |
% |
||||
PCI loans: | ||||||||||||||||
Carrying value of PCI loans |
|
138,367 |
|
|
3,339 |
|
|
- |
|
|
141,706 |
|
||||
Allowance for PCI loans |
|
11,063 |
|
|
371 |
|
|
- |
|
|
11,434 |
|
||||
Allowance for PCI loans to carrying value |
|
8.00 |
% |
|
11.11 |
% |
|
- |
|
|
8.07 |
% |
||||
Loans with general allowance: | ||||||||||||||||
Principal balance of loans |
|
2,541,363 |
|
|
3,633,279 |
|
|
2,085,779 |
|
|
8,260,421 |
|
||||
Allowance for loan and lease losses |
|
18,433 |
|
|
57,195 |
|
|
48,114 |
|
|
123,742 |
|
||||
Allowance for loan and lease losses to principal balance |
|
0.73 |
% |
|
1.57 |
% |
|
2.31 |
% |
|
1.50 |
% |
||||
Total loans held for investment: | ||||||||||||||||
Principal balance of loans | $ |
3,070,746 |
|
$ |
3,930,293 |
|
$ |
2,112,916 |
|
$ |
9,113,955 |
|
||||
Allowance for loan and lease losses |
|
48,284 |
|
|
71,043 |
|
|
52,684 |
|
|
172,011 |
|
||||
Allowance for loan and lease losses to principal balance |
|
1.57 |
% |
|
1.81 |
% |
|
2.49 |
% |
|
1.89 |
% |
||||
Net Charge-Offs
The following table presents annualized net charge-offs to average loans held-in-portfolio:
Net Charge-Offs (annualized) to Average Loans Trends | |||||||||||
Quarter Ended | |||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||
|
|
|
|
|
|||||||
Residential mortgage | 0.58% |
0.54% |
0.71% |
0.77% |
0.95% |
||||||
Commercial mortgage | 0.19% |
2.97% |
0.59% |
-1.10% |
2.47% |
||||||
Commercial and Industrial | -0.26% |
0.01% |
0.96% |
0.03% |
0.42% |
||||||
Construction | -0.81% |
-1.03% |
0.78% |
-0.22% |
7.13% |
||||||
Consumer and finance leases | 1.92% |
1.68% |
2.27% |
2.10% |
2.57% |
||||||
Total loans | 0.61% |
1.07% |
1.10% |
0.54% |
1.52% |
||||||
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 $13.8 million for the third quarter of 2019, or an annualized 0.61% of average loans, compared to $24.3 million, or an annualized 1.07% of average loans, in the second quarter of 2019. The decrease of $10.5 million in net charge-offs was mainly related to:
Partially offset by:
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $12.5 billion as of September 30, 2019, relatively flat compared to June 30, 2019.
The following variances were noted:
Partially offset by:
Total liabilities were approximately $10.3 billion as of September 30, 2019, down $54.1 million from June 30, 2019.
The decrease in total liabilities was mainly due to:
Partially offset by:
Total stockholders' equity amounted to $2.2 billion as of September 30, 2019, an increase of $47.6 million from June 30, 2019. The increase was mainly driven by the earnings generated in the third quarter and the $7.6 million increase in the fair value of available-for-sale investment securities recorded as part of "Other comprehensive income," partially offset by common and preferred stock dividends declared in the third quarter of 2019 totaling $7.2 million.
The Corporation's common equity tier 1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules were 21.61%, 22.02%, 25.27% and 16.04%, respectively, as of September 30, 2019, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 20.63%, 21.03%, 24.25%, and 15.64%, respectively, as of June 30, 2019.
Meanwhile, the common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank Puerto Rico, were 20.07%, 23.52%, 24.78%, and 17.16%, respectively, as of September 30, 2019, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 19.09%, 22.48%, 23.74% and 16.75%, respectively, as of June 30, 2019.
Tangible Common Equity
The Corporation's tangible common equity ratio increased to 17.03% as of September 30, 2019, compared to 16.64% as of June 30, 2019.
The following table presents a reconciliation of the Corporation's tangible common equity and tangible assets over the last five quarters to the comparable GAAP items:
(In thousands, except ratios and per share information) | |||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||||
2019 |
2019 |
2019 |
2018 |
2018 |
|||||||||||||||||
Tangible Equity: | |||||||||||||||||||||
Total equity - GAAP | $ |
2,200,595 |
|
$ |
2,152,976 |
|
$ |
2,100,457 |
|
$ |
2,044,704 |
|
$ |
1,927,415 |
|
||||||
Preferred equity |
|
(36,104 |
) |
|
(36,104 |
) |
|
(36,104 |
) |
|
(36,104 |
) |
|
(36,104 |
) |
||||||
Goodwill |
|
(28,098 |
) |
|
(28,098 |
) |
|
(28,098 |
) |
|
(28,098 |
) |
|
(28,098 |
) |
||||||
Purchased credit card relationship intangible |
|
(4,137 |
) |
|
(4,659 |
) |
|
(5,180 |
) |
|
(5,702 |
) |
|
(6,276 |
) |
||||||
Core deposit intangible |
|
(3,695 |
) |
|
(3,903 |
) |
|
(4,096 |
) |
|
(4,335 |
) |
|
(4,585 |
) |
||||||
Insurance customer relationship intangible |
|
(508 |
) |
|
(546 |
) |
|
(584 |
) |
|
(622 |
) |
|
(661 |
) |
||||||
Tangible common equity | $ |
2,128,053 |
|
$ |
2,079,666 |
|
$ |
2,026,395 |
|
$ |
1,969,843 |
|
$ |
1,851,691 |
|
||||||
Tangible Assets: | |||||||||||||||||||||
Total assets - GAAP | $ |
12,530,713 |
|
$ |
12,537,196 |
|
$ |
12,376,780 |
|
$ |
12,243,561 |
|
$ |
12,209,700 |
|
||||||
Goodwill |
|
(28,098 |
) |
|
(28,098 |
) |
|
(28,098 |
) |
|
(28,098 |
) |
|
(28,098 |
) |
||||||
Purchased credit card relationship intangible |
|
(4,137 |
) |
|
(4,659 |
) |
|
(5,180 |
) |
|
(5,702 |
) |
|
(6,276 |
) |
||||||
Core deposit intangible |
|
(3,695 |
) |
|
(3,903 |
) |
|
(4,096 |
) |
|
(4,335 |
) |
|
(4,585 |
) |
||||||
Insurance customer relationship intangible |
|
(508 |
) |
|
(546 |
) |
|
(584 |
) |
|
(622 |
) |
|
(661 |
) |
||||||
Tangible assets | $ |
12,494,275 |
|
$ |
12,499,990 |
|
$ |
12,338,822 |
|
$ |
12,204,804 |
|
$ |
12,170,080 |
|
||||||
Common shares outstanding |
|
217,361 |
|
|
217,328 |
|
|
217,332 |
|
|
217,235 |
|
|
217,241 |
|
||||||
Tangible common equity ratio |
|
17.03 |
% |
|
16.64 |
% |
|
16.42 |
% |
|
16.14 |
% |
|
15.22 |
% |
||||||
Tangible book value per common share | $ |
9.79 |
|
$ |
9.57 |
|
$ |
9.32 |
|
$ |
9.07 |
|
$ |
8.52 |
|
||||||
Exposure to Puerto Rico Government
As of September 30, 2019, the Corporation had $204.8 million of direct exposure to the Puerto Rico Government, its municipalities and public corporations, compared to $213.4 million as of June 30, 2019. Approximately $182.5 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. The Corporation's total direct exposure to the Puerto Rico Government also included a $14.0 million loan extended to an affiliate of a public corporation and obligations of the Puerto Rico Government, specifically bonds of the Puerto Rico Housing Finance Authority, at an amortized cost of $8.3 million as part of its available-for-sale investment securities portfolio (fair value of $7.2 million as of September 30, 2019).
The aforementioned exposure to municipalities in Puerto Rico included $138.7 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 investment securities.
As of September 30, 2019, the Corporation had $768.2 million of public sector deposits in Puerto Rico, compared to $785.4 million as of June 30, 2019. Approximately 39% is from municipalities and municipal agencies in Puerto Rico and 61% is from public corporations and the central government and agencies in Puerto Rico.
Conference Call / Webcast Information
First BanCorp's senior management will host an earnings conference call and live webcast on Tuesday, October 22, 2019, 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: www.1firstbank.com or through a dial-in telephone number at (877) 506-6537 or (412) 380?2001 for international callers. 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 web site, www.1firstbank.com, until October 22, 2020. A telephone replay will be available one hour after the end of the conference call through November 22, 2019 at (877) 344-7529 or (412) 317-0088 for international callers. The replay access code is 10135120.
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," "look forward," "should," "would," "believes" 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 made, and advises readers that various factors, including, but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by such forward-looking statements: uncertainty as to the ultimate outcomes of actions taken, or those that may be taken, by the Puerto Rico government, or the oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA") to address the Commonwealth of Puerto Rico's financial problems, including the filing of a form of bankruptcy under Title III of PROMESA, which provides a court-supervised debt restructuring process similar to U.S. bankruptcy protection, the designation by the PROMESA oversight board of Puerto Rico municipalities as instrumentalities covered under PROMESA, the effects of measures included in the Puerto Rico government fiscal plan, or any revisions to it, on our clients and loan portfolios, and any potential impact from future economic or political developments in Puerto Rico; changes in economic and business conditions, including those caused by past or future natural disasters, that directly or indirectly affect the financial health of the Corporation's customer base in the geographic areas we serve; the actual pace and magnitude of economic recovery in the Corporation's service areas that were affected by Hurricanes Maria and Irma during 2017 compared to management's current views on the economic recovery; uncertainty as to the timing of the receipt of disaster relief funds allocated to Puerto Rico; uncertainty about whether the Federal Reserve Bank of New York (the "New York FED" or "Federal Reserve") will continue to provide approvals for receiving dividends from FirstBank, and for the Corporation to make payments of dividends on non-cumulative perpetual preferred stock and common stock, or payments on trust-preferred securities or subordinated debt, or to incur, increase or guarantee debt or repurchase any capital securities, despite the consents that have enabled the Corporation to receive quarterly dividends from FirstBank since the second quarter of 2016, to pay quarterly interest payments on the Corporation's subordinated debentures associated with its trust-preferred securities since the second quarter of 2016, to pay monthly dividends on the non-cumulative perpetual preferred stock since December 2016, and to pay quarterly dividends on common stock since December 2018; a decrease in demand for the Corporation's products and services, resulting in lower revenues and earnings because of the continued economic recession in Puerto Rico; uncertainty as to the availability of certain funding sources, such as brokered CDs; the Corporation's reliance on brokered CDs to fund operations and provide liquidity; the weakness of the real estate markets and of the consumer and commercial sectors and their impact on the credit quality of the Corporation's loans and other assets, which have contributed and may continue to contribute to, among other things, higher than targeted levels of non-performing assets, charge-offs and provisions for loan and lease losses, and may subject the Corporation to further risk from loan defaults and foreclosures; the estimated or actual impact of changes in accounting standards or assumptions in applying those standards, including the new credit loss accounting standard that is effective in 2020; the ability of FirstBank to realize the benefits of its net deferred tax assets; adverse changes in general economic conditions in Puerto Rico, the U.S., the U.S. Virgin Islands, and the British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, which may further reduce interest margins, affect funding sources and demand for all of the Corporation's products and services, and reduce the Corporation's revenues and earnings and the value of the Corporation's assets; uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate at the end of 2021; an adverse change in the Corporation's ability to attract new clients and retain existing ones; the risk that additional portions of the unrealized losses in the Corporation's investment portfolio are determined to be other-than-temporary, including additional impairments on the Corporation's remaining $8.3 million exposure to the Puerto Rico government's debt securities held as part of the available-for-sale securities portfolio; uncertainty about legislative, tax or regulatory changes that affect financial services companies in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, which could affect the Corporation's financial condition or performance and could cause the Corporation's actual results for future periods to differ materially from prior results and anticipated or projected results; changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments, including those determined by the Federal Reserve Board, the New York FED, the FDIC, government-sponsored housing agencies, and regulators in Puerto Rico and the U.S. and British Virgin Islands; the risk of possible failure or circumvention of controls and procedures and the risk that the Corporation's risk management policies may not be adequate; the Corporation's ability to identify and address cyber-security incidents such as data security breaches, malware, "denial of service" attacks, "hacking" and identity theft, a failure of which could disrupt our business, may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses or an adverse effect to our reputation; the risk that the FDIC may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation's non-interest expenses; the impact on the Corporation's results of operations and financial condition of business acquisitions and dispositions; a need to recognize impairments on the Corporation's financial instruments, goodwill and other intangible assets relating to business acquisitions; the effect of changes in the interest rate scenario on the Corporation's businesses, business practices and results of operations; the risk that the impact of the occurrence of any of these uncertainties on the Corporation's capital would preclude further growth of the Bank and preclude the Corporation's Board of Directors from declaring dividends; 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; and general competitive factors and industry consolidation. 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.
Basis of Presentation
Use of Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an investor's understanding of the Corporation's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the tables in or attached to this earnings release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.
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 equity less preferred equity, goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with 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.
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 such as the hurricanes that affected the Corporation's service areas in 2017. Adjusted pre-tax, pre-provision income, as defined by management, represents net income excluding income tax expense (benefit) and the provision for loan and lease losses, as well as Special Items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts.
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 facilitates comparison of results to the results of peers.
Financial measures adjusted to exclude the effect of Special Items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts.
To supplement the Corporation's financial statements presented in accordance with GAAP, the Corporation uses, and believes that investors would benefit from disclosure of, non-GAAP financial measures that reflect adjustments to net income to exclude items that management identifies as Special Items because management believes they are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts. This press release includes the following non-GAAP financial measures for the third and second quarters of 2019, and the third quarter of 2018 that reflect the described items that were excluded for one of those reasons:
Management believes that the presentation of adjusted net income enhances the ability of analysts and investors to analyze trends in the Corporation's business and understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process.
The following table reconciles the ratio of the adjusted provision for loan and lease losses to net charge-offs for the third quarter of 2018 and the first nine months of 2019 and 2018, excluding the hurricane-related qualitative reserve releases:
Provision for loan and lease losses to Net Charge-Offs
|
|||||||||||||||
Quarter Ended September 30, 2018 | |||||||||||||||
(In thousands) | Provision for Loan and Lease Losses | Net Charge-Offs | |||||||||||||
Provision for loan and lease losses and net charge-offs (GAAP) | $ |
11,524 |
|
$ |
32,996 |
||||||||||
Less Special items: | |||||||||||||||
Hurricane-related qualitative reserve release |
|
2,781 |
|
|
- |
||||||||||
Provision for loan and lease losses and net charge-offs, excluding special items (Non-GAAP) | $ |
14,305 |
|
$ |
32,996 |
||||||||||
Provision for loan and lease losses to net charge-offs (GAAP) |
|
34.93 |
% |
||||||||||||
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP) |
|
43.35 |
% |
||||||||||||
Provision for loan and lease losses to Net Charge-Offs (GAAP to Non-GAAP reconciliation) |
Provision for loan and lease losses to Net Charge-Offs (GAAP to Non-GAAP reconciliation) |
||||||||||||||
Nine-Month Period Ended September 30, 2019 | Nine-Month Period Ended September 30, 2018 | ||||||||||||||
(In thousands) | Provision for Loan and Lease Losses |
Net Charge-Offs | Provision for Loan and Lease Losses |
Net Charge-Offs | |||||||||||
Provision for loan and lease losses and net charge-offs (GAAP) | $ |
31,752 |
|
$ |
62,539 |
$ |
51,604 |
|
$ |
82,884 |
|||||
Less Special items: | |||||||||||||||
Hurricane-related qualitative reserve release |
|
6,425 |
|
|
- |
|
11,245 |
|
|
- |
|||||
Provision for loan and lease losses and net charge-offs, excluding special items (Non-GAAP) | $ |
38,177 |
|
$ |
62,539 |
$ |
62,849 |
|
$ |
82,884 |
|||||
Provision for loan and lease losses to net charge-offs (GAAP) |
|
50.77 |
% |
|
62.26 |
% |
|||||||||
Provision for loan and lease losses to net charge-offs, excluding special items (Non-GAAP) |
|
61.05 |
% |
|
75.83 |
% |
|||||||||
FIRST BANCORP | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||||||||||||
As of | ||||||||||||
September 30, | June 30, | December 31, | ||||||||||
(In thousands, except for share information) | 2019 |
2019 |
2018 |
|||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ |
878,206 |
|
$ |
642,440 |
|
$ |
578,613 |
|
|||
Money market investments: | ||||||||||||
Time deposits with other financial institutions |
|
300 |
|
|
300 |
|
|
300 |
|
|||
Other short-term investments |
|
97,431 |
|
|
97,553 |
|
|
7,290 |
|
|||
Total money market investments |
|
97,731 |
|
|
97,853 |
|
|
7,590 |
|
|||
Investment securities available for sale, at fair value |
|
1,736,563 |
|
|
1,803,688 |
|
|
1,942,568 |
|
|||
Investment securities held to maturity, at amortized cost |
|
138,676 |
|
|
144,672 |
|
|
144,815 |
|
|||
Equity securities |
|
45,228 |
|
|
44,227 |
|
|
44,530 |
|
|||
Total investment securities |
|
1,920,467 |
|
|
1,992,587 |
|
|
2,131,913 |
|
|||
Loans, net of allowance for loan and lease losses of $165,575 | ||||||||||||
(June 30, 2019 - $172,011; December 31, 2018 - $196,362) |
|
8,802,845 |
|
|
8,941,944 |
|
|
8,661,761 |
|
|||
Loans held for sale, at lower of cost or market |
|
42,470 |
|
|
33,630 |
|
|
43,186 |
|
|||
Total loans, net |
|
8,845,315 |
|
|
8,975,574 |
|
|
8,704,947 |
|
|||
Premises and equipment, net |
|
151,185 |
|
|
148,814 |
|
|
147,814 |
|
|||
Other real estate owned |
|
103,033 |
|
|
118,081 |
|
|
131,402 |
|
|||
Accrued interest receivable on loans and investments |
|
47,122 |
|
|
53,931 |
|
|
50,365 |
|
|||
Deferred tax asset, net |
|
273,845 |
|
|
290,326 |
|
|
319,851 |
|
|||
Other assets |
|
213,809 |
|
|
217,590 |
|
|
171,066 |
|
|||
Total assets | $ |
12,530,713 |
|
$ |
12,537,196 |
|
$ |
12,243,561 |
|
|||
LIABILITIES | ||||||||||||
Deposits: | ||||||||||||
Non-interest-bearing deposits | $ |
2,270,250 |
|
$ |
2,375,517 |
|
$ |
2,395,481 |
|
|||
Interest-bearing deposits |
|
6,862,649 |
|
|
6,806,664 |
|
|
6,599,233 |
|
|||
Total deposits |
|
9,132,899 |
|
|
9,182,181 |
|
|
8,994,714 |
|
|||
Securities sold under agreements to repurchase |
|
100,000 |
|
|
100,000 |
|
|
150,086 |
|
|||
Advances from the Federal Home Loan Bank (FHLB) |
|
740,000 |
|
|
740,000 |
|
|
740,000 |
|
|||
Other borrowings |
|
184,150 |
|
|
184,150 |
|
|
184,150 |
|
|||
Accounts payable and other liabilities |
|
173,069 |
|
|
177,889 |
|
|
129,907 |
|
|||
Total liabilities |
|
10,330,118 |
|
|
10,384,220 |
|
|
10,198,857 |
|
|||
STOCKHOLDERS' EQUITY | ||||||||||||
Preferred Stock, authorized 50,000,000 shares; issued 22,828,174 shares; | ||||||||||||
outstanding 1,444,146 shares; aggregate liquidation value of $36,104 |
|
36,104 |
|
|
36,104 |
|
|
36,104 |
|
|||
Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued, 222,103,721 shares | ||||||||||||
(June 30, 2019 - 222,055,625 shares issued; December 31, 2018 - 221,789,509 shares issued) |
|
22,210 |
|
|
22,205 |
|
|
22,179 |
|
|||
Less: Treasury stock (at par value) |
|
(474 |
) |
|
(472 |
) |
|
(455 |
) |
|||
Common stock outstanding, 217,360,587 shares outstanding | ||||||||||||
(June 30, 2019 - 217,328,179 shares outstanding; December 31, 2018 - 217,235,140 shares outstanding) |
|
21,736 |
|
|
21,733 |
|
|
21,724 |
|
|||
Additional paid-in capital |
|
940,700 |
|
|
939,769 |
|
|
939,674 |
|
|||
Retained earnings |
|
1,196,931 |
|
|
1,157,808 |
|
|
1,087,617 |
|
|||
Accumulated other comprehensive income (loss) |
|
5,124 |
|
|
(2,438 |
) |
|
(40,415 |
) |
|||
Total stockholders' equity |
|
2,200,595 |
|
|
2,152,976 |
|
|
2,044,704 |
|
|||
Total liabilities and stockholders' equity | $ |
12,530,713 |
|
$ |
12,537,196 |
|
$ |
12,243,561 |
|
|||
FIRST BANCORP | ||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
Quarter Ended | Nine-Month Period Ended | |||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
(In thousands, except per share information) | 2019 |
2019 |
2018 |
2019 |
2018 |
|||||||||||||||
Net interest income: | ||||||||||||||||||||
Interest income | $ |
172,295 |
|
$ |
169,510 |
|
$ |
157,492 |
|
$ |
508,277 |
|
$ |
462,543 |
|
|||||
Interest expense |
|
27,870 |
|
|
26,964 |
|
|
24,971 |
|
|
81,125 |
|
|
74,858 |
|
|||||
Net interest income |
|
144,425 |
|
|
142,546 |
|
|
132,521 |
|
|
427,152 |
|
|
387,685 |
|
|||||
Provision for loan and lease losses |
|
7,398 |
|
|
12,534 |
|
|
11,524 |
|
|
31,752 |
|
|
51,604 |
|
|||||
Net interest income after provision for loan and lease losses |
|
137,027 |
|
|
130,012 |
|
|
120,997 |
|
|
395,400 |
|
|
336,081 |
|
|||||
Non-interest income: | ||||||||||||||||||||
Service charges on deposit accounts |
|
6,108 |
|
|
5,887 |
|
|
5,581 |
|
|
17,711 |
|
|
16,013 |
|
|||||
Mortgage banking activities |
|
4,396 |
|
|
4,395 |
|
|
4,551 |
|
|
12,418 |
|
|
13,551 |
|
|||||
Net (loss) gain on investments and impairments |
|
(497 |
) |
|
- |
|
|
- |
|
|
(497 |
) |
|
- |
|
|||||
Gain on early extinguishment of debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,316 |
|
|||||
Other non-interest income |
|
11,394 |
|
|
11,941 |
|
|
8,391 |
|
|
36,535 |
|
|
29,899 |
|
|||||
Total non-interest income |
|
21,401 |
|
|
22,223 |
|
|
18,523 |
|
|
66,167 |
|
|
61,779 |
|
|||||
Non-interest expenses: | ||||||||||||||||||||
Employees' compensation and benefits |
|
41,409 |
|
|
40,813 |
|
|
39,243 |
|
|
121,518 |
|
|
119,482 |
|
|||||
Occupancy and equipment |
|
15,129 |
|
|
15,834 |
|
|
14,660 |
|
|
47,018 |
|
|
43,511 |
|
|||||
Business promotion |
|
4,004 |
|
|
3,940 |
|
|
3,860 |
|
|
11,650 |
|
|
10,452 |
|
|||||
Professional fees |
|
12,467 |
|
|
11,671 |
|
|
11,502 |
|
|
34,448 |
|
|
31,755 |
|
|||||
Taxes, other than income taxes |
|
3,904 |
|
|
3,737 |
|
|
3,534 |
|
|
11,461 |
|
|
11,027 |
|
|||||
Insurance and supervisory fees |
|
2,425 |
|
|
2,029 |
|
|
3,210 |
|
|
7,322 |
|
|
10,766 |
|
|||||
Net loss on other real estate owned operations |
|
2,578 |
|
|
5,043 |
|
|
4,360 |
|
|
11,364 |
|
|
10,205 |
|
|||||
Other non-interest expenses |
|
10,917 |
|
|
9,870 |
|
|
10,496 |
|
|
30,961 |
|
|
29,910 |
|
|||||
Total non-interest expenses |
|
92,833 |
|
|
92,937 |
|
|
90,865 |
|
|
275,742 |
|
|
267,108 |
|
|||||
Income before income taxes |
|
65,595 |
|
|
59,298 |
|
|
48,655 |
|
|
185,825 |
|
|
130,752 |
|
|||||
Income tax expense |
|
(19,268 |
) |
|
(18,011 |
) |
|
(12,332 |
) |
|
(54,897 |
) |
|
(30,249 |
) |
|||||
Net income | $ |
46,327 |
|
$ |
41,287 |
|
$ |
36,323 |
|
$ |
130,928 |
|
$ |
100,503 |
|
|||||
Net income attributable to common stockholders | $ |
45,658 |
|
$ |
40,618 |
|
$ |
35,654 |
|
$ |
128,921 |
|
$ |
98,496 |
|
|||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ |
0.21 |
|
$ |
0.19 |
|
$ |
0.16 |
|
$ |
0.60 |
|
$ |
0.46 |
|
|||||
Diluted | $ |
0.21 |
|
$ |
0.19 |
|
$ |
0.16 |
|
$ |
0.59 |
|
$ |
0.45 |
|
|||||
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 - Selected Financial Data | ||||||||||||||||||||
(In thousands, except per share amounts and financial ratios) | Quarter Ended | Nine-Month Period Ended | ||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||
2019 |
2019 |
2018 |
2019 |
2018 |
||||||||||||||||
Condensed Income Statements: | ||||||||||||||||||||
Total interest income | $ |
172,295 |
|
$ |
169,510 |
|
$ |
157,492 |
|
$ |
508,277 |
|
$ |
462,543 |
|
|||||
Total interest expense |
|
27,870 |
|
|
26,964 |
|
|
24,971 |
|
|
81,125 |
|
|
74,858 |
|
|||||
Net interest income |
|
144,425 |
|
|
142,546 |
|
|
132,521 |
|
|
427,152 |
|
|
387,685 |
|
|||||
Provision for loan and lease losses |
|
7,398 |
|
|
12,534 |
|
|
11,524 |
|
|
31,752 |
|
|
51,604 |
|
|||||
Non-interest income |
|
21,401 |
|
|
22,223 |
|
|
18,523 |
|
|
66,167 |
|
|
61,779 |
|
|||||
Non-interest expenses |
|
92,833 |
|
|
92,937 |
|
|
90,865 |
|
|
275,742 |
|
|
267,108 |
|
|||||
Income before income taxes |
|
65,595 |
|
|
59,298 |
|
|
48,655 |
|
|
185,825 |
|
|
130,752 |
|
|||||
Income tax expense |
|
(19,268 |
) |
|
(18,011 |
) |
|
(12,332 |
) |
|
(54,897 |
) |
|
(30,249 |
) |
|||||
Net income |
|
46,327 |
|
|
41,287 |
|
|
36,323 |
|
|
130,928 |
|
|
100,503 |
|
|||||
Net income attributable to common stockholders |
|
45,658 |
|
|
40,618 |
|
|
35,654 |
|
|
128,921 |
|
|
98,496 |
|
|||||
Per Common Share Results: | ||||||||||||||||||||
Net earnings per share - basic | $ |
0.21 |
|
$ |
0.19 |
|
$ |
0.16 |
|
$ |
0.60 |
|
$ |
0.46 |
|
|||||
Net earnings per share - diluted | $ |
0.21 |
|
$ |
0.19 |
|
$ |
0.16 |
|
$ |
0.59 |
|
$ |
0.45 |
|
|||||
Cash dividends declared | $ |
0.03 |
|
$ |
0.03 |
|
$ |
- |
|
$ |
0.09 |
|
$ |
- |
|
|||||
Average shares outstanding |
|
216,690 |
|
|
216,674 |
|
|
216,149 |
|
|
216,569 |
|
|
215,516 |
|
|||||
Average shares outstanding diluted |
|
217,227 |
|
|
216,978 |
|
|
216,775 |
|
|
217,053 |
|
|
216,584 |
|
|||||
Book value per common share | $ |
9.96 |
|
$ |
9.74 |
|
$ |
8.71 |
|
$ |
9.96 |
|
$ |
8.71 |
|
|||||
Tangible book value per common share (1) | $ |
9.79 |
|
$ |
9.57 |
|
$ |
8.52 |
|
$ |
9.79 |
|
$ |
8.52 |
|
|||||
Selected Financial Ratios (In Percent): | ||||||||||||||||||||
Profitability: | ||||||||||||||||||||
Return on Average Assets |
|
1.47 |
|
|
1.33 |
|
|
1.18 |
|
|
1.41 |
|
|
1.10 |
|
|||||
Interest Rate Spread (2) |
|
4.59 |
|
|
4.59 |
|
|
4.32 |
|
|
4.60 |
|
|
4.27 |
|
|||||
Net Interest Margin (2) |
|
5.06 |
|
|
5.07 |
|
|
4.73 |
|
|
5.08 |
|
|
4.66 |
|
|||||
Return on Average Total Equity |
|
8.39 |
|
|
7.77 |
|
|
7.69 |
|
|
8.19 |
|
|
7.28 |
|
|||||
Return on Average Common Equity |
|
8.53 |
|
|
7.90 |
|
|
7.84 |
|
|
8.33 |
|
|
7.43 |
|
|||||
Average Total Equity to Average Total Assets |
|
17.55 |
|
|
17.12 |
|
|
15.32 |
|
|
17.22 |
|
|
15.07 |
|
|||||
Total capital |
|
25.27 |
|
|
24.25 |
|
|
23.85 |
|
|
25.27 |
|
|
23.85 |
|
|||||
Common equity Tier 1 capital |
|
21.61 |
|
|
20.63 |
|
|
20.13 |
|
|
21.61 |
|
|
20.13 |
|
|||||
Tier 1 capital |
|
22.02 |
|
|
21.03 |
|
|
20.54 |
|
|
22.02 |
|
|
20.54 |
|
|||||
Leverage |
|
16.04 |
|
|
15.64 |
|
|
14.85 |
|
|
16.04 |
|
|
14.85 |
|
|||||
Tangible common equity ratio (1) |
|
17.03 |
|
|
16.64 |
|
|
15.22 |
|
|
17.03 |
|
|
15.22 |
|
|||||
Dividend payout ratio |
|
14.24 |
|
|
16.00 |
|
|
- |
|
|
15.12 |
|
|
- |
|
|||||
Efficiency ratio (3) |
|
55.98 |
|
|
56.40 |
|
|
60.16 |
|
|
55.90 |
|
|
59.43 |
|
|||||
Asset Quality: | ||||||||||||||||||||
Allowance for loan and lease losses to loans held for investment |
|
1.85 |
|
|
1.89 |
|
|
2.30 |
|
|
1.85 |
|
|
2.30 |
|
|||||
Net charge-offs (annualized) to average loans |
|
0.61 |
|
|
1.07 |
|
|
1.52 |
|
|
0.93 |
|
|
1.27 |
|
|||||
Provision for loan and lease losses to net charge-offs (4) |
|
53.48 |
|
|
51.68 |
|
|
34.93 |
|
|
50.77 |
|
|
62.26 |
|
|||||
Non-performing assets to total assets |
|
2.65 |
|
|
3.06 |
|
|
4.28 |
|
|
2.65 |
|
|
4.28 |
|
|||||
Nonaccrual loans held for investment to total loans held for investment |
|
2.41 |
|
|
2.78 |
|
|
3.89 |
|
|
2.41 |
|
|
3.89 |
|
|||||
Allowance to total nonaccrual loans held for investment |
|
76.57 |
|
|
67.96 |
|
|
59.10 |
|
|
76.57 |
|
|
59.10 |
|
|||||
Allowance to total nonaccrual loans held for investment, | ||||||||||||||||||||
excluding residential real estate loans |
|
185.65 |
|
|
139.16 |
|
|
109.79 |
|
|
185.65 |
|
|
109.79 |
|
|||||
Other Information: | ||||||||||||||||||||
Common Stock Price: End of period | $ |
9.98 |
|
$ |
11.04 |
|
$ |
9.10 |
|
$ |
9.98 |
|
$ |
9.10 |
|
|||||
1- | Non-GAAP financial measure. See page 16 for GAAP to Non-GAAP reconciliations. |
2- | On a tax-equivalent basis and excluding changes in the fair value of derivative instruments (Non-GAAP financial measure). See page 5 for GAAP to Non-GAAP reconciliations and refer to discussion in Tables 2 and 3 below. |
3- | Non-interest expenses to the sum of net interest income and non-interest income. The denominator includes non-recurring income and changes in the fair value of derivative instruments. |
4- | The ratio of the provision for loan and lease losses to net charge-offs, excluding the hurricane-related qualitative reserve releases, was 43.35% for the quarter ended September 30, 2018 and 61.05% and 75.83% for the nine-month periods ended September 30, 2019 and 2018, respectively. |
Table 2 ? Quarterly Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis) | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Average volume | Interest income (1) / expense | Average rate (1) | ||||||||||||||||||||||
September 30, | June 30, | September 30, | September 30, | June 30, | September 30, | September 30, | June 30, | September 30, | ||||||||||||||||
Quarter ended | 2019 |
2019 |
2018 |
2019 |
2019 |
2018 |
2019 |
2019 |
2018 |
|||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Money market & other short-term investments | $ |
762,934 |
$ |
590,517 |
$ |
661,374 |
$ |
4,081 |
$ |
3,440 |
$ |
3,166 |
2.12% |
2.34% |
1.90% |
|||||||||
Government obligations (2) |
|
588,287 |
|
720,106 |
|
785,400 |
|
6,752 |
|
7,254 |
|
7,174 |
4.55% |
4.04% |
3.62% |
|||||||||
Mortgage-backed securities |
|
1,295,189 |
|
1,285,812 |
|
1,402,554 |
|
9,820 |
|
10,316 |
|
11,219 |
3.01% |
3.22% |
3.17% |
|||||||||
FHLB stock |
|
41,779 |
|
41,720 |
|
39,778 |
|
660 |
|
657 |
|
687 |
6.27% |
6.32% |
6.85% |
|||||||||
Other investments |
|
3,395 |
|
3,030 |
|
3,042 |
|
7 |
|
7 |
|
5 |
0.82% |
0.93% |
0.65% |
|||||||||
Total investments (3) |
|
2,691,584 |
|
2,641,185 |
|
2,892,148 |
|
21,320 |
|
21,674 |
|
22,251 |
3.14% |
3.29% |
3.05% |
|||||||||
Residential mortgage loans |
|
3,018,603 |
|
3,075,037 |
|
3,165,250 |
|
40,610 |
|
41,350 |
|
42,601 |
5.34% |
5.39% |
5.34% |
|||||||||
Construction loans |
|
104,816 |
|
91,711 |
|
122,186 |
|
1,691 |
|
1,511 |
|
1,233 |
6.40% |
6.61% |
4.00% |
|||||||||
C&I and commercial mortgage loans |
|
3,748,186 |
|
3,809,702 |
|
3,576,886 |
|
55,543 |
|
54,693 |
|
48,269 |
5.88% |
5.76% |
5.35% |
|||||||||
Finance leases |
|
378,866 |
|
360,224 |
|
295,866 |
|
7,192 |
|
6,735 |
|
5,575 |
7.53% |
7.50% |
7.48% |
|||||||||
Consumer loans |
|
1,776,254 |
|
1,698,944 |
|
1,516,432 |
|
50,904 |
|
48,477 |
|
42,976 |
11.37% |
11.44% |
11.24% |
|||||||||
Total loans (4) (5) |
|
9,026,725 |
|
9,035,618 |
|
8,676,620 |
|
155,940 |
|
152,766 |
|
140,654 |
6.85% |
6.78% |
6.43% |
|||||||||
Total interest-earning assets | $ |
11,718,309 |
$ |
11,676,803 |
$ |
11,568,768 |
$ |
177,260 |
$ |
174,440 |
$ |
162,905 |
6.00% |
5.99% |
5.59% |
|||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Brokered CDs | $ |
502,569 |
$ |
509,102 |
$ |
763,988 |
$ |
2,843 |
$ |
2,782 |
$ |
3,495 |
2.24% |
2.19% |
1.81% |
|||||||||
Other interest-bearing deposits |
|
6,290,767 |
|
6,181,141 |
|
6,050,621 |
|
17,498 |
|
16,321 |
|
13,484 |
1.10% |
1.06% |
0.88% |
|||||||||
Other borrowed funds |
|
284,150 |
|
284,150 |
|
323,280 |
|
3,651 |
|
4,034 |
|
4,648 |
5.10% |
5.69% |
5.70% |
|||||||||
FHLB advances |
|
741,522 |
|
740,000 |
|
692,174 |
|
3,878 |
|
3,827 |
|
3,344 |
2.07% |
2.07% |
1.92% |
|||||||||
Total interest-bearing liabilities | $ |
7,819,008 |
$ |
7,714,393 |
$ |
7,830,063 |
$ |
27,870 |
$ |
26,964 |
$ |
24,971 |
1.41% |
1.40% |
1.27% |
|||||||||
Net interest income | $ |
149,390 |
$ |
147,476 |
$ |
137,934 |
||||||||||||||||||
Interest rate spread | 4.59% |
4.59% |
4.32% |
|||||||||||||||||||||
Net interest margin | 5.06% |
5.07% |
4.73% |
|||||||||||||||||||||
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% (39% for the quarter ended September 30, 2018) 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. See page 5 for GAAP to Non-GAAP reconciliations. |
2- | Government obligations include debt issued by government-sponsored agencies. |
3- | Unrealized gains and losses on available-for-sale securities are excluded from the average volumes. |
4- | Average loan balances include the average of non-performing loans. |
5- | Interest income on loans includes $2.4 million, $2.2 million and $1.8 million for the quarters ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio. |
Table 3 ? Year-to-Date Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis) |
||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Average volume | Interest income (1) / expense | Average rate (1) | ||||||||||||||||
September 30, | September 30, | September 30, | September 30, | September 30, | September 30, | |||||||||||||
Nine-Month Period Ended | 2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Interest-earning assets: | ||||||||||||||||||
Money market & other short-term investments | $ |
615,499 |
$ |
686,886 |
$ |
10,350 |
$ |
8,809 |
2.25 |
% |
1.71 |
% |
||||||
Government obligations (2) |
|
690,566 |
|
801,954 |
|
21,482 |
|
20,470 |
4.16 |
% |
3.41 |
% |
||||||
Mortgage-backed securities |
|
1,304,777 |
|
1,325,780 |
|
32,033 |
|
32,669 |
3.28 |
% |
3.29 |
% |
||||||
FHLB stock |
|
41,809 |
|
40,505 |
|
2,013 |
|
2,036 |
6.44 |
% |
6.72 |
% |
||||||
Other investments |
|
3,169 |
|
2,795 |
|
20 |
|
9 |
0.84 |
% |
0.43 |
% |
||||||
Total investments (3) |
|
2,655,820 |
|
2,857,920 |
|
65,898 |
|
63,993 |
3.32 |
% |
2.99 |
% |
||||||
Residential mortgage loans |
|
3,071,624 |
|
3,195,572 |
|
123,779 |
|
128,793 |
5.39 |
% |
5.39 |
% |
||||||
Construction loans |
|
94,075 |
|
120,734 |
|
4,531 |
|
3,261 |
6.44 |
% |
3.61 |
% |
||||||
C&I and commercial mortgage loans |
|
3,760,878 |
|
3,630,655 |
|
163,518 |
|
141,807 |
5.81 |
% |
5.22 |
% |
||||||
Finance leases |
|
360,429 |
|
276,158 |
|
20,313 |
|
15,136 |
7.54 |
% |
7.33 |
% |
||||||
Consumer loans |
|
1,705,150 |
|
1,492,579 |
|
145,459 |
|
124,907 |
11.41 |
% |
11.19 |
% |
||||||
Total loans (4) (5) |
|
8,992,156 |
|
8,715,698 |
|
457,600 |
|
413,904 |
6.80 |
% |
6.35 |
% |
||||||
Total interest-earning assets | $ |
11,647,976 |
$ |
11,573,618 |
$ |
523,498 |
$ |
477,897 |
6.01 |
% |
5.52 |
% |
||||||
Interest-bearing liabilities: | ||||||||||||||||||
Brokered CDs | $ |
511,567 |
$ |
892,980 |
$ |
8,312 |
$ |
11,715 |
2.17 |
% |
1.75 |
% |
||||||
Other interest-bearing deposits |
|
6,166,594 |
|
6,051,197 |
|
48,624 |
|
39,209 |
1.05 |
% |
0.87 |
% |
||||||
Other borrowed funds |
|
298,277 |
|
373,639 |
|
12,699 |
|
13,808 |
5.69 |
% |
4.94 |
% |
||||||
FHLB advances |
|
740,513 |
|
707,308 |
|
11,490 |
|
10,126 |
2.07 |
% |
1.91 |
% |
||||||
Total interest-bearing liabilities | $ |
7,716,951 |
$ |
8,025,124 |
$ |
81,125 |
$ |
74,858 |
1.41 |
% |
1.25 |
% |
||||||
Net interest income | $ |
442,373 |
$ |
403,039 |
||||||||||||||
Interest rate spread | 4.60 |
% |
4.27 |
% |
||||||||||||||
Net interest margin | 5.08 |
% |
4.66 |
% |
||||||||||||||
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% (39% for the nine-month period ended September 30, 2018) 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. See page 5 for GAAP to Non-GAAP reconciliation. |
2- | Government obligations include debt issued by government-sponsored agencies. |
3- | Unrealized gains and losses on available-for-sale securities are excluded from the average volumes. |
4- | Average loan balances include the average of non-performing loans. |
5- | Interest income on loans includes $6.7 million and $5.7 million for the nine-month periods ended September 30, 2019 and 2018, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio. |
Table 4 - Non-Interest Income | ||||||||||||||||||
Quarter Ended | Nine-Month Period Ended | |||||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||
(In thousands) | 2019 |
2019 |
2018 |
2019 |
2018 |
|||||||||||||
Service charges on deposit accounts | $ |
6,108 |
|
$ |
5,887 |
$ |
5,581 |
$ |
17,711 |
|
$ |
16,013 |
||||||
Mortgage banking activities |
|
4,396 |
|
|
4,395 |
|
4,551 |
|
12,418 |
|
|
13,551 |
||||||
Insurance income |
|
1,983 |
|
|
2,025 |
|
1,493 |
|
8,258 |
|
|
6,628 |
||||||
Other operating income |
|
9,411 |
|
|
9,916 |
|
6,898 |
|
28,277 |
|
|
23,271 |
||||||
Non-interest income before net (loss) gain on investments | ||||||||||||||||||
and gain on early extinguishment of debt |
|
21,898 |
|
|
22,223 |
|
18,523 |
|
66,664 |
|
|
59,463 |
||||||
Net gain on sale of investments |
|
- |
|
|
- |
|
- |
|
- |
|
|
- |
||||||
OTTI on debt securities |
|
(497 |
) |
|
- |
|
- |
|
(497 |
) |
|
- |
||||||
Net (loss) gain on investments |
|
(497 |
) |
|
- |
|
- |
|
(497 |
) |
|
- |
||||||
Gain on early extinguishment of debt |
|
- |
|
|
- |
|
- |
|
- |
|
|
2,316 |
||||||
$ |
21,401 |
|
$ |
22,223 |
$ |
18,523 |
$ |
66,167 |
|
$ |
61,779 |
|||||||
Table 5 - Non-Interest Expenses | ||||||||||||||||
Quarter Ended | Nine-Month Period Ended | |||||||||||||||
September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||
(In thousands) | 2019 |
2019 |
2018 |
2019 |
2018 |
|||||||||||
Employees' compensation and benefits | $ |
41,409 |
$ |
40,813 |
$ |
39,243 |
$ |
121,518 |
$ |
119,482 |
||||||
Occupancy and equipment |
|
15,129 |
|
15,834 |
|
14,660 |
|
47,018 |
|
43,511 |
||||||
Deposit insurance premium |
|
1,465 |
|
1,482 |
|
2,067 |
|
4,645 |
|
7,159 |
||||||
Other insurance and supervisory fees |
|
960 |
|
547 |
|
1,143 |
|
2,677 |
|
3,607 |
||||||
Taxes, other than income taxes |
|
3,904 |
|
3,737 |
|
3,534 |
|
11,461 |
|
11,027 |
||||||
Professional fees: | ||||||||||||||||
Collections, appraisals and other credit related fees |
|
1,797 |
|
1,946 |
|
2,150 |
|
5,460 |
|
5,399 |
||||||
Outsourcing technology services |
|
6,206 |
|
5,798 |
|
5,215 |
|
17,524 |
|
15,465 |
||||||
Other professional fees |
|
4,464 |
|
3,927 |
|
4,137 |
|
11,464 |
|
10,891 |
||||||
Credit and debit card processing expenses |
|
4,764 |
|
3,820 |
|
4,147 |
|
12,738 |
|
11,450 |
||||||
Business promotion |
|
4,004 |
|
3,940 |
|
3,860 |
|
11,650 |
|
10,452 |
||||||
Communications |
|
1,834 |
|
1,714 |
|
1,642 |
|
5,300 |
|
4,706 |
||||||
Net loss on OREO operations |
|
2,578 |
|
5,043 |
|
4,360 |
|
11,364 |
|
10,205 |
||||||
Other |
|
4,319 |
|
4,336 |
|
4,707 |
|
12,923 |
|
13,754 |
||||||
Total | $ |
92,833 |
$ |
92,937 |
$ |
90,865 |
$ |
275,742 |
$ |
267,108 |
||||||
Table 6 - Selected Balance Sheet Data | ||||||||||||
(In thousands) | As of | |||||||||||
September 30, | June 30, | December 31, | ||||||||||
2019 |
2019 |
2018 |
||||||||||
Balance Sheet Data: | ||||||||||||
Loans, including loans held for sale | $ |
9,010,890 |
$ |
9,147,585 |
|
$ |
8,901,309 |
|
||||
Allowance for loan and lease losses |
|
165,575 |
|
172,011 |
|
|
196,362 |
|
||||
Money market and investment securities |
|
2,018,198 |
|
2,090,440 |
|
|
2,139,503 |
|
||||
Intangible assets |
|
36,438 |
|
37,206 |
|
|
38,757 |
|
||||
Deferred tax asset, net |
|
273,845 |
|
290,326 |
|
|
319,851 |
|
||||
Total assets |
|
12,530,713 |
|
12,537,196 |
|
|
12,243,561 |
|
||||
Deposits |
|
9,132,899 |
|
9,182,181 |
|
|
8,994,714 |
|
||||
Borrowings |
|
1,024,150 |
|
1,024,150 |
|
|
1,074,236 |
|
||||
Total preferred equity |
|
36,104 |
|
36,104 |
|
|
36,104 |
|
||||
Total common equity |
|
2,159,367 |
|
2,119,310 |
|
|
2,049,015 |
|
||||
Accumulated other comprehensive income (loss), net of tax |
|
5,124 |
|
(2,438 |
) |
|
(40,415 |
) |
||||
Total equity |
|
2,200,595 |
|
2,152,976 |
|
|
2,044,704 |
|
||||
Table 7 ? Loan Portfolio |
||||||||||
Composition of the loan portfolio including loans held for sale at period-end. |
||||||||||
(In thousands) | As of | |||||||||
September 30, | June 30, | December 31, | ||||||||
2019 |
2019 |
2018 |
||||||||
Residential mortgage loans | $ |
2,997,953 |
$ |
3,070,746 |
$ |
3,163,208 |
||||
Commercial loans: | ||||||||||
Construction loans |
|
108,862 |
|
100,244 |
|
79,429 |
||||
Commercial mortgage loans |
|
1,439,362 |
|
1,550,364 |
|
1,522,662 |
||||
Commercial and Industrial loans |
|
2,222,496 |
|
2,279,685 |
|
2,148,111 |
||||
Commercial loans |
|
3,770,720 |
|
3,930,293 |
|
3,750,202 |
||||
Finance leases |
|
391,373 |
|
370,907 |
|
333,536 |
||||
Consumer loans |
|
1,808,374 |
|
1,742,009 |
|
1,611,177 |
||||
Loans held for investment |
|
8,968,420 |
|
9,113,955 |
|
8,858,123 |
||||
Loans held for sale |
|
42,470 |
|
33,630 |
|
43,186 |
||||
Total loans | $ |
9,010,890 |
$ |
9,147,585 |
$ |
8,901,309 |
||||
Table 8 - Loan Portfolio by Geography | ||||||||||||||||
(In thousands) | As of September 30, 2019 | |||||||||||||||
Puerto Rico | Virgin Islands | United States | Consolidated | |||||||||||||
Residential mortgage loans | $ |
2,182,413 |
|
$ |
235,164 |
|
$ |
580,376 |
|
$ |
2,997,953 |
|||||
Commercial loans: | ||||||||||||||||
Construction loans |
|
31,189 |
|
|
12,739 |
|
|
64,934 |
|
|
108,862 |
|||||
Commercial mortgage loans |
|
975,883 |
|
|
68,914 |
|
|
394,565 |
|
|
1,439,362 |
|||||
Commercial and Industrial loans |
|
1,353,520 |
|
|
106,110 |
|
|
762,866 |
|
|
2,222,496 |
|||||
Commercial loans |
|
2,360,592 |
|
|
187,763 |
|
|
1,222,365 |
|
|
3,770,720 |
|||||
Finance leases |
|
391,373 |
|
|
- |
|
|
- |
|
|
391,373 |
|||||
Consumer loans |
|
1,714,247 |
|
|
48,942 |
|
|
45,185 |
|
|
1,808,374 |
|||||
Loans held for investment |
|
6,648,625 |
|
|
471,869 |
|
|
1,847,926 |
|
|
8,968,420 |
|||||
Loans held for sale |
|
35,056 |
|
|
- |
|
|
7,414 |
|
|
42,470 |
|||||
Total loans | $ |
6,683,681 |
|
$ |
471,869 |
|
$ |
1,855,340 |
|
$ |
9,010,890 |
|||||
(In thousands) | As of June 30, 2019 | |||||||||||||||
Puerto Rico | Virgin Islands | United States | Consolidated | |||||||||||||
Residential mortgage loans | $ |
2,235,828 |
|
$ |
242,937 |
|
$ |
591,981 |
|
$ |
3,070,746 |
|||||
Commercial loans: | ||||||||||||||||
Construction loans |
|
31,191 |
|
|
12,585 |
|
|
56,468 |
|
|
100,244 |
|||||
Commercial mortgage loans |
|
1,031,597 |
|
|
70,131 |
|
|
448,636 |
|
|
1,550,364 |
|||||
Commercial and Industrial loans |
|
1,416,447 |
|
|
107,789 |
|
|
755,449 |
|
|
2,279,685 |
|||||
Commercial loans |
|
2,479,235 |
|
|
190,505 |
|
|
1,260,553 |
|
|
3,930,293 |
|||||
Finance leases |
|
370,907 |
|
|
- |
|
|
- |
|
|
370,907 |
|||||
Consumer loans |
|
1,643,248 |
|
|
48,233 |
|
|
50,528 |
|
|
1,742,009 |
|||||
Loans held for investment |
|
6,729,218 |
|
|
481,675 |
|
|
1,903,062 |
|
|
9,113,955 |
|||||
Loans held for sale |
|
32,092 |
|
|
311 |
|
|
1,227 |
|
|
33,630 |
|||||
Total loans | $ |
6,761,310 |
|
$ |
481,986 |
|
$ |
1,904,289 |
|
$ |
9,147,585 |
|||||
(In thousands) | As of December 31, 2018 | |||||||||||||||
Puerto Rico | Virgin Islands | United States | Consolidated | |||||||||||||
Residential mortgage loans | $ |
2,313,230 |
|
$ |
252,363 |
|
$ |
597,615 |
|
$ |
3,163,208 |
|||||
Commercial loans: | ||||||||||||||||
Construction loans |
|
26,069 |
|
|
11,303 |
|
|
42,057 |
|
|
79,429 |
|||||
Commercial mortgage loans |
|
1,014,023 |
|
|
74,585 |
|
|
434,054 |
|
|
1,522,662 |
|||||
Commercial and Industrial loans |
|
1,351,661 |
|
|
95,900 |
|
|
700,550 |
|
|
2,148,111 |
|||||
Commercial loans |
|
2,391,753 |
|
|
181,788 |
|
|
1,176,661 |
|
|
3,750,202 |
|||||
Finance leases |
|
333,536 |
|
|
- |
|
|
- |
|
|
333,536 |
|||||
Consumer loans |
|
1,505,720 |
|
|
46,838 |
|
|
58,619 |
|
|
1,611,177 |
|||||
Loans held for investment |
|
6,544,239 |
|
|
480,989 |
|
|
1,832,895 |
|
|
8,858,123 |
|||||
Loans held for sale |
|
41,794 |
|
|
199 |
|
|
1,193 |
|
|
43,186 |
|||||
Total loans | $ |
6,586,033 |
|
$ |
481,188 |
|
$ |
1,834,088 |
|
$ |
8,901,309 |
|||||
Table 9 ? Non-Performing Assets |
|||||||||||||
As of | |||||||||||||
(Dollars in thousands) | September 30, | June 30, | December 31, | ||||||||||
2019 |
2019 |
2018 |
|||||||||||
Nonaccrual loans held for investment: | |||||||||||||
Residential mortgage | $ |
127,040 |
|
$ |
129,501 |
|
$ |
147,287 |
|
||||
Commercial mortgage |
|
42,525 |
|
|
77,495 |
|
|
109,536 |
|
||||
Commercial and Industrial |
|
20,725 |
|
|
21,327 |
|
|
30,382 |
|
||||
Construction |
|
6,358 |
|
|
6,936 |
|
|
8,362 |
|
||||
Consumer and Finance leases |
|
19,579 |
|
|
17,846 |
|
|
20,406 |
|
||||
Total nonaccrual loans held for investment |
|
216,227 |
|
|
253,105 |
|
|
315,973 |
|
||||
OREO |
|
103,033 |
|
|
118,081 |
|
|
131,402 |
|
||||
Other repossessed property |
|
5,932 |
|
|
5,744 |
|
|
3,576 |
|
||||
Total non-performing assets, excluding nonaccrual loans held for sale | $ |
325,192 |
|
$ |
376,930 |
|
$ |
450,951 |
|
||||
Nonaccrual loans held for sale |
|
6,906 |
|
|
7,144 |
|
|
16,111 |
|
||||
Total non-performing assets, including nonaccrual loans held for sale (1) | $ |
332,098 |
|
$ |
384,074 |
|
$ |
467,062 |
|
||||
Past-due loans 90 days and still accruing (2) | $ |
144,787 |
|
$ |
142,113 |
|
$ |
158,527 |
|
||||
Allowance for loan and lease losses | $ |
165,575 |
|
$ |
172,011 |
|
$ |
196,362 |
|
||||
Allowance to total nonaccrual loans held for investment |
|
76.57 |
% |
|
67.96 |
% |
|
62.15 |
% |
||||
Allowance to total nonaccrual loans held for investment, excluding residential real estate loans |
|
185.65 |
% |
|
139.16 |
% |
|
116.41 |
% |
(1) |
Purchased credit impaired loans of $139.3 million accounted for under ASC 310-30 as of September 30, 2019, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, are excluded and not considered nonaccrual loans due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis. |
(2) |
Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2019 of approximately $27.7 million, primarily related to loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014. |
Table 10 - Non-Performing Assets by Geography | |||||||||
As of | |||||||||
(In thousands) | September 30, | June 30, | December 31, | ||||||
2019 |
2019 |
2018 |
|||||||
Puerto Rico: | |||||||||
Nonaccrual loans held for investment: | |||||||||
Residential mortgage | $ |
104,112 |
$ |
108,152 |
$ |
120,707 |
|||
Commercial mortgage |
|
25,515 |
|
26,535 |
|
44,925 |
|||
Commercial and Industrial |
|
17,096 |
|
17,709 |
|
26,005 |
|||
Construction |
|
4,309 |
|
4,857 |
|
6,220 |
|||
Finance leases |
|
1,340 |
|
994 |
|
1,329 |
|||
Consumer |
|
16,989 |
|
15,684 |
|
18,037 |
|||
Total nonaccrual loans held for investment |
|
169,361 |
|
173,931 |
|
217,223 |
|||
OREO |
|
97,520 |
|
111,990 |
|
124,124 |
|||
Other repossessed property |
|
5,700 |
|
5,560 |
|
3,357 |
|||
Total non-performing assets, excluding nonaccrual loans held for sale | $ |
272,581 |
$ |
291,481 |
$ |
344,704 |
|||
Nonaccrual loans held for sale |
|
6,906 |
|
7,144 |
|
16,111 |
|||
Total non-performing assets, including nonaccrual loans held for sale (1) | $ |
279,487 |
$ |
298,625 |
$ |
360,815 |
|||
Past-due loans 90 days and still accruing (2) | $ |
138,860 |
$ |
140,099 |
$ |
153,269 |
|||
Virgin Islands: | |||||||||
Nonaccrual loans held for investment: | |||||||||
Residential mortgage | $ |
10,041 |
$ |
11,178 |
$ |
12,106 |
|||
Commercial mortgage |
|
17,010 |
|
18,118 |
|
19,368 |
|||
Commercial and Industrial |
|
2,347 |
|
3,618 |
|
4,377 |
|||
Construction |
|
2,049 |
|
2,079 |
|
2,142 |
|||
Consumer |
|
625 |
|
426 |
|
710 |
|||
Total nonaccrual loans held for investment |
|
32,072 |
|
35,419 |
|
38,703 |
|||
OREO |
|
5,381 |
|
5,636 |
|
6,704 |
|||
Other repossessed property |
|
128 |
|
105 |
|
76 |
|||
Total non-performing assets, excluding nonaccrual loans held for sale | $ |
37,581 |
$ |
41,160 |
$ |
45,483 |
|||
Nonaccrual loans held for sale |
|
- |
|
- |
|||||
Total non-performing assets, including nonaccrual loans held for sale | $ |
37,581 |
$ |
41,160 |
$ |
45,483 |
|||
Past-due loans 90 days and still accruing | $ |
5,927 |
$ |
2,014 |
$ |
5,258 |
|||
United States: | |||||||||
Nonaccrual loans held for investment: | |||||||||
Residential mortgage | $ |
12,887 |
$ |
10,171 |
$ |
14,474 |
|||
Commercial mortgage |
|
- |
|
32,842 |
|
45,243 |
|||
Commercial and Industrial |
|
1,282 |
|
- |
|
- |
|||
Construction |
|
- |
|
- |
|
- |
|||
Consumer |
|
625 |
|
742 |
|
330 |
|||
Total nonaccrual loans held for investment |
|
14,794 |
|
43,755 |
|
60,047 |
|||
OREO |
|
132 |
|
455 |
|
574 |
|||
Other repossessed property |
|
104 |
|
79 |
|
143 |
|||
Total non-performing assets, excluding nonaccrual loans held for sale | $ |
15,030 |
$ |
44,289 |
$ |
60,764 |
|||
Nonaccrual loans held for sale |
|
- |
|
- |
|
- |
|||
Total non-performing assets, including nonaccrual loans held for sale | $ |
15,030 |
$ |
44,289 |
$ |
60,764 |
|||
Past-due loans 90 days and still accruing | $ |
- |
$ |
- |
$ |
- |
|||
(1) |
Purchased credit impaired loans of $139.3 million accounted for under ASC 310-30 as of September 30, 2019, primarily mortgage loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014, are excluded and not considered nonaccrual loans due to the application of the accretion method, under which these loans will accrete interest income over the remaining life of the loans using an estimated cash flow analysis. | |
(2) |
Amount includes purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2019 of approximately $27.7 million, primarily related to loans acquired from Doral Bank in the first quarter of 2015 and from Doral Financial in the second quarter of 2014. | |
Table 11 ? Allowance for Loan and Lease Losses |
||||||||||||||||||||||||||
Quarter Ended | Nine-Month Period Ended | |||||||||||||||||||||||||
(Dollars in thousands) | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||
2019 |
2019 |
2018 |
2019 |
2018 |
||||||||||||||||||||||
Allowance for loan and lease losses, beginning of period | $ |
172,011 |
|
$ |
183,732 |
|
$ |
222,035 |
|
$ |
196,362 |
|
$ |
231,843 |
|
|||||||||||
Provision for loan and lease losses |
|
7,398 |
|
|
12,534 |
|
|
11,524 |
|
(1) |
|
31,752 |
|
(2) |
|
51,604 |
|
(3) |
||||||||
Net (charge-offs) recoveries of loans: | ||||||||||||||||||||||||||
Residential mortgage |
|
(4,414 |
) |
|
(4,188 |
) |
|
(7,483 |
) |
|
(14,149 |
) |
|
(15,374 |
) |
|||||||||||
Commercial mortgage |
|
(717 |
) |
|
(11,598 |
) |
|
(9,559 |
) |
|
(14,587 |
) |
|
(20,179 |
) |
|||||||||||
Commercial and Industrial |
|
1,439 |
|
|
(83 |
) |
|
(2,115 |
) |
|
(3,860 |
) |
|
(7,717 |
) |
|||||||||||
Construction |
|
211 |
|
|
237 |
|
|
(2,178 |
) |
|
282 |
|
|
(8,022 |
) |
|||||||||||
Consumer and finance leases |
|
(10,353 |
) |
|
(8,623 |
) |
|
(11,661 |
) |
|
(30,225 |
) |
|
(31,592 |
) |
|||||||||||
Net charge-offs |
|
(13,834 |
) |
|
(24,255 |
) |
|
(32,996 |
) |
|
(62,539 |
) |
|
(82,884 |
) |
|||||||||||
Allowance for loan and lease losses, end of period | $ |
165,575 |
|
$ |
172,011 |
|
$ |
200,563 |
|
$ |
165,575 |
|
$ |
200,563 |
|
|||||||||||
Allowance for loan and lease losses to period end total loans held for investment |
|
1.85 |
% |
|
1.89 |
% |
|
2.30 |
% |
|
1.85 |
% |
|
2.30 |
% |
|||||||||||
Net charge-offs (annualized) to average loans outstanding during the period |
|
0.61 |
% |
|
1.07 |
% |
|
1.52 |
% |
|
0.93 |
% |
|
1.27 |
% |
|||||||||||
Provision for loan and lease losses to net charge-offs during the period | 0.53x | 0.52x | 0.35x | 0.51x | 0.62x | |||||||||||||||||||||
Provision for loan and lease losses to net charge-offs during the period, | ||||||||||||||||||||||||||
excluding effect of the hurricane-related qualitative reserve releases in the | ||||||||||||||||||||||||||
first nine months of 2019, and the third quarter and first nine-months of 2018 | 0.53x | 0.52x | 0.43x | 0.61x | 0.76x | |||||||||||||||||||||
(1) Net of a $2.8 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria. | ||||||||||||||||||||||||||
(2) Net of a $6.4 million net loan loss reserve release associated with the effect of Hurricanes Irma and Maria. | ||||||||||||||||||||||||||
(3) Net of an $11.2 million net loan loss reserve releases associated with the effect of Hurricanes Irma and Maria. | ||||||||||||||||||||||||||
Table 12 ? Net Charge-Offs to Average Loans | |||||||||||
Nine-Month Period Ended | Year Ended | ||||||||||
September 30, 2019 | December 31, | December 31, | December 31, | December 31, | |||||||
(annualized) | 2018 |
2017 |
2016 |
2015 |
|||||||
Residential mortgage | 0.61% |
0.67% |
0.79% |
0.93% |
0.55% |
||||||
Commercial mortgage | 1.26% |
1.03% |
2.42% |
1.28% |
3.12% |
||||||
Commercial and Industrial | 0.23% |
0.38% |
0.66% |
1.11% |
1.32% |
||||||
Construction | -0.40% |
6.75% |
2.05% |
1.02% |
1.42% |
||||||
Consumer and finance leases | 1.95% |
2.31% |
2.12% |
2.63% |
2.85% |
||||||
Total loans |
0.93% |
1.09% |
1.33% |
1.37% |
1.68% |
||||||
These press releases may also interest you
|