First BanCorp. (the "Corporation" or "First BanCorp.") (NYSE: FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported net income of $75.7 million, or $0.36 per diluted share, for the third quarter of 2021, compared to $70.6 million, or $0.33 per diluted share, for the second quarter of 2021, and $28.6 million, or $0.13 per diluted share, for the third quarter of 2020. Financial results for the third quarter of 2021 include a net benefit of $12.1 million ($7.6 million after-tax, or an increase of $0.04 per diluted share) recorded to the provision for credit losses, compared to a net benefit of $26.2 million ($16.3 million after-tax, or an increase of $0.08 per diluted share) for the second quarter of 2021. In addition, during the third quarter of 2021, the Corporation recorded merger and restructuring costs of $2.3 million ($1.4 million after-tax, or a decrease of $0.01 per diluted share) related to the BSPR integration process and related restructuring initiatives, compared to $11.0 million ($6.9 million after-tax, or a decrease of $0.03 per diluted share) for the second quarter of 2021. The Corporation repurchased 4,158,806 shares of its common stock in the third quarter of 2021. Since the inception of the $300 million repurchase program through September 30, 2021, the Corporation has repurchased 12,121,453 shares at a cost of approximately $150 million, or $12.37 per share, which includes transaction costs.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: "Financial benefits of our fully integrated and expanded franchise are well underway as we report strong third quarter results. We generated $75.7 million in net income ($0.36 per diluted share) and a record $103.6 million in pre-tax, pre-provision income for the quarter. Improvements in the economic backdrop within our operating markets continue to drive core performance metrics. Asset quality continued to improve, with non-performing assets reaching a decade low of 0.81% of total assets. Loan originations, including refinancings, were healthy at $1.1 billion; however, the loan portfolio decreased largely driven by a $130.9 million reduction in SBA PPP loans and the sale of $52.5 million in nonaccrual residential mortgage loans. Core deposits, net of brokered and government deposits grew by $288.5 million during the quarter primarily in demand deposit accounts in Puerto Rico and Florida.
Early in the third quarter, we completed the integration of the acquired operations, which included the conversion of all deposit, debit card, online banking, and cash management platforms, leading to the achievement of efficiencies and synergies planned as part of the transaction. Adoption of electronic channels continues to grow significantly, with digital banking users registering an organic increase of 12% during the quarter. Also, over 40% of all deposits were captured through electronic and digital channels during the quarter.
Finally, we continue to return capital to our shareholders. We repurchased 4.2 million shares amounting to approximately $50.0 million during the quarter, and just announced an increase in our common dividend by 43% demonstrating the strength of our balance sheet and our commitment to increasing shareholder value".
NON-GAAP DISCLOSURES
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, adjusted non-interest expenses, 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 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"), and should be read in conjunction with the discussion below in Basis of Presentation ? Use of Non-GAAP Financial Measures, the accompanying tables (Exhibit A), which are an integral part of this press release, and the Corporation's other financial information that is presented in accordance with GAAP.
SPECIAL ITEMS
The financial results for the third and second quarters of 2021 and third quarter of 2020 included the following significant Special Items:
Quarter ended September 30, 2021
- Merger and restructuring costs of $2.3 million ($1.4 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the third quarter were primarily related to system conversions completed early in the third quarter and other integration related efforts.
- Costs of $0.6 million ($0.4 million after-tax) related to COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security measures.
Quarter ended June 30, 2021
- Merger and restructuring costs of $11.0 million ($6.9 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the second quarter included approximately $1.7 million related to the previously announced Employee Voluntary Separation Program (the "VSP") offered to eligible employees in the Puerto Rico region and approximately $2.1 million related to service contract cancellation penalties. In addition, merger and restructuring costs in the second quarter of 2021 included expenses related to system conversions and other integration related efforts, as well as accelerated depreciation charges related to planned closures and consolidation of branches in accordance with the Corporation's integration and restructuring plan.
- Costs of $1.1 million ($0.7 million after-tax) related to COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security measures.
Quarter ended September 30, 2020
- Merger and restructuring costs of $10.4 million ($6.5 million after-tax) in connection with the acquisition of BSPR and related restructuring initiatives. Merger and restructuring costs in the third quarter of 2020 primarily included consulting, legal, system conversions, and other integration related efforts.
- An $8.0 million tax benefit related to a partial reversal of the deferred tax asset valuation allowance.
- A $5.3 million aggregate gain on sales of approximately $116.6 million of U.S. agencies mortgage-backed securities ("MBS") and $803.3 million of U.S. Treasury Notes executed in the latter part of September. The gain on tax-exempt securities or realized at the tax-exempt international banking entity subsidiary level had no effect in the income tax expense recorded in the third quarter of 2020.
- Costs of $1.0 million ($0.6 million after-tax) related to the COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security matters.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)
Net income was $75.7 million for the third quarter of 2021, or $0.36 per diluted share, compared to $70.6 million for the second quarter of 2021, or $0.33 per diluted share. Adjusted net income was $77.5 million, or $0.37 per diluted share, for the third quarter of 2021, compared to $78.2 million, or $0.36 per diluted share, for the second quarter of 2021. The following table reconciles for the third and second quarters of 2021 and the third quarter of 2020 the net income to adjusted net income and adjusted earnings per share, which are non-GAAP financial measures that exclude the significant Special Items identified above, as well as a non-significant gain realized on the repurchase and cancellation of trust preferred securities in the third quarter of 2020.
Quarter Ended | Quarter Ended | Quarter Ended | |||||||||||
(In thousands, except per share information) | September 30, 2021 | June 30, 2021 | September 30, 2020 | ||||||||||
Net income, as reported (GAAP) | $ |
75,678 |
|
$ |
70,558 |
|
$ |
28,613 |
|
||||
Adjustments: | |||||||||||||
Merger and restructuring costs |
|
2,268 |
|
|
11,047 |
|
|
10,441 |
|
||||
Partial reversal of deferred tax asset valuation allowance |
|
- |
|
|
- |
|
|
(8,000 |
) |
||||
Gain on sales of investment securities |
|
- |
|
|
- |
|
|
(5,288 |
) |
||||
Gain on early extinguishment of debt |
|
- |
|
|
- |
|
|
(94 |
) |
||||
COVID-19 pandemic-related expenses |
|
640 |
|
|
1,105 |
|
|
962 |
|
||||
Income tax impact of adjustments (1) |
|
(1,091 |
) |
|
(4,557 |
) |
|
(4,276 |
) |
||||
Adjusted net income (Non-GAAP) | $ |
77,495 |
|
$ |
78,153 |
|
$ |
22,358 |
|
||||
Preferred stock dividends |
|
(669 |
) |
|
(669 |
) |
|
(669 |
) |
||||
Adjusted net income attributable to common stockholders (Non-GAAP) | $ |
76,826 |
|
$ |
77,484 |
|
$ |
21,689 |
|
||||
Weighted-average diluted shares outstanding | $ |
207,796 |
|
|
214,609 |
|
$ |
217,715 |
|
||||
Earnings Per Share - diluted (GAAP) | $ |
0.36 |
|
$ |
0.33 |
|
$ |
0.13 |
|
||||
Adjusted Earnings Per Share - diluted (Non-GAAP) | $ |
0.37 |
|
$ |
0.36 |
|
$ |
0.10 |
|
||||
(1) See Basis of Presentation for the individual tax impact related to reconciling items. |
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $112.7 million for the third quarter of 2021, compared to $110.7 million for the second quarter of 2021. Adjusted pre-tax, pre-provision income was $103.6 million for the third quarter of 2021, up $6.9 million from the second quarter of 2021. 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, |
||||||||||||
2021 |
|
2021 |
|
2021 |
|
2020 |
|
2020 |
||||||||||||
Income before income taxes | $ |
112,735 |
|
$ |
110,650 |
|
$ |
89,172 |
|
$ |
65,514 |
|
$ |
24,208 |
|
|||||
Less/Add: Provision for credit losses (benefit) expense |
|
(12,082 |
) |
|
(26,155 |
) |
|
(15,252 |
) |
|
7,691 |
|
|
46,914 |
|
|||||
Add/Less: Net loss (gain) on sales of investment securities |
|
- |
|
|
- |
|
|
- |
|
|
182 |
|
|
(5,288 |
) |
|||||
Less: Gain on early extinguishment of debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(94 |
) |
|||||
Add: COVID-19 pandemic-related expenses |
|
640 |
|
|
1,105 |
|
|
1,209 |
|
|
1,125 |
|
|
962 |
|
|||||
Add: Merger and restructuring costs |
|
2,268 |
|
|
11,047 |
|
|
11,267 |
|
|
12,321 |
|
|
10,441 |
|
|||||
Adjusted pre-tax, pre-provision income (1) | $ |
103,561 |
|
$ |
96,647 |
|
$ |
86,396 |
|
$ |
86,833 |
|
$ |
77,143 |
|
|||||
Change from most recent prior quarter (in dollars) | $ |
6,914 |
|
$ |
10,251 |
|
$ |
(437 |
) |
$ |
9,690 |
|
$ |
9,809 |
|
|||||
Change from most recent prior quarter (in percentage) |
|
7.2 |
% |
|
11.9 |
% |
|
-0.5 |
% |
|
12.6 |
% |
|
14.6 |
% |
|||||
(1) Non-GAAP financial measure. See Basis of Presentation below for definition and additional information about this non-GAAP financial measure. |
NET INTEREST INCOME
The following table sets forth information concerning net interest income for the last five quarters:
(Dollars in thousands) | Quarter Ended | |||||||||||||||||||
September 30, 2021 |
June 30, 2021 |
March 31, 2021 |
December 31, 2020 |
September 30, 2020 |
||||||||||||||||
Net Interest Income | ||||||||||||||||||||
Interest income | $ |
200,172 |
|
$ |
201,459 |
|
$ |
194,642 |
|
$ |
198,700 |
|
$ |
170,402 |
|
|||||
Interest expense |
|
15,429 |
|
|
16,676 |
|
|
18,377 |
|
|
20,933 |
|
|
21,706 |
|
|||||
Net interest income | $ |
184,743 |
|
$ |
184,783 |
|
$ |
176,265 |
|
$ |
177,767 |
|
$ |
148,696 |
|
|||||
Average Balances | ||||||||||||||||||||
Loans and leases | $ |
11,223,926 |
|
$ |
11,560,731 |
|
$ |
11,768,266 |
|
$ |
11,843,157 |
|
$ |
10,163,671 |
|
|||||
Total securities, other short-term investments and interest-bearing cash balances |
|
9,134,121 |
|
|
7,898,975 |
|
|
6,510,960 |
|
|
6,057,360 |
|
|
4,871,710 |
|
|||||
Average interest-earning assets | $ |
20,358,047 |
|
$ |
19,459,706 |
|
$ |
18,279,226 |
|
$ |
17,900,517 |
|
$ |
15,035,381 |
|
|||||
Average interest-bearing liabilities | $ |
11,718,557 |
|
$ |
12,118,631 |
|
$ |
11,815,179 |
|
$ |
11,704,166 |
|
$ |
9,732,691 |
|
|||||
Average Yield/Rate | ||||||||||||||||||||
Average yield on interest-earning assets - GAAP |
|
3.90 |
% |
|
4.15 |
% |
|
4.32 |
% |
|
4.42 |
% |
|
4.51 |
% |
|||||
Average rate on interest-bearing liabilities - GAAP |
|
0.52 |
% |
|
0.55 |
% |
|
0.63 |
% |
|
0.71 |
% |
|
0.89 |
% |
|||||
Net interest spread - GAAP |
|
3.38 |
% |
|
3.60 |
% |
|
3.69 |
% |
|
3.71 |
% |
|
3.62 |
% |
|||||
Net interest margin - GAAP |
|
3.60 |
% |
|
3.81 |
% |
|
3.91 |
% |
|
3.95 |
% |
|
3.93 |
% |
Net interest income amounted to $184.7 million for the third quarter of 2021, a decrease of $0.1 million, compared to $184.8 million for the second quarter of 2021. The slight decrease in net interest income was mainly due to:
Partially offset by:
Net interest margin was 3.60%, compared to 3.81% for the second quarter of 2021. The decrease was driven by an increase in low-yielding interest-bearing cash balances and investment securities associated with the growth in average deposits and loan repayments. The total average balance of interest-bearing cash deposited at the FED and investment securities increased by $1.2 billion to 45% of total average interest-earning assets in the third quarter, compared to 41% in the second quarter, while the average balance of the loan portfolio declined $336.8 million to 55% of total average interest-earning assets in the third quarter, compared to 59% in the second quarter. The variance also reflects the above-mentioned effects of a lower amount of interest income realized from deferred interests and discounts recognized on commercial and construction loans paid off, partially offset by the lower premium amortization expense on U.S. agencies MBS and the decrease in the average cost of deposits.
The third quarter results continue to reflect the effect of SBA PPP loans. Interest and realized deferred fees on SBA PPP loans in the third quarter of 2021 amounted to $6.5 million, compared to $4.0 million in the second quarter of 2021.
NON-INTEREST INCOME
The following table sets forth information concerning non-interest income for the last five quarters:
Quarter Ended | ||||||||||||||||
September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
||||||||||||
(In thousands) | 2021 |
2021 |
2021 |
2020 |
2020 |
|||||||||||
Service charges on deposit accounts | $ |
8,690 |
$ |
8,788 |
$ |
8,304 |
$ |
8,332 |
|
$ |
5,848 |
|||||
Mortgage banking activities |
|
6,098 |
|
6,404 |
|
7,273 |
|
7,551 |
|
|
7,099 |
|||||
Net (loss) gain on investments |
|
- |
|
- |
|
- |
|
(182 |
) |
|
5,288 |
|||||
Gain on early extinguishment of debt |
|
- |
|
- |
|
- |
|
- |
|
|
94 |
|||||
Other operating income |
|
15,158 |
|
14,692 |
|
15,379 |
|
14,499 |
|
|
11,605 |
|||||
Non-interest income | $ |
29,946 |
$ |
29,884 |
$ |
30,956 |
$ |
30,200 |
|
$ |
29,934 |
Non-interest income amounted to $29.9 million for the third quarter of 2021, relatively unchanged compared to the second quarter of 2021. The main variances within the components of non-interest income include:
Partially offset by:
NON-INTEREST EXPENSES
The following table sets forth information concerning non-interest expenses for the last five quarters:
Quarter Ended | |||||||||||||||||
September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
|||||||||||||
(In thousands) | 2021 |
2021 |
2021 |
2020 |
2020 |
||||||||||||
Employees' compensation and benefits | $ |
50,220 |
|
$ |
49,714 |
|
$ |
50,842 |
$ |
51,618 |
$ |
43,063 |
|||||
Occupancy and equipment |
|
23,306 |
|
|
24,116 |
|
|
24,242 |
|
24,066 |
|
19,064 |
|||||
Deposit insurance premium |
|
1,381 |
|
|
1,922 |
|
|
1,988 |
|
1,900 |
|
1,630 |
|||||
Other insurance and supervisory fees |
|
2,249 |
|
|
2,360 |
|
|
2,362 |
|
2,720 |
|
1,389 |
|||||
Taxes, other than income taxes |
|
5,238 |
|
|
5,576 |
|
|
6,199 |
|
5,795 |
|
4,510 |
|||||
Professional fees: | |||||||||||||||||
Collections, appraisals and other credit-related fees |
|
1,451 |
|
|
1,080 |
|
|
1,310 |
|
1,218 |
|
1,262 |
|||||
Outsourcing technology services |
|
8,878 |
|
|
11,946 |
|
|
12,373 |
|
12,524 |
|
6,949 |
|||||
Other professional fees |
|
3,225 |
|
|
3,738 |
|
|
4,018 |
|
3,567 |
|
3,352 |
|||||
Credit and debit card processing expenses |
|
5,573 |
|
|
6,795 |
|
|
4,278 |
|
6,397 |
|
4,859 |
|||||
Business promotion |
|
3,370 |
|
|
3,225 |
|
|
2,970 |
|
3,163 |
|
3,046 |
|||||
Communications |
|
2,250 |
|
|
2,407 |
|
|
2,462 |
|
2,462 |
|
2,246 |
|||||
Net (gain) loss on OREO operations |
|
(2,288 |
) |
|
(139 |
) |
|
1,898 |
|
580 |
|
1,019 |
|||||
Merger and restructuring costs |
|
2,268 |
|
|
11,047 |
|
|
11,267 |
|
12,321 |
|
10,441 |
|||||
Other |
|
6,915 |
|
|
6,385 |
|
|
7,092 |
|
6,431 |
|
4,678 |
|||||
Total | $ |
114,036 |
|
$ |
130,172 |
|
$ |
133,301 |
$ |
134,762 |
$ |
107,508 |
Non-interest expenses amounted to $114.0 million in the third quarter of 2021, a decrease of $16.2 million from $130.2 million in the second quarter of 2021. Included in non-interest expenses are the following Special Items:
On a non-GAAP basis, adjusted non-interest expenses, excluding the effect of the Special Items mentioned above, amounted to $111.1 million for the third quarter of 2021, compared to $118.0 million for the second quarter of 2021. The $6.9 million decrease in adjusted non-interest expenses reflects, among other things, the following significant variances:
Partially offset by:
The adjusted non-interest expense financial metric presented above is a non-GAAP financial measure. See Basis of Presentation for additional information and the reconciliation of total non-interest expense and certain non-interest expense components to adjusted total non-interest expense and certain adjusted non-interest expense components.
INCOME TAXES
The Corporation recorded an income tax expense of $37.1 million for the third quarter of 2021, compared to $40.1 million for the second quarter of 2021. The variance was primarily related to the true up adjustment recorded at the end of the second quarter resulting from a higher than previously-estimated effective tax rate for the year.
The Corporation's estimated effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, remained relatively unchanged at 33.2% compared to the second quarter of 2021. As of September 30, 2021, the Corporation had a deferred tax asset of $243.4 million (net of a valuation allowance of $106.3 million, including a valuation allowance of $65.6 million against the deferred tax assets of the Corporation's banking subsidiary, FirstBank).
CREDIT QUALITY
Non-Performing Assets
The following table sets forth information concerning non-performing assets for the last five quarters:
(Dollars in thousands) | September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
|||||||||||||||
2021 |
2021 |
2021 |
2020 |
2020 |
||||||||||||||||
Nonaccrual loans held for investment: | ||||||||||||||||||||
Residential mortgage | $ |
60,589 |
|
$ |
121,695 |
|
$ |
132,339 |
|
$ |
125,367 |
|
$ |
122,797 |
|
|||||
Commercial mortgage |
|
26,812 |
|
|
27,242 |
|
|
28,548 |
|
|
29,611 |
|
|
29,651 |
|
|||||
Commercial and Industrial |
|
18,990 |
|
|
18,835 |
|
|
19,128 |
|
|
20,881 |
|
|
20,882 |
|
|||||
Construction |
|
6,093 |
|
|
6,175 |
|
|
6,378 |
|
|
12,971 |
|
|
13,090 |
|
|||||
Consumer and Finance leases |
|
9,657 |
|
|
8,703 |
|
|
14,708 |
|
|
16,259 |
|
|
14,870 |
|
|||||
Total nonaccrual loans held for investment |
|
122,141 |
|
|
182,650 |
|
|
201,101 |
|
|
205,089 |
|
|
201,290 |
|
|||||
OREO |
|
43,798 |
|
|
66,586 |
|
|
79,207 |
|
|
83,060 |
|
|
89,049 |
|
|||||
Other repossessed property |
|
3,550 |
|
|
3,470 |
|
|
4,544 |
|
|
5,357 |
|
|
3,006 |
|
|||||
Other assets (1) |
|
2,894 |
|
|
2,928 |
|
|
- |
|
|
- |
|
|
- |
|
|||||
Total non-performing assets (2) | $ |
172,383 |
|
$ |
255,634 |
|
$ |
284,852 |
|
$ |
293,506 |
|
$ |
293,345 |
|
|||||
Past-due loans 90 days and still accruing (3) | $ |
148,322 |
|
$ |
144,262 |
|
$ |
160,884 |
|
$ |
146,889 |
|
$ |
160,066 |
|
|||||
Nonaccrual loans held for investment to total loans held for investment |
|
1.10 |
% |
|
1.60 |
% |
|
1.73 |
% |
|
1.74 |
% |
|
1.70 |
% |
|||||
Nonaccrual loans to total loans |
|
1.09 |
% |
|
1.60 |
% |
|
1.72 |
% |
|
1.73 |
% |
|
1.69 |
% |
|||||
Non-performing assets to total assets |
|
0.81 |
% |
|
1.20 |
% |
|
1.47 |
% |
|
1.56 |
% |
|
1.57 |
% |
(1) |
Residential pass-through MBS issued by the Puerto Rico Housing Finance Authority held as part of the available-for-sale investment securities portfolio with an amortized cost of $3.7 million, recorded on the Corporation's books at its fair value of $2.9 million. | |||||||||
(2) |
Excludes purchased-credit deteriorated ("PCD") loans previously accounted for under Accounting Standards Codification ("ASC") 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans accounted for under ASC 310-30 as "units of account" both at the time of adoption of the current expected credit loss ("CECL") accounting standard on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans accrete interest income based on the effective interest rate of the loan pools determined at the time of adoption of the CECL accounting standard and will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The amortized cost of such loans as of September 30,2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020 amounted to $120.7 million, $125.2 million, $128.4 million, $130.9 million and $133.2 million, respectively. |
|||||||||
(3) |
These include rebooked loans, which were previously pooled into Government National Mortgage Association ("GNMA") securities, amounting to $8.5 million (June 30, 2021 - $8.0 million; March 31, 2021 - $17.2 million December 31, 2020 - $10.7 million; September 30, 2020 - $17.7 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability. |
Variances in credit quality metrics:
The decrease in non-performing assets consisted of:
- A $61.1 million decrease in nonaccrual residential mortgage loans, driven by the aforementioned bulk sale of $52.5 million of non-performing loans, as well as the repayment of two large nonaccrual residential mortgage loans totaling $3.9 million.
Early in August 2021, the Corporation sold $52.5 million of non-performing residential mortgage loans and related servicing advances of $2.0 million. The Corporation received $31.5 million, or 58% of book value before reserves, for the $54.5 million of non-performing loans and related servicing advances. Approximately $20.9 million of reserves had been allocated to the loans sold. The transaction resulted in total net charge-offs of $23.1 million and an additional loss of approximately $2.1 million recorded as a charge to the provision for credit losses in the third quarter.
- A $22.8 million decrease in the OREO portfolio balance. The decrease was driven by sales of $28.1 million, including the aforementioned sale of a $20.7 million commercial OREO property in the Puerto Rico region, and approximately $0.8 million of fair value and other adjustments that reduced the OREO carrying value, partially offset by additions of $6.1 million.
- A $0.4 million decrease in nonaccrual commercial and construction loans, primarily due to the repayment of a $1.2 million nonaccrual commercial and industrial loan in the Puerto Rico region.
- A $1.0 million increase in nonaccrual consumer loans, primarily related to auto loans.
Early Delinquency, CARES Act Modifications, and SBA PPP Loans
Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory reporting instructions) amounted to $107.3 million as of September 30, 2021, an increase of $23.7 million, compared to $83.6 million as of June 30, 2021. The variances by major portfolio categories were as follow:
- Commercial and construction loans in early delinquency increased in the third quarter by $20.0 million to $28.6 million as of September 30, 2021. Almost one half of the increase was related to the migration of loans associated with two commercial relationships that are delinquent for over 30 days with respect to their final balloon payment but with respect to which the Corporation continues to receive from the borrower interest and principal payments.
- Residential mortgage loans in early delinquency decreased by $4.4 million to $36.3 million as of September 30, 2021, and consumer loans in early delinquency increased by $8.2 million to $42.5 million as of September 30, 2021.
As of September 30, 2021, commercial loans totaling $329.9 million, or 2.96% of the balance of the total loan portfolio held for investment, were permanently modified under the provisions of Section 4013 of the Coronavirus Aid, Relief, and Economic Security (the "CARES") Act of 2020, as amended by Section 541 of the Consolidated Appropriations Act. These permanent modifications primarily relate to loans to commercial borrowers in industries with longer expected recovery times, mostly hospitality, retail and entertainment industries.
As of September 30, 2021, SBA PPP loans, net of unearned fees of $12.4 million, totaled $218.4 million. The unearned fees are being accreted into income based on the five-year contractual maturity (two years for the $13.1 million in SBA PPP loans originated before June 5, 2020). During the third quarter of 2021, the Corporation received forgiveness remittances and customer payments related to approximately $136.9 million in principal balance of SBA PPP loans.
Allowance for Credit Losses
The following table summarizes the activity of the allowance for credit losses ("ACL") for on-balance sheet and off-balance sheet exposures during the third and second quarters of 2021:
Quarter Ended September 30, 2021 | ||||||||||||||||||||
Loans and | Unfunded Loan | Held-to-Maturity | Available-for-Sale | |||||||||||||||||
Allowance for Credit Losses | Finance Leases | Commitments | Debt Securities | Debt Securities | Total | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Allowance for credit losses, beginning balance | $ |
324,958 |
|
$ |
2,730 |
|
$ |
10,685 |
|
$ |
1,166 |
|
|
339,539 |
|
|||||
Provision for credit losses benefit |
|
(8,734 |
) |
|
(971 |
) |
|
(2,368 |
) |
|
(9 |
) |
|
(12,082 |
) |
|||||
Net charge-offs |
|
(27,864 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(27,864 |
) |
|||||
Allowance for credit losses, end of period | $ |
288,360 |
|
$ |
1,759 |
(1) |
|
$ |
8,317 |
|
$ |
1,157 |
|
$ |
299,593 |
|
||||
(1) Included in accounts payable and other liabilities. | ||||||||||||||||||||
Quarter Ended June 30, 2021 | ||||||||||||||||||||
Loans and | Unfunded Loan | Held-to-Maturity | Available-for-Sale | |||||||||||||||||
Allowance for Credit Losses | Finance Leases | Commitments | Debt Securities | Debt Securities | Total | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Allowance for credit losses, beginning balance | $ |
358,936 |
|
$ |
4,399 |
|
$ |
8,869 |
|
$ |
1,183 |
|
$ |
373,387 |
|
|||||
Provision for credit losses (benefit) expense |
|
(26,302 |
) |
|
(1,669 |
) |
|
1,816 |
|
|
- |
|
|
(26,155 |
) |
|||||
Net charge-offs |
|
(7,676 |
) |
|
- |
|
|
- |
|
|
(17 |
) |
|
(7,693 |
) |
|||||
Allowance for credit losses, end of period | $ |
324,958 |
|
$ |
2,730 |
(1) |
|
$ |
10,685 |
|
$ |
1,166 |
|
$ |
339,539 |
|
||||
(1) Included in accounts payable and other liabilities. |
The main variances of the total ACL by main categories are discussed below:
Allowance for Credit Losses for Loans and Finance Leases
The following table sets forth information concerning the ACL for loans and finance leases during the periods indicated:
Quarter Ended | ||||||||||||||||||||
(Dollars in thousands) | September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|||||||||||
2021 |
|
2021 |
|
2021 |
|
2020 |
|
2020 |
||||||||||||
Allowance for credit losses, beginning balance | $ |
324,958 |
|
$ |
358,936 |
|
$ |
385,887 |
|
$ |
384,718 |
|
$ |
319,297 |
|
|||||
Provision for credit losses (benefit) expense |
|
(8,734 |
) |
|
(26,302 |
) |
|
(14,443 |
) |
|
10,186 |
|
|
48,078 |
|
|||||
Initial allowance on PCD loans |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
28,744 |
|
|||||
Net (charge-offs) recoveries of loans: | ||||||||||||||||||||
Residential mortgage |
|
(23,450 |
)(1) |
|
|
(1,987 |
) |
|
(2,092 |
) |
|
(1,642 |
) |
|
(2,283 |
) |
||||
Commercial mortgage |
|
(386 |
) |
|
(31 |
) |
|
(740 |
) |
|
1,769 |
|
|
(3,104 |
) |
|||||
Commercial and Industrial |
|
327 |
|
|
5,809 |
|
|
(545 |
) |
|
(367 |
) |
|
(70 |
) |
|||||
Construction |
|
35 |
|
|
38 |
|
|
(9 |
) |
|
102 |
|
|
36 |
|
|||||
Consumer and finance leases |
|
(4,390 |
) |
|
(11,505 |
) |
|
(9,122 |
) |
|
(8,879 |
) |
|
(5,980 |
) |
|||||
Net charge-offs |
|
(27,864 |
) |
|
(7,676 |
) |
|
(12,508 |
) |
|
(9,017 |
) |
|
(11,401 |
) |
|||||
Allowance for credit losses on loans and finance leases, end of period | $ |
288,360 |
|
$ |
324,958 |
|
$ |
358,936 |
|
$ |
385,887 |
|
$ |
384,718 |
|
|||||
Allowance for credit losses on loans and finance leases to period end total loans held for investment |
|
2.59 |
% |
|
2.85 |
% |
|
3.08 |
% |
|
3.28 |
% |
|
3.25 |
% |
|||||
Net charge-offs (annualized) to average loans outstanding during the period |
|
0.99 |
% |
|
0.27 |
% |
|
0.43 |
% |
|
0.30 |
% |
|
0.45 |
% |
|||||
Provision for credit losses on loans and finance leases to net charge-offs during the period | -0.31x |
-3.43x |
-1.15x |
1.13x |
4.22x |
__________________________________________ | |
(1) |
Includes net charge-offs totaling $23.1 million associated with the bulk sale of residential mortgage nonaccrual loans and related servicing advance receivables. |
Quarter Ended September 30, 2021 | ||||||||||||||
(In thousands) | Residential Mortgage Loans |
Commercial Loans (including Commercial Mortgage, C&I, and Construction) |
Consumer Loans and Finance Leases |
Total | ||||||||||
Provision for credit losses on loans and finance leases (benefit) expense | $ |
(6,206 |
) |
$ |
(8,582 |
) |
$ |
6,054 |
$ |
(8,734 |
) |
|||
Quarter Ended June 30, 2021 | ||||||||||||||
(In thousands) | Residential Mortgage Loans |
Commercial Loans (including Commercial Mortgage, C&I, and Construction) |
Consumer Loans and Finance Leases |
Total | ||||||||||
Provision for credit losses on loans and finance leases expense (benefit) | $ |
825 |
|
$ |
(27,921 |
) |
$ |
794 |
$ |
(26,302 |
) |
- Provision for credit losses for the commercial and construction loan portfolio was a net benefit of $8.6 million for the third quarter of 2021, compared to a net benefit of $27.9 million in the second quarter of 2021. The net benefit recorded in the third quarter of 2021, reflects improvements in forecasted macroeconomic variables, primarily in the commercial real estate price index, and the overall decrease in the size of the commercial and construction loan portfolios.
- Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $6.2 million for the third quarter of 2021, compared to a charge of $0.8 million in the second quarter of 2021. The net benefit recorded for the third quarter of 2021 was primarily related to improvements in the outlook of macroeconomic variables and the overall decrease in the size of the portfolio, partially offset by an incremental charge of $2.1 million related to the aforementioned bulk sale of nonaccrual residential mortgage loans.
- Provision for credit losses for the consumer loans and finance leases portfolio was $6.1 million for the third quarter of 2021, compared to $0.8 million in the second quarter of 2021. The charges to the provision in the third quarter of 2021 were primarily related to the increase in the size of the auto and finance leases loan portfolios and some increase in cumulative historical charge-off levels related to the credit card loans portfolio.
The following table sets forth information concerning the composition of the Corporation's ACL for loans and finance leases as of September 30, 2021 and June 30, 2021 by loan category:
(Dollars in thousands) | Residential Mortgage Loans |
Commercial Loans (including Commercial Mortgage, C&I, and Construction) |
Consumer and Finance Leases |
Total | |||||||||||||
As of September 30, 2021 | |||||||||||||||||
Total loans held for investment: | |||||||||||||||||
Amortized cost | $ |
3,095,015 |
|
$ |
5,239,422 |
|
$ |
2,806,145 |
|
$ |
11,140,582 |
|
|||||
Allowance for credit losses on loans |
|
83,226 |
|
|
106,073 |
|
|
99,061 |
|
|
288,360 |
|
|||||
Allowance for credit losses on loans to amortized cost |
|
2.69 |
% |
|
2.02 |
% |
|
3.53 |
% |
|
2.59 |
% |
|||||
As of June 30, 2021 | |||||||||||||||||
Total loans held for investment: | |||||||||||||||||
Amortized cost | $ |
3,253,857 |
|
$ |
5,415,784 |
|
$ |
2,717,953 |
|
$ |
11,387,594 |
|
|||||
Allowance for credit losses on loans |
|
112,882 |
|
|
114,679 |
|
|
97,397 |
|
|
324,958 |
|
|||||
Allowance for credit losses on loans to amortized cost |
|
3.47 |
% |
|
2.12 |
% |
|
3.58 |
% |
|
2.85 |
% |
Net Charge-Offs
The following table presents ratios of annualized net charge-offs to average loans held-in-portfolio:
Quarter Ended | ||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||
2021 |
2021 |
2021 |
2020 |
2020 |
||||||||
Residential mortgage | 2.94% |
(1) |
0.24% |
0.24% |
0.18% |
0.29% |
||||||
Commercial mortgage | 0.07% |
0.01% |
0.13% |
-0.31% |
0.73% |
|||||||
Commercial and Industrial | -0.04% |
-0.74% |
0.07% |
0.05% |
0.01% |
|||||||
Construction | -0.08% |
-0.09% |
0.02% |
-0.21% |
-0.08% |
|||||||
Consumer and finance leases | 0.64% |
1.72% |
1.39% |
1.37% |
1.00% |
|||||||
Total loans | 0.99% |
(1) |
0.27% |
0.43% |
0.30% |
0.45% |
(1) |
Includes net charge-offs totaling $23.1 million associated with the bulk sale of residential mortgage nonaccrual loans and related servicing advance receivables. Excluding net charge-offs associated with the bulk sale, residential mortgage and total net charge-offs to related average loans for the third quarter of 2021 was 0.05% and 0.17%, respectively. |
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 $27.9 million for the third quarter of 2021, or an annualized 0.99% of average loans, compared to $7.7 million, or an annualized 0.27% of average loans, in the second quarter of 2021. The bulk sale of $52.5 million nonaccrual residential mortgage loans and related servicing advance receivables added $23.1 million in net charge-offs in the third quarter. Adjusted for those net charge-offs, total net charge-offs in the third quarter were $4.8 million, or an annualized 0.17% of average loans. The variances in net charge-offs by portfolio categories consisted of:
Allowance for Credit Losses for Unfunded Loan Commitments
The Corporation estimates expected credit losses over the contractual period during which the Corporation is exposed to credit risk as a result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. As of September 30, 2021, the ACL for off-balance sheet credit exposures was $1.8 million, down $0.9 million from $2.7 million as of June 30, 2021. The decrease was mainly related to improvements in forecasted macroeconomic variables.
Allowance for Credit Losses for Held-to-Maturity Debt Securities
As of September 30, 2021, the held-to-maturity debt securities portfolio consisted of Puerto Rico municipal bonds. As of September 30, 2021, the ACL for held-to-maturity debt securities was $8.3 million, down $2.4 million from $10.7 million as of June 30, 2021. The decrease was mainly related to improvements in forecasted macroeconomic variables and the repayment of certain bonds during the third quarter.
Allowance for Credit Losses for Available-for-Sale Debt Securities
As of September 30, 2021, the ACL for available-for-sale debt securities was $1.2 million, relatively unchanged from June 30, 2021.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $21.3 billion as of September 30, 2021, down $113.8 million from June 30, 2021.
The following variances within the main components of total assets are noted:
Total liabilities were approximately $19.1 billion as of September 30, 2021, down $106.8 million from June 30, 2021.
The decrease in total liabilities was mainly due to:
Partially offset by:
Total stockholders' equity amounted to $2.2 billion as of September 30, 2021, a decrease of $7.0 million from June 30, 2021. The decrease was driven by the repurchase of 4.16 million of shares of common stock for a total purchase price of approximately $50 million, common and preferred stock dividends declared in the third quarter totaling $15.2 million, and an $18.7 million decrease in the fair value of available-for-sale investment securities recorded as part of Other comprehensive (loss) income in the consolidated statements of financial condition. These variances were partially offset by earnings generated in the third quarter.
As of September 30, 2021, capital ratios exceeded the required regulatory levels for bank holding companies and well-capitalized banks. The Corporation's estimated common equity tier 1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules were 17.62%, 17.92%, 20.67%, and 10.17%, respectively, as of September 30, 2021, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 17.34%, 17.64%, 20.38%, and 10.51%, respectively, as of June 30, 2021.
Meanwhile, the estimated common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank Puerto Rico, were 17.62%, 18.95%, 20.20%, and 10.75%, respectively, as of September 30, 2021, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 16.92%, 18.65%, 19.91%, and 11.12%, respectively, as of June 30, 2021.
Tangible Common Equity
The Corporation's tangible common equity ratio increased to 9.87% as of September 30, 2021, compared to 9.84% as of June 30, 2021.
The following table presents a reconciliation of the Corporation's tangible common equity and tangible assets over the last five quarters to the most comparable GAAP items:
(In thousands, except ratios and per share information) | ||||||||||||||||||||
September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
||||||||||||||||
2021 |
2021 |
2021 |
2020 |
2020 |
||||||||||||||||
Tangible Equity: | ||||||||||||||||||||
Total equity - GAAP | $ |
2,197,965 |
|
$ |
2,204,955 |
|
$ |
2,220,425 |
|
$ |
2,275,179 |
|
$ |
2,225,282 |
|
|||||
Preferred equity |
|
(36,104 |
) |
|
(36,104 |
) |
|
(36,104 |
) |
|
(36,104 |
) |
|
(36,104 |
) |
|||||
Goodwill |
|
(38,611 |
) |
|
(38,611 |
) |
|
(38,611 |
) |
|
(38,632 |
) |
|
(34,401 |
) |
|||||
Purchased credit card relationship intangible |
|
(1,992 |
) |
|
(2,855 |
) |
|
(3,768 |
) |
|
(4,733 |
) |
|
(5,789 |
) |
|||||
Core deposit intangible |
|
(30,494 |
) |
|
(32,416 |
) |
|
(34,339 |
) |
|
(35,842 |
) |
|
(37,749 |
) |
|||||
Insurance customer relationship intangible |
|
(203 |
) |
|
(241 |
) |
|
(280 |
) |
|
(318 |
) |
|
(355 |
) |
|||||
Tangible common equity | $ |
2,090,561 |
|
$ |
2,094,728 |
|
$ |
2,107,323 |
|
$ |
2,159,550 |
|
$ |
2,110,884 |
|
|||||
Tangible Assets: | ||||||||||||||||||||
Total assets - GAAP | $ |
21,256,154 |
|
$ |
21,369,962 |
|
$ |
19,413,734 |
|
$ |
18,793,071 |
|
$ |
18,659,768 |
|
|||||
Goodwill |
|
(38,611 |
) |
|
(38,611 |
) |
|
(38,611 |
) |
|
(38,632 |
) |
|
(34,401 |
) |
|||||
Purchased credit card relationship intangible |
|
(1,992 |
) |
|
(2,855 |
) |
|
(3,768 |
) |
|
(4,733 |
) |
|
(5,789 |
) |
|||||
Core deposit intangible |
|
(30,494 |
) |
|
(32,416 |
) |
|
(34,339 |
) |
|
(35,842 |
) |
|
(37,749 |
) |
|||||
Insurance customer relationship intangible |
|
(203 |
) |
|
(241 |
) |
|
(280 |
) |
|
(318 |
) |
|
(355 |
) |
|||||
Tangible assets | $ |
21,184,854 |
|
$ |
21,295,839 |
|
$ |
19,336,736 |
|
$ |
18,713,546 |
|
$ |
18,581,474 |
|
|||||
Common shares outstanding |
|
206,496 |
|
|
210,649 |
|
|
218,629 |
|
|
218,235 |
|
|
218,229 |
|
|||||
Tangible common equity ratio |
|
9.87 |
% |
|
9.84 |
% |
|
10.90 |
% |
|
11.54 |
% |
|
11.36 |
% |
|||||
Tangible book value per common share | $ |
10.12 |
|
$ |
9.94 |
|
$ |
9.64 |
|
$ |
9.90 |
|
$ |
9.67 |
|
Exposure to Puerto Rico Government
As of September 30, 2021, the Corporation had $362.6 million of direct exposure to the Puerto Rico government, its municipalities and public corporations, compared to $388.7 million as of June 30, 2021. As of September 30, 2021, approximately $187.7 million of the exposure consisted of loans and obligations of municipalities in Puerto Rico that are supported by assigned property tax revenues and for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment, and $122.7 million consisted of municipal revenue or special obligation bonds. The Corporation's total direct exposure to the Puerto Rico government also included $13.1 million in loans extended to an affiliate of a public corporation, $35.4 million in loans to an agency of the Puerto Rico central government, and obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $3.7 million (fair value of $2.9 million as of September 30, 2021), included as part of the Corporation's available-for-sale investment securities portfolio. This residential pass-through MBS issued by the PRHFA is collateralized by certain second mortgages and had an unrealized loss of $0.8 million as of September 30, 2021, of which $0.3 million is due to credit deterioration and was charged against earnings through an ACL during 2020.
The aforementioned exposure to municipalities in Puerto Rico included $177.8 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, 2021, the ACL for these securities was $8.3 million, compared to $10.7 million as of June 30, 2021.
As of September 30, 2021, the Corporation had $2.8 billion of public sector deposits in Puerto Rico, compared to $2.9 billion as of June 30, 2021. Approximately 19% of the public sector deposits as of September 30, 2021 was from municipalities and municipal agencies in Puerto Rico and 81% was from public corporations, the Puerto Rico central government and agencies, and U.S. federal government agencies in Puerto Rico.
Conference Call / Webcast Information
First BanCorp.'s senior management will host an earnings conference call and live webcast on Monday, October 25, 2021, 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 (844) 200-6205 or (929) 526?1599 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 website, www.1firstbank.com, until October 25, 2022. A telephone replay will be available one hour after the end of the conference call through November 24, 2021 at (929) 458-6194 or (866) 813-9403 for international callers. The replay access code is 721741.
Safe Harbor
This press release may contain "forward-looking statements" concerning the Corporation's future economic, operational and financial performance. The words or phrases "expect," "anticipate," "intend," "should," "would," "believe" and similar expressions are meant to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. The Corporation cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date hereof, and advises readers that any such forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by us that are difficult to predict. Various factors, some of which are beyond our control, including, but not limited to, the following, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements: uncertainties relating to the impact of the COVID-19 pandemic, including new variants of the virus, such as the Delta variant, and the efficacy and acceptance of various vaccines and treatments for the disease, on the Corporation's business, operations, employees, credit quality, financial condition and net income, including because of uncertainties as to the extent and duration of the pandemic and the impact of the pandemic on consumer spending, borrowing and saving habits, the underemployment and unemployment rates, which can adversely affect repayment patterns, the Puerto Rico economy and the global economy, as well as the risk that the COVID-19 pandemic may exacerbate any other factor that could cause our actual results to differ materially from those expressed in or implied by any forward-looking statements; risks related to the effect on the Corporation and its customers of governmental, regulatory, or central bank responses to the COVID-19 pandemic and the Corporation's participation in any such responses or programs, such as the SBA PPP established by the CARES Act of 2020, including any judgments, claims, damages, penalties, fines or reputational damage resulting from claims or challenges against the Corporation by governments, regulators, customers or otherwise, relating to the Corporation's participation in any such responses or programs; risks, uncertainties and other factors related to the Corporation's acquisition of BSPR, including the risk that the Corporation may not realize, either fully or on a timely basis, the cost savings and any other synergies from the acquisition that the Corporation expected, because of deposit attrition, customer loss and/or revenue loss following the acquisition; 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 situation, including a court-supervised debt restructuring process similar to U.S. bankruptcy protection undertaken pursuant to Title III of PROMESA, 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; the impact that a resumption of the slowing economy and increased unemployment or underemployment may have on the performance of our loan and lease portfolio, the market price of our investment securities, the availability of sources of funding and the demand for our products; uncertainty as to the availability of wholesale funding sources, such as securities sold under agreements to repurchase, FHLB advances and brokered CDs; the effect of a resumption of deteriorating economic conditions in the real estate markets and the consumer and commercial sectors and their impact on the credit quality of the Corporation's loans and other assets, which may contribute to, among other things, higher than targeted levels of non-performing assets, charge-offs and provisions for credit losses, and may subject the Corporation to further risk from loan defaults and foreclosures; the impact of changes in accounting standards or assumptions in applying those standards, including the continuing impact of the COVID-19 pandemic on forecasts of economic variables considered for the determination of the ACL required by the CECL accounting standard; the ability of FirstBank to realize the benefits of its net deferred tax assets; the ability of FirstBank to generate sufficient cash flow to make dividend payments to the Corporation; adverse changes in general economic conditions in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, including the interest rate environment, market liquidity, housing absorption rates, real estate prices, and disruptions in the U.S. capital markets, including as a result of the COVID-19 pandemic, 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; the effect of changes in the interest rate environment, including the replacement of the London Interbank Offered Rate as an interest rate benchmark beginning at the end of 2021, which could adversely affect the Corporation's results of operations, cash flows, and liquidity; 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 credit-related, resulting in additional charges to the provision for credit losses on the Corporation's exposure to the Puerto Rico government's debt securities held as part of the available-for-sale securities portfolio with a fair value of $2.9 million ($3.7 million ? amortized cost) and an allowance for credit losses of $0.3 million; 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, including as a result of the change in the political landscape resulting from the 2020 elections in the U.S. and Puerto Rico, 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 the Corporation's internal controls and procedures and the risk that the Corporation's risk management policies may not be adequate; the Corporation's ability to identify and prevent cyber-security incidents, such as data security breaches, ransomware, malware, "denial of service" attacks, "hacking" and identity theft, a failure of which resulted in a previously-disclosed cyber incident during 2020, and the occurrence of any of which 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, such as the acquisition of BSPR, and dispositions; a need to recognize impairments on the Corporation's financial instruments, goodwill and other intangible assets relating to business acquisitions, including as a result of the COVID-19 pandemic; the risk that the impact of the occurrence of any of these uncertainties on the Corporation's capital would preclude further growth of FirstBank and preclude the Corporation's Board of Directors from declaring dividends; 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 most comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure, can be found in the text or in the tables in or attached to this 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 uses and believe that 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 or health epidemics, such as the COVID-19 pandemic in 2020 and 2021. Adjusted pre-tax, pre-provision income, as defined by management, represents income before income taxes adjusted to exclude the provisions for credit losses on loans, finance leases and debt securities and any gains or losses on sales of investment securities. In addition, from time to time, earnings are also adjusted for certain items regarded as Special Items, such as merger and restructuring costs in connection with the acquisition of BSPR and related integration and restructuring efforts, and costs incurred in connection with the COVID-19 pandemic response efforts, 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.
Net Interest Income, Excluding Valuations, and on a Tax-Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation's net interest income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that management believes facilitates comparison of results to the results of peers.
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 third and second quarters of 2021, the third quarter of 2020, and the nine-month period ended September 30, 2021 and 2020. The table also reconciles net interest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.
(Dollars in thousands) | Quarter Ended | Nine-Month Period Ended | ||||||||||||||||||
September 30, 2021 |
June 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
||||||||||||||||
Net Interest Income | ||||||||||||||||||||
Interest income - GAAP | $ |
200,172 |
|
$ |
201,459 |
|
$ |
170,402 |
|
$ |
596,273 |
|
$ |
494,282 |
|
|||||
Unrealized (gain) loss on | ||||||||||||||||||||
derivative instruments |
|
(4 |
) |
|
7 |
|
|
(18 |
) |
|
(22 |
) |
|
(18 |
) |
|||||
Interest income excluding valuations |
|
200,168 |
|
|
201,466 |
|
|
170,384 |
|
|
596,251 |
|
|
494,264 |
|
|||||
Tax-equivalent adjustment |
|
6,864 |
|
|
6,129 |
|
|
4,964 |
|
|
17,545 |
|
|
15,751 |
|
|||||
Interest income on a tax-equivalent basis and excluding valuations | $ |
207,032 |
|
$ |
207,595 |
|
$ |
175,348 |
|
$ |
613,796 |
|
$ |
510,015 |
|
|||||
Interest expense - GAAP |
|
15,429 |
|
|
16,676 |
|
|
21,706 |
|
|
50,482 |
|
|
71,727 |
|
|||||
Net interest income - GAAP | $ |
184,743 |
|
$ |
184,783 |
|
$ |
148,696 |
|
$ |
545,791 |
|
$ |
422,555 |
|
|||||
Net interest income excluding valuations | $ |
184,739 |
|
$ |
184,790 |
|
$ |
148,678 |
|
$ |
545,769 |
|
$ |
422,537 |
|
|||||
Net interest income on a tax-equivalent basis and excluding valuations | $ |
191,603 |
|
$ |
190,919 |
|
$ |
153,642 |
|
$ |
563,314 |
|
$ |
438,288 |
|
|||||
Average Balances | ||||||||||||||||||||
Loans and leases | $ |
11,223,926 |
|
$ |
11,560,731 |
|
$ |
10,163,671 |
|
$ |
11,515,647 |
|
$ |
9,472,189 |
|
|||||
Total securities, other short-term investments and interest-bearing cash balances |
|
9,134,121 |
|
|
7,898,975 |
|
|
4,871,710 |
|
|
7,857,639 |
|
|
3,859,381 |
|
|||||
Average interest-earning assets | $ |
20,358,047 |
|
$ |
19,459,706 |
|
$ |
15,035,381 |
|
$ |
19,373,286 |
|
$ |
13,331,570 |
|
|||||
Average interest-bearing liabilities | $ |
11,718,557 |
|
$ |
12,118,631 |
|
$ |
9,732,691 |
|
$ |
11,883,768 |
|
$ |
8,729,809 |
|
|||||
Average Yield/Rate | ||||||||||||||||||||
Average yield on interest-earning assets - GAAP |
|
3.90 |
% |
|
4.15 |
% |
|
4.51 |
% |
|
4.12 |
% |
|
4.95 |
% |
|||||
Average rate on interest-bearing liabilities - GAAP |
|
0.52 |
% |
|
0.55 |
% |
|
0.89 |
% |
|
0.57 |
% |
|
1.10 |
% |
|||||
Net interest spread - GAAP |
|
3.38 |
% |
|
3.60 |
% |
|
3.62 |
% |
|
3.55 |
% |
|
3.85 |
% |
|||||
Net interest margin - GAAP |
|
3.60 |
% |
|
3.81 |
% |
|
3.93 |
% |
|
3.77 |
% |
|
4.23 |
% |
|||||
Average yield on interest-earning assets excluding valuations |
|
3.90 |
% |
|
4.15 |
% |
|
4.51 |
% |
|
4.11 |
% |
|
4.95 |
% |
|||||
Average rate on interest-bearing liabilities excluding valuations |
|
0.52 |
% |
|
0.55 |
% |
|
0.89 |
% |
|
0.57 |
% |
|
1.10 |
% |
|||||
Net interest spread excluding valuations |
|
3.38 |
% |
|
3.60 |
% |
|
3.62 |
% |
|
3.54 |
% |
|
3.85 |
% |
|||||
Net interest margin excluding valuations |
|
3.60 |
% |
|
3.81 |
% |
|
3.93 |
% |
|
3.77 |
% |
|
4.23 |
% |
|||||
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations |
|
4.03 |
% |
|
4.28 |
% |
|
4.64 |
% |
|
4.24 |
% |
|
5.11 |
% |
|||||
Average rate on interest-bearing liabilities excluding valuations |
|
0.52 |
% |
|
0.55 |
% |
|
0.89 |
% |
|
0.57 |
% |
|
1.10 |
% |
|||||
Net interest spread on a tax-equivalent basis and excluding valuations |
|
3.51 |
% |
|
3.73 |
% |
|
3.75 |
% |
|
3.67 |
% |
|
4.01 |
% |
|||||
Net interest margin on a tax-equivalent basis and excluding valuations |
|
3.73 |
% |
|
3.94 |
% |
|
4.07 |
% |
|
3.89 |
% |
|
4.39 |
% |
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 and non-interest expenses, and the components of each, 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 2021 and the third quarter of 2020 that reflect the described items that were excluded for one of those reasons:
- Merger and restructuring costs of $2.3 million, $11.0 million, and $10.4 million recorded in the third quarter of 2021, second quarter of 2021, and third quarter of 2020, respectively, related to transaction costs and restructuring initiatives in connection with the acquisition of BSPR.
- COVID-19 pandemic-related expenses of $0.6 million, $1.1 million and $1.0 million in the third quarter of 2021, second quarter of 2021, and third quarter of 2020, respectively.
- Tax benefit of $8.0 million recorded in the third quarter of 2020 related to a partial reversal of the deferred tax asset valuation allowance.
- Gain of $5.3 million on sales of U.S. agencies MBS and U.S. Treasury Notes recoded in the third quarter of 2020.
- Gain of $0.1 million on the repurchase and cancellation of $0.4 million in trust preferred securities in the third quarter of 2020 reflected in the statement of income set forth below as "Gain on early extinguishment of debt."
- The tax-related effects of all of the pre-tax items mentioned in the above bullets as follows:
- Tax benefit of $0.9 million, $4.1 million and $3.9 million in the third quarter of 2021, second quarter of 2021, and third quarter of 2020, respectively, related to merger and restructuring costs in connection with the acquisition of BSPR (calculated based on the statutory tax rate of 37.5%).
- Tax benefit of $0.2 million, $0.4 million, and $0.4 million in the third quarter of 2021, second quarter of 2021, and third quarter of 2020, respectively, in connection with COVID-19 pandemic-related expenses (calculated based on the statutory tax rate of 37.5%).
- No tax expense was recorded for the gain on sales of U.S. agencies MBS and U.S. Treasury Notes in the third quarter of 2020. Those sales consisted of tax-exempt securities or were recorded at the tax-exempt international banking entity subsidiary level.
- The gain realized on the repurchase and cancellation of trust-preferred securities in the third quarter of 2020 recorded at the holding company level had no effect on the income tax expense in 2020.
(In thousands) | ||||||||||||||
Third Quarter 2021 | Non-Interest Expenses (GAAP) |
Merger and Restructuring Costs |
COVID-19 Pandemic- Related Expenses |
Adjusted (Non-GAAP) |
||||||||||
Non-interest expenses | $ |
114,036 |
|
$ |
2,268 |
$ |
640 |
$ |
111,128 |
|
||||
Employees' compensation and benefits |
|
50,220 |
|
|
- |
|
10 |
|
50,210 |
|
||||
Occupancy and equipment |
|
23,306 |
|
|
- |
|
576 |
|
22,730 |
|
||||
Business promotion |
|
3,370 |
|
|
- |
|
- |
|
3,370 |
|
||||
Professional service fees |
|
13,554 |
|
|
- |
|
- |
|
13,554 |
|
||||
Taxes, other than income taxes |
|
5,238 |
|
|
- |
|
49 |
|
5,189 |
|
||||
Insurance and supervisory fees |
|
3,630 |
|
|
- |
|
- |
|
3,630 |
|
||||
Net gain on other real estate owned operations |
|
(2,288 |
) |
|
- |
|
- |
|
(2,288 |
) |
||||
Merger and restructuring costs |
|
2,268 |
|
|
2,268 |
|
- |
|
- |
|
||||
Other non-interest expenses |
|
14,738 |
|
|
- |
|
5 |
|
14,733 |
|
||||
(In thousands) | ||||||||||||||
Second Quarter 2021 | Non-Interest Expenses (GAAP) |
Merger and Restructuring Costs |
COVID-19 Pandemic- Related Expenses |
Adjusted (Non-GAAP) |
||||||||||
Non-interest expenses | $ |
130,172 |
|
$ |
11,047 |
$ |
1,105 |
$ |
118,020 |
|
||||
Employees' compensation and benefits |
|
49,714 |
|
|
- |
|
10 |
|
49,704 |
|
||||
Occupancy and equipment |
|
24,116 |
|
|
- |
|
992 |
|
23,124 |
|
||||
Business promotion |
|
3,225 |
|
|
- |
|
4 |
|
3,221 |
|
||||
Professional service fees |
|
16,764 |
|
|
- |
|
- |
|
16,764 |
|
||||
Taxes, other than income taxes |
|
5,576 |
|
|
- |
|
97 |
|
5,479 |
|
||||
Insurance and supervisory fees |
|
4,282 |
|
|
- |
|
- |
|
4,282 |
|
||||
Net gain on other real estate owned operations |
|
(139 |
) |
|
- |
|
- |
|
(139 |
) |
||||
Merger and restructuring costs |
|
11,047 |
|
|
11,047 |
|
- |
|
- |
|
||||
Other non-interest expenses |
|
15,587 |
|
|
- |
|
2 |
|
15,585 |
Allowance for credit losses for loans and finance leases to Loans Held for Investment (GAAP to Non-GAAP reconciliation) | ||||||||
As of September 30, 2021 | ||||||||
(In thousands) | Allowance for Credit Losses for Loans and Finance Leases |
Loans Held for Investment |
||||||
Allowance for credit losses for loans and finance leases and loans held for investment (GAAP) | $ |
288,360 |
|
$ |
11,140,582 |
|||
Less: | ||||||||
SBA PPP loans |
|
- |
|
|
218,360 |
|||
Allowance for credit losses for loans and finance leases and adjusted loans held for investment, excluding SBA PPP loans (Non-GAAP) | $ |
288,360 |
|
$ |
10,922,222 |
|||
Allowance for credit losses for loans and finance leases to loans held for investment (GAAP) |
|
2.59 |
% |
|||||
Allowance for credit losses for loans and finance leases to adjusted loans held for investment, excluding SBA PPP loans (Non-GAAP) |
|
2.64 |
% |
|||||
Allowance for credit losses for loans and finance leases to Loans Held for Investment (GAAP to Non-GAAP reconciliation) | ||||||||
As of June 30, 2021 | ||||||||
(In thousands) | Allowance for Credit Losses for Loans and Finance Leases |
Loans Held for Investment |
||||||
Allowance for credit losses for loans and finance leases and loans held for investment (GAAP) | $ |
324,958 |
|
$ |
11,387,594 |
|||
Less: | ||||||||
SBA PPP loans |
|
- |
|
|
349,261 |
|||
Allowance for credit losses for loans and finance leases and adjusted loans held for investment, excluding SBA PPP loans (Non-GAAP) | $ |
324,958 |
|
$ |
11,038,333 |
|||
Allowance for credit losses for loans and finance leases to loans held for investment (GAAP) |
|
2.85 |
% |
|||||
Allowance for credit losses for loans and finance leases to adjusted loans held for investment, excluding SBA PPP loans (Non-GAAP) |
|
2.94 |
% |
Management believes that the presentation of adjusted net income, adjusted non-interest expenses and adjustments to the various components of non-interest expenses, and the ratio of allowance for credit losses to adjusted total loans held for investment 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.
FIRST BANCORP | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||||||||||||
As of | ||||||||||||
September 30, |
June 30, |
December 31, |
||||||||||
(In thousands, except for share information) | 2021 |
2021 |
2020 |
|||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ |
2,655,491 |
|
$ |
2,786,066 |
|
$ |
1,433,261 |
|
|||
Money market investments: | ||||||||||||
Time deposits with other financial institutions |
|
300 |
|
|
300 |
|
|
300 |
|
|||
Other short-term investments |
|
2,382 |
|
|
2,403 |
|
|
60,272 |
|
|||
Total money market investments |
|
2,682 |
|
|
2,703 |
|
|
60,572 |
|
|||
Investment securities available for sale, at fair value (allowance for credit losses of $1,157 as of September 30, 2021; $1,166 as of June 30, 2021; $1,310 as of December 31, 2020) |
|
6,689,479 |
|
|
6,402,258 |
|
|
4,647,019 |
|
|||
Investment securities held to maturity, at amortized cost, net of allowance for credit losses of $8,317 as of September 30, 2021, $10,685 as of June 30, 2021, and $8,845 as of December 31, 2020 |
|
169,488 |
|
|
179,327 |
|
|
180,643 |
|
|||
Equity securities |
|
37,427 |
|
|
37,722 |
|
|
37,588 |
|
|||
Total investment securities |
|
6,896,394 |
|
|
6,619,307 |
|
|
4,865,250 |
|
|||
Loans, net of allowance for credit losses of $288,360 | ||||||||||||
(June 30, 2021 - $324,958; December 31, 2020 - $385,887) |
|
10,852,222 |
|
|
11,062,636 |
|
|
11,391,402 |
|
|||
Loans held for sale, at lower of cost or market |
|
30,681 |
|
|
32,699 |
|
|
50,289 |
|
|||
Total loans, net |
|
10,882,903 |
|
|
11,095,335 |
|
|
11,441,691 |
|
|||
Premises and equipment, net |
|
149,894 |
|
|
152,974 |
|
|
158,209 |
|
|||
Other real estate owned |
|
43,798 |
|
|
66,586 |
|
|
83,060 |
|
|||
Accrued interest receivable on loans and investments |
|
58,454 |
|
|
63,301 |
|
|
69,505 |
|
|||
Deferred tax asset, net |
|
243,447 |
|
|
273,869 |
|
|
329,261 |
|
|||
Goodwill |
|
38,611 |
|
|
38,611 |
|
|
38,632 |
|
|||
Intangible assets |
|
32,689 |
|
|
35,512 |
|
|
40,893 |
|
|||
Other assets |
|
251,791 |
|
|
235,698 |
|
|
272,737 |
|
|||
Total assets | $ |
21,256,154 |
|
$ |
21,369,962 |
|
$ |
18,793,071 |
|
|||
LIABILITIES | ||||||||||||
Deposits: | ||||||||||||
Non-interest-bearing deposits | $ |
7,097,313 |
|
$ |
6,258,463 |
|
$ |
4,546,123 |
|
|||
Interest-bearing deposits |
|
10,887,345 |
|
|
11,811,528 |
|
|
10,771,260 |
|
|||
Total deposits |
|
17,984,658 |
|
|
18,069,991 |
|
|
15,317,383 |
|
|||
Securities sold under agreements to repurchase |
|
300,000 |
|
|
300,000 |
|
|
300,000 |
|
|||
Advances from the FHLB |
|
320,000 |
|
|
320,000 |
|
|
440,000 |
|
|||
Other borrowings |
|
183,762 |
|
|
183,762 |
|
|
183,762 |
|
|||
Accounts payable and other liabilities |
|
269,769 |
|
|
291,254 |
|
|
276,747 |
|
|||
Total liabilities |
|
19,058,189 |
|
|
19,165,007 |
|
|
16,517,892 |
|
|||
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, 223,655,186 shares | ||||||||||||
(June 30, 2021 - 223,632,377 shares issued; December 31,2020 - 223,034,348 shares issued) |
|
22,366 |
|
|
22,363 |
|
|
22,303 |
|
|||
Less: Treasury stock (at par value) |
|
(1,716 |
) |
|
(1,298 |
) |
|
(480 |
) |
|||
Common stock outstanding, 206,495,900 shares outstanding | ||||||||||||
(June 30, 2021 - 210,649,414 shares outstanding; December 31, 2020 - 218,235,064 shares outstanding) |
|
20,650 |
|
|
21,065 |
|
|
21,823 |
|
|||
Additional paid-in capital |
|
799,132 |
|
|
847,412 |
|
|
946,476 |
|
|||
Retained earnings |
|
1,375,797 |
|
|
1,315,352 |
|
|
1,215,321 |
|
|||
Accumulated other comprehensive (loss) income |
|
(33,718 |
) |
|
(14,978 |
) |
|
55,455 |
|
|||
Total stockholders' equity |
|
2,197,965 |
|
|
2,204,955 |
|
|
2,275,179 |
|
|||
Total liabilities and stockholders' equity | $ |
21,256,154 |
|
$ |
21,369,962 |
|
$ |
18,793,071 |
|
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) | 2021 |
2021 |
2020 |
2021 |
2020 |
||||||||||||||
Net interest income: | |||||||||||||||||||
Interest income | $ |
200,172 |
|
$ |
201,459 |
|
$ |
170,402 |
|
$ |
596,273 |
|
$ |
494,282 |
|||||
Interest expense |
|
15,429 |
|
|
16,676 |
|
|
21,706 |
|
|
50,482 |
|
|
71,727 |
|||||
Net interest income |
|
184,743 |
|
|
184,783 |
|
|
148,696 |
|
|
545,791 |
|
|
422,555 |
|||||
Provision for credit losses (benefit) expense: | |||||||||||||||||||
Loans |
|
(8,734 |
) |
|
(26,302 |
) |
|
48,078 |
|
|
(49,479 |
) |
|
158,531 |
|||||
Unfunded loan commitments |
|
(971 |
) |
|
(1,669 |
) |
|
(803 |
) |
|
(3,346 |
) |
|
2,359 |
|||||
Debt securities |
|
(2,377 |
) |
|
1,816 |
|
|
(361 |
) |
|
(664 |
) |
|
2,404 |
|||||
Provision for credit losses (benefit) expense |
|
(12,082 |
) |
|
(26,155 |
) |
|
46,914 |
|
|
(53,489 |
) |
|
163,294 |
|||||
Net interest income after provision for credit losses |
|
196,825 |
|
|
210,938 |
|
|
101,782 |
|
|
599,280 |
|
|
259,261 |
|||||
Non-interest income: | |||||||||||||||||||
Service charges on deposit accounts |
|
8,690 |
|
|
8,788 |
|
|
5,848 |
|
|
25,782 |
|
|
16,280 |
|||||
Mortgage banking activities |
|
6,098 |
|
|
6,404 |
|
|
7,099 |
|
|
19,775 |
|
|
14,573 |
|||||
Net gain on investments |
|
- |
|
|
- |
|
|
5,288 |
|
|
- |
|
|
13,380 |
|||||
Gain on early extinguishment of debt |
|
- |
|
|
- |
|
|
94 |
|
|
- |
|
|
94 |
|||||
Other non-interest income |
|
15,158 |
|
|
14,692 |
|
|
11,605 |
|
|
45,229 |
|
|
36,699 |
|||||
Total non-interest income |
|
29,946 |
|
|
29,884 |
|
|
29,934 |
|
|
90,786 |
|
|
81,026 |
|||||
Non-interest expenses: | |||||||||||||||||||
Employees' compensation and benefits |
|
50,220 |
|
|
49,714 |
|
|
43,063 |
|
|
150,776 |
|
|
125,454 |
|||||
Occupancy and equipment |
|
23,306 |
|
|
24,116 |
|
|
19,064 |
|
|
71,664 |
|
|
50,567 |
|||||
Business promotion |
|
3,370 |
|
|
3,225 |
|
|
3,046 |
|
|
9,565 |
|
|
8,982 |
|||||
Professional service fees |
|
13,554 |
|
|
16,764 |
|
|
11,563 |
|
|
48,019 |
|
|
35,324 |
|||||
Taxes, other than income taxes |
|
5,238 |
|
|
5,576 |
|
|
4,510 |
|
|
17,013 |
|
|
11,967 |
|||||
Insurance and supervisory fees |
|
3,630 |
|
|
4,282 |
|
|
3,019 |
|
|
12,262 |
|
|
8,193 |
|||||
Net (gain) loss on other real estate owned operations |
|
(2,288 |
) |
|
(139 |
) |
|
1,019 |
|
|
(529 |
) |
|
3,018 |
|||||
Merger and restructuring costs |
|
2,268 |
|
|
11,047 |
|
|
10,441 |
|
|
24,582 |
|
|
14,188 |
|||||
Other non-interest expenses |
|
14,738 |
|
|
15,587 |
|
|
11,783 |
|
|
44,157 |
|
|
31,785 |
|||||
Total non-interest expenses |
|
114,036 |
|
|
130,172 |
|
|
107,508 |
|
|
377,509 |
|
|
289,478 |
|||||
Income before income taxes |
|
112,735 |
|
|
110,650 |
|
|
24,208 |
|
|
312,557 |
|
|
50,809 |
|||||
Income tax (expense) benefit |
|
(37,057 |
) |
|
(40,092 |
) |
|
4,405 |
|
|
(105,171 |
) |
|
1,326 |
|||||
Net income | $ |
75,678 |
|
$ |
70,558 |
|
$ |
28,613 |
|
$ |
207,386 |
|
$ |
52,135 |
|||||
Net income attributable to common stockholders | $ |
75,009 |
|
$ |
69,889 |
|
$ |
27,944 |
|
$ |
205,379 |
|
$ |
50,128 |
|||||
Earnings per common share: | |||||||||||||||||||
Basic | $ |
0.36 |
|
$ |
0.33 |
|
$ |
0.13 |
|
$ |
0.97 |
|
$ |
0.23 |
|||||
Diluted | $ |
0.36 |
|
$ |
0.33 |
|
$ |
0.13 |
|
$ |
0.96 |
|
$ |
0.23 |
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, |
|||||||||||
2021 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||||||||
Condensed Income Statements: | |||||||||||||||||||
Total interest income | $ |
200,172 |
|
$ |
201,459 |
|
$ |
170,402 |
$ |
596,273 |
|
$ |
494,282 |
||||||
Total interest expense |
|
15,429 |
|
|
16,676 |
|
|
21,706 |
|
50,482 |
|
|
71,727 |
||||||
Net interest income |
|
184,743 |
|
|
184,783 |
|
|
148,696 |
|
545,791 |
|
|
422,555 |
||||||
Provision for credit losses (benefit) expense |
|
(12,082 |
) |
|
(26,155 |
) |
|
46,914 |
|
(53,489 |
) |
|
163,294 |
||||||
Non-interest income |
|
29,946 |
|
|
29,884 |
|
|
29,934 |
|
90,786 |
|
|
81,026 |
||||||
Non-interest expenses |
|
114,036 |
|
|
130,172 |
|
|
107,508 |
|
377,509 |
|
|
289,478 |
||||||
Income before income taxes |
|
112,735 |
|
|
110,650 |
|
|
24,208 |
|
312,557 |
|
|
50,809 |
||||||
Income tax (expense) benefit |
|
(37,057 |
) |
|
(40,092 |
) |
|
4,405 |
|
(105,171 |
) |
|
1,326 |
||||||
Net income |
|
75,678 |
|
|
70,558 |
|
|
28,613 |
|
207,386 |
|
|
52,135 |
||||||
Net income attributable to common stockholders |
|
75,009 |
|
|
69,889 |
|
|
27,944 |
|
205,379 |
|
|
50,128 |
||||||
Per Common Share Results: | |||||||||||||||||||
Net earnings per share - basic | $ |
0.36 |
|
$ |
0.33 |
|
$ |
0.13 |
$ |
0.97 |
|
$ |
0.23 |
||||||
Net earnings per share - diluted | $ |
0.36 |
|
$ |
0.33 |
|
$ |
0.13 |
$ |
0.96 |
|
$ |
0.23 |
||||||
Cash dividends declared | $ |
0.07 |
|
$ |
0.07 |
|
$ |
0.05 |
$ |
0.21 |
|
$ |
0.15 |
||||||
Average shares outstanding |
|
206,725 |
|
|
213,574 |
|
|
216,922 |
|
212,406 |
|
|
216,876 |
||||||
Average shares outstanding diluted |
|
207,796 |
|
|
214,609 |
|
|
217,715 |
|
213,523 |
|
|
217,533 |
||||||
Book value per common share | $ |
10.47 |
|
$ |
10.30 |
|
$ |
10.03 |
$ |
10.47 |
|
$ |
10.03 |
||||||
Tangible book value per common share (1) | $ |
10.12 |
|
$ |
9.94 |
|
$ |
9.67 |
$ |
10.12 |
|
$ |
9.67 |
||||||
Selected Financial Ratios (In Percent): | |||||||||||||||||||
Profitability: | |||||||||||||||||||
Return on Average Assets |
|
1.42 |
|
|
1.40 |
|
|
0.72 |
|
1.38 |
|
|
0.50 |
||||||
Interest Rate Spread (2) |
|
3.51 |
|
|
3.73 |
|
|
3.75 |
|
3.67 |
|
|
4.01 |
||||||
Net Interest Margin (2) |
|
3.73 |
|
|
3.94 |
|
|
4.07 |
|
3.89 |
|
|
4.39 |
||||||
Return on Average Total Equity |
|
13.43 |
|
|
12.60 |
|
|
5.07 |
|
12.28 |
|
|
3.13 |
||||||
Return on Average Common Equity |
|
13.53 |
|
|
12.68 |
|
|
5.03 |
|
12.36 |
|
|
3.06 |
||||||
Average Total Equity to Average Total Assets |
|
10.61 |
|
|
11.13 |
|
|
14.22 |
|
11.22 |
|
|
15.84 |
||||||
Total capital |
|
20.67 |
|
|
20.38 |
|
|
20.32 |
|
20.67 |
|
|
20.32 |
||||||
Common equity Tier 1 capital |
|
17.62 |
|
|
17.34 |
|
|
17.21 |
|
17.62 |
|
|
17.21 |
||||||
Tier 1 capital |
|
17.92 |
|
|
17.64 |
|
|
17.52 |
|
17.92 |
|
|
17.52 |
||||||
Leverage |
|
10.17 |
|
|
10.51 |
|
|
13.04 |
|
10.17 |
|
|
13.04 |
||||||
Tangible common equity ratio (1) |
|
9.87 |
|
|
9.84 |
|
|
11.36 |
|
9.87 |
|
|
11.36 |
||||||
Dividend payout ratio |
|
19.29 |
|
|
21.39 |
|
|
38.81 |
|
21.72 |
|
|
64.90 |
||||||
Efficiency ratio (3) |
|
53.12 |
|
|
60.64 |
|
|
60.18 |
|
59.30 |
|
|
57.48 |
||||||
Asset Quality: | |||||||||||||||||||
Allowance for credit losses on loans and finance leases to loans held for investment |
|
2.59 |
|
|
2.85 |
|
|
3.25 |
|
2.59 |
|
|
3.25 |
||||||
Net charge-offs (annualized) to average loans |
|
0.99 |
|
|
0.27 |
|
|
0.45 |
|
0.56 |
|
|
0.55 |
||||||
Provision for credit losses for loans and finance leases to net charge-offs |
|
(31.34 |
) |
|
(342.66 |
) |
|
421.70 |
|
(102.98 |
) |
|
407.94 |
||||||
Non-performing assets to total assets |
|
0.81 |
|
|
1.20 |
|
|
1.57 |
|
0.81 |
|
|
1.57 |
||||||
Nonaccrual loans held for investment to total loans held for investment |
|
1.10 |
|
|
1.60 |
|
|
1.70 |
|
1.10 |
|
|
1.70 |
||||||
Allowance for credit losses on loans and finance leases to total nonaccrual loans held for investment |
|
236.09 |
|
|
177.91 |
|
|
191.13 |
|
236.09 |
|
|
191.13 |
||||||
Allowance for credit losses on loans and finance leases to total nonaccrual loans held for investment, excluding residential real estate loans |
|
468.48 |
|
|
533.11 |
|
|
490.13 |
|
468.48 |
|
|
490.13 |
||||||
Other Information: | |||||||||||||||||||
Common Stock Price: End of period | $ |
13.15 |
|
$ |
11.92 |
|
$ |
5.22 |
$ |
13.15 |
|
$ |
5.22 |
_______________ | |
1- |
Non-GAAP financial measure. See page 18 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 22 for GAAP to Non-GAAP reconciliations and refer to discussions 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. |
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 | 2021 |
|
2021 |
|
2020 |
|
2021 |
|
2021 |
|
2020 |
|
2021 |
|
2021 |
|
2020 |
|||||||
Interest-earning assets: | ||||||||||||||||||||||||
Money market & other short-term investments | $ |
2,514,882 |
$ |
1,741,167 |
$ |
1,450,669 |
$ |
968 |
$ |
433 |
$ |
405 |
0.15% |
0.10% |
0.11% |
|||||||||
Government obligations (2) |
|
2,325,835 |
|
1,895,868 |
|
1,129,976 |
|
7,044 |
|
6,609 |
|
4,890 |
1.20% |
1.40% |
1.72% |
|||||||||
MBS |
|
4,255,171 |
|
4,222,478 |
|
2,253,121 |
|
17,091 |
|
14,352 |
|
11,525 |
1.59% |
1.36% |
2.03% |
|||||||||
FHLB stock |
|
27,080 |
|
28,489 |
|
31,635 |
|
327 |
|
366 |
|
441 |
4.79% |
5.15% |
5.55% |
|||||||||
Other investments |
|
11,153 |
|
10,973 |
|
6,309 |
|
30 |
|
6 |
|
10 |
1.07% |
0.22% |
0.63% |
|||||||||
Total investments (3) |
|
9,134,121 |
|
7,898,975 |
|
4,871,710 |
|
25,460 |
|
21,766 |
|
17,271 |
1.11% |
1.11% |
1.41% |
|||||||||
Residential mortgage loans |
|
3,193,918 |
|
3,357,114 |
|
3,117,021 |
|
43,901 |
|
45,627 |
|
41,577 |
5.45% |
5.45% |
5.31% |
|||||||||
Construction loans |
|
171,088 |
|
177,688 |
|
185,359 |
|
2,178 |
|
5,108 |
|
2,453 |
5.05% |
11.53% |
5.26% |
|||||||||
C&I and commercial mortgage loans |
|
5,104,362 |
|
5,353,657 |
|
4,468,614 |
|
64,835 |
|
67,027 |
|
51,902 |
5.04% |
5.02% |
4.62% |
|||||||||
Finance leases |
|
528,893 |
|
501,734 |
|
447,854 |
|
9,945 |
|
9,322 |
|
8,349 |
7.46% |
7.45% |
7.42% |
|||||||||
Consumer loans |
|
2,225,665 |
|
2,170,538 |
|
1,944,823 |
|
60,713 |
|
58,745 |
|
53,796 |
10.82% |
10.86% |
11.00% |
|||||||||
Total loans (4) (5) |
|
11,223,926 |
|
11,560,731 |
|
10,163,671 |
|
181,572 |
|
185,829 |
|
158,077 |
6.42% |
6.45% |
6.19% |
|||||||||
Total interest-earning assets | $ |
20,358,047 |
$ |
19,459,706 |
$ |
15,035,381 |
$ |
207,032 |
$ |
207,595 |
$ |
175,348 |
4.03% |
4.28% |
4.64% |
|||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Brokered CDs | $ |
126,775 |
$ |
146,912 |
$ |
332,429 |
$ |
664 |
$ |
768 |
$ |
1,850 |
2.08% |
2.10% |
2.21% |
|||||||||
Other interest-bearing deposits |
|
10,788,020 |
|
11,131,583 |
|
8,412,342 |
|
9,018 |
|
10,014 |
|
14,238 |
0.33% |
0.36% |
0.67% |
|||||||||
Loans payable |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
0.00% |
0.00% |
0.00% |
|||||||||
Other borrowed funds |
|
483,762 |
|
483,762 |
|
493,572 |
|
3,848 |
|
3,828 |
|
2,840 |
3.16% |
3.17% |
2.29% |
|||||||||
FHLB advances |
|
320,000 |
|
356,374 |
|
494,348 |
|
1,899 |
|
2,066 |
|
2,778 |
2.35% |
2.33% |
2.24% |
|||||||||
Total interest-bearing liabilities | $ |
11,718,557 |
$ |
12,118,631 |
$ |
9,732,691 |
$ |
15,429 |
$ |
16,676 |
$ |
21,706 |
0.52% |
0.55% |
0.89% |
|||||||||
Net interest income | $ |
191,603 |
$ |
190,919 |
$ |
153,642 |
||||||||||||||||||
Interest rate spread | 3.51% |
3.73% |
3.75% |
|||||||||||||||||||||
Net interest margin | 3.73% |
3.94% |
4.07% |
_______________ | ||
1- |
On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. See page 22 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 $2.7 million, $2.5 million and $1.5 million for the quarters ended September 30, 2021, June 30, 2021, and September 30, 2020, 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 | 2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
Interest-earning assets: | |||||||||||||||
Money market & other short-term investments | $ |
1,898,678 |
$ |
1,099,634 |
$ |
1,750 |
$ |
2,950 |
0.12% |
0.36% |
|||||
Government obligations (2) |
|
1,890,437 |
|
784,348 |
|
19,627 |
|
15,454 |
1.39% |
2.63% |
|||||
MBS |
|
4,029,794 |
|
1,937,083 |
|
41,173 |
|
37,874 |
1.37% |
2.61% |
|||||
FHLB stock |
|
28,917 |
|
32,234 |
|
1,094 |
|
1,527 |
5.06% |
6.33% |
|||||
Other investments |
|
9,813 |
|
6,082 |
|
45 |
|
31 |
0.61% |
0.68% |
|||||
Total investments (3) |
|
7,857,639 |
|
3,859,381 |
|
63,689 |
|
57,836 |
1.08% |
2.00% |
|||||
Residential mortgage loans |
|
3,347,186 |
|
2,952,278 |
|
135,114 |
|
118,044 |
5.40% |
5.34% |
|||||
Construction loans |
|
186,998 |
|
159,092 |
|
10,530 |
|
6,519 |
7.53% |
5.47% |
|||||
C&I and commercial mortgage loans |
|
5,295,346 |
|
4,032,497 |
|
198,131 |
|
146,629 |
5.00% |
4.86% |
|||||
Finance leases |
|
504,379 |
|
433,014 |
|
28,137 |
|
24,015 |
7.46% |
7.41% |
|||||
Consumer loans |
|
2,181,738 |
|
1,895,308 |
|
178,195 |
|
156,972 |
10.92% |
11.06% |
|||||
Total loans (4) (5) |
|
11,515,647 |
|
9,472,189 |
|
550,107 |
|
452,179 |
6.39% |
6.38% |
|||||
Total interest-earning assets | $ |
19,373,286 |
$ |
13,331,570 |
$ |
613,796 |
$ |
510,015 |
4.24% |
5.11% |
|||||
Interest-bearing liabilities: | |||||||||||||||
Brokered CDs | $ |
153,984 |
$ |
393,038 |
$ |
2,421 |
$ |
6,572 |
2.10% |
2.23% |
|||||
Other interest-bearing deposits |
|
10,874,337 |
|
7,330,643 |
|
30,385 |
|
46,167 |
0.37% |
0.84% |
|||||
Loans payable |
|
- |
|
11,241 |
|
- |
|
21 |
0.00% |
0.25% |
|||||
Other borrowed funds |
|
483,762 |
|
472,715 |
|
11,248 |
|
10,311 |
3.11% |
2.91% |
|||||
FHLB advances |
|
371,685 |
|
522,172 |
|
6,428 |
|
8,656 |
2.31% |
2.21% |
|||||
Total interest-bearing liabilities | $ |
11,883,768 |
$ |
8,729,809 |
$ |
50,482 |
$ |
71,727 |
0.57% |
1.10% |
|||||
Net interest income | $ |
563,314 |
$ |
438,288 |
|||||||||||
Interest rate spread | 3.67% |
4.01% |
|||||||||||||
Net interest margin | 3.89% |
4.39% |
________________ | |
1- |
On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. See page 22 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 $7.8 million and $4.6 million for the nine-month periods ended September 30, 2021 and 2020, 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) | 2021 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Service charges on deposit accounts | $ |
8,690 |
$ |
8,788 |
$ |
5,848 |
$ |
25,782 |
$ |
16,280 |
|||||||
Mortgage banking activities |
|
6,098 |
|
6,404 |
|
7,099 |
|
19,775 |
|
14,573 |
|||||||
Insurance income |
|
2,318 |
|
2,215 |
|
1,473 |
|
9,775 |
|
7,436 |
|||||||
Other operating income |
|
12,840 |
|
12,477 |
|
10,132 |
|
35,454 |
|
29,263 |
|||||||
Non-interest income before net gain on sales of investment securities | 29,946 | 29,884 | 24,552 | 90,786 | 67,552 | ||||||||||||
Net gain on sales of investment securities |
|
- |
|
- |
|
5,288 |
|
- |
|
13,380 |
|||||||
Gain on early extinguishment of debt |
|
- |
|
- |
|
94 |
|
- |
|
94 |
|||||||
$ |
29,946 |
$ |
29,884 |
$ |
29,934 |
$ |
90,786 |
$ |
81,026 |
Table 5 ? Non-Interest Expenses
Quarter Ended | Nine-Month Period Ended | |||||||||||||||||||
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
||||||||||||||||
(In thousands) | 2021 |
2021 |
2020 |
2021 |
2020 |
|||||||||||||||
Employees' compensation and benefits | $ |
50,220 |
|
$ |
49,714 |
|
$ |
43,063 |
$ |
150,776 |
|
$ |
125,454 |
|||||||
Occupancy and equipment |
|
23,306 |
|
|
24,116 |
|
|
19,064 |
|
71,664 |
|
|
50,567 |
|||||||
Deposit insurance premium |
|
1,381 |
|
|
1,922 |
|
|
1,630 |
|
5,291 |
|
|
4,588 |
|||||||
Other insurance and supervisory fees |
|
2,249 |
|
|
2,360 |
|
|
1,389 |
|
6,971 |
|
|
3,605 |
|||||||
Taxes, other than income taxes |
|
5,238 |
|
|
5,576 |
|
|
4,510 |
|
17,013 |
|
|
11,967 |
|||||||
Collections, appraisals and other credit related fees |
|
1,451 |
|
|
1,080 |
|
|
1,262 |
|
3,841 |
|
|
4,345 |
|||||||
Outsourcing technology services |
|
8,878 |
|
|
11,946 |
|
|
6,949 |
|
33,197 |
|
|
21,450 |
|||||||
Other professional fees |
|
3,225 |
|
|
3,738 |
|
|
3,352 |
|
10,981 |
|
|
9,529 |
|||||||
Credit and debit card processing expenses |
|
5,573 |
|
|
6,795 |
|
|
4,859 |
|
16,646 |
|
|
12,747 |
|||||||
Business promotion |
|
3,370 |
|
|
3,225 |
|
|
3,046 |
|
9,565 |
|
|
8,982 |
|||||||
Communications |
|
2,250 |
|
|
2,407 |
|
|
2,246 |
|
7,119 |
|
|
5,975 |
|||||||
Net (gain) loss on OREO operations |
|
(2,288 |
) |
|
(139 |
) |
|
1,019 |
|
(529 |
) |
|
3,018 |
|||||||
Merger and restructuring costs |
|
2,268 |
|
|
11,047 |
|
|
10,441 |
|
24,582 |
|
|
14,188 |
|||||||
Other |
|
6,915 |
|
|
6,385 |
|
|
4,678 |
|
20,392 |
|
|
13,063 |
|||||||
Total | $ |
114,036 |
|
$ |
130,172 |
|
$ |
107,508 |
$ |
377,509 |
|
$ |
289,478 |
Table 6 ? Selected Balance Sheet Data
(In thousands) | As of | |||||||||||
September 30, |
June 30, |
December 31, |
||||||||||
2021 |
2021 |
2020 |
||||||||||
Balance Sheet Data: | ||||||||||||
Loans, including loans held for sale | $ |
11,171,263 |
|
$ |
11,420,293 |
|
$ |
11,827,578 |
||||
Allowance for credit losses for loans and finance leases |
|
288,360 |
|
|
324,958 |
|
|
385,887 |
||||
Money market and investment securities, net of allowance for credit losses for debt securities |
|
6,899,076 |
|
|
6,622,010 |
|
|
4,925,822 |
||||
Intangible assets |
|
71,300 |
|
|
74,123 |
|
|
79,525 |
||||
Deferred tax asset, net |
|
243,447 |
|
|
273,869 |
|
|
329,261 |
||||
Total assets |
|
21,256,154 |
|
|
21,369,962 |
|
|
18,793,071 |
||||
Deposits |
|
17,984,658 |
|
|
18,069,991 |
|
|
15,317,383 |
||||
Borrowings |
|
803,762 |
|
|
803,762 |
|
|
923,762 |
||||
Total preferred equity |
|
36,104 |
|
|
36,104 |
|
|
36,104 |
||||
Total common equity |
|
2,195,579 |
|
|
2,183,829 |
|
|
2,183,620 |
||||
Accumulated other comprehensive (loss) income, net of tax |
|
(33,718 |
) |
|
(14,978 |
) |
|
55,455 |
||||
Total equity |
|
2,197,965 |
|
|
2,204,955 |
|
|
2,275,179 |
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, | ||||||||
2021 |
2021 |
2020 |
||||||||
Residential mortgage loans | $ |
3,095,015 |
$ |
3,253,857 |
$ |
3,521,954 |
||||
Commercial loans: | ||||||||||
Construction loans |
|
170,208 |
|
177,032 |
|
212,500 |
||||
Commercial mortgage loans |
|
2,136,502 |
|
2,154,889 |
|
2,230,602 |
||||
Commercial and Industrial loans |
|
2,932,712 |
|
3,083,863 |
|
3,202,590 |
||||
Commercial loans |
|
5,239,422 |
|
5,415,784 |
|
5,645,692 |
||||
Finance leases |
|
548,837 |
|
516,756 |
|
472,989 |
||||
Consumer loans |
|
2,257,308 |
|
2,201,197 |
|
2,136,654 |
||||
Loans held for investment |
|
11,140,582 |
|
11,387,594 |
|
11,777,289 |
||||
Loans held for sale |
|
30,681 |
|
32,699 |
|
50,289 |
||||
Total loans | $ |
11,171,263 |
$ |
11,420,293 |
$ |
11,827,578 |
Table 8 ? Loan Portfolio by Geography
(In thousands) | As of September 30, 2021 | ||||||||||||
Puerto Rico | Virgin Islands | United States | Consolidated | ||||||||||
Residential mortgage loans | $ |
2,450,624 |
$ |
190,539 |
$ |
453,852 |
$ |
3,095,015 |
|||||
Commercial loans: | |||||||||||||
Construction loans |
|
45,666 |
|
4,471 |
|
120,071 |
|
170,208 |
|||||
Commercial mortgage loans |
|
1,644,633 |
|
64,665 |
|
427,204 |
|
2,136,502 |
|||||
Commercial and Industrial loans |
|
1,847,057 |
|
114,494 |
|
971,161 |
|
2,932,712 |
|||||
Commercial loans |
|
3,537,356 |
|
183,630 |
|
1,518,436 |
|
5,239,422 |
|||||
Finance leases |
|
548,837 |
|
- |
|
- |
|
548,837 |
|||||
Consumer loans |
|
2,187,584 |
|
51,913 |
|
17,811 |
|
2,257,308 |
|||||
Loans held for investment |
|
8,724,401 |
|
426,082 |
|
1,990,099 |
|
11,140,582 |
|||||
Loans held for sale |
|
29,205 |
|
830 |
|
646 |
|
30,681 |
|||||
Total loans | $ |
8,753,606 |
$ |
426,912 |
$ |
1,990,745 |
$ |
11,171,263 |
|||||
(In thousands) | As of June 30, 2021 | ||||||||||||
Puerto Rico | Virgin Islands | United States | Consolidated | ||||||||||
Residential mortgage loans | $ |
2,591,304 |
$ |
198,658 |
$ |
463,895 |
$ |
3,253,857 |
|||||
Commercial loans: | |||||||||||||
Construction loans |
|
62,830 |
|
4,362 |
|
109,840 |
|
177,032 |
|||||
Commercial mortgage loans |
|
1,687,731 |
|
58,105 |
|
409,053 |
|
2,154,889 |
|||||
Commercial and Industrial loans |
|
1,945,708 |
|
129,825 |
|
1,008,330 |
|
3,083,863 |
|||||
Commercial loans |
|
3,696,269 |
|
192,292 |
|
1,527,223 |
|
5,415,784 |
|||||
Finance leases |
|
516,756 |
|
- |
|
- |
|
516,756 |
|||||
Consumer loans |
|
2,128,572 |
|
52,287 |
|
20,338 |
|
2,201,197 |
|||||
Loans held for investment |
|
8,932,901 |
|
443,237 |
|
2,011,456 |
|
11,387,594 |
|||||
Loans held for sale |
|
25,565 |
|
935 |
|
6,199 |
|
32,699 |
|||||
Total loans | $ |
8,958,466 |
$ |
444,172 |
$ |
2,017,655 |
$ |
11,420,293 |
|||||
(In thousands) | As of December 31, 2020 | ||||||||||||
Puerto Rico | Virgin Islands | United States | Consolidated | ||||||||||
Residential mortgage loans | $ |
2,788,827 |
$ |
213,376 |
$ |
519,751 |
$ |
3,521,954 |
|||||
Commercial loans: | |||||||||||||
Construction loans |
|
73,619 |
|
11,397 |
|
127,484 |
|
212,500 |
|||||
Commercial mortgage loans |
|
1,793,095 |
|
60,129 |
|
377,378 |
|
2,230,602 |
|||||
Commercial and Industrial loans |
|
2,135,291 |
|
129,440 |
|
937,859 |
|
3,202,590 |
|||||
Commercial loans |
|
4,002,005 |
|
200,966 |
|
1,442,721 |
|
5,645,692 |
|||||
Finance leases |
|
472,989 |
|
- |
|
- |
|
472,989 |
|||||
Consumer loans |
|
2,058,217 |
|
51,726 |
|
26,711 |
|
2,136,654 |
|||||
Loans held for investment |
|
9,322,038 |
|
466,068 |
|
1,989,183 |
|
11,777,289 |
|||||
Loans held for sale |
|
44,994 |
|
681 |
|
4,614 |
|
50,289 |
|||||
Total loans | $ |
9,367,032 |
$ |
466,749 |
$ |
1,993,797 |
$ |
11,827,578 |
Table 9 ? Non-Performing Assets
As of | ||||||||||||
(Dollars in thousands) | September 30, |
June 30, |
December 31, |
|||||||||
2021 |
2021 |
2020 |
||||||||||
Nonaccrual loans held for investment: | ||||||||||||
Residential mortgage | $ |
60,589 |
|
$ |
121,695 |
|
$ |
125,367 |
|
|||
Commercial mortgage |
|
26,812 |
|
|
27,242 |
|
|
29,611 |
|
|||
Commercial and Industrial |
|
18,990 |
|
|
18,835 |
|
|
20,881 |
|
|||
Construction |
|
6,093 |
|
|
6,175 |
|
|
12,971 |
|
|||
Consumer and Finance leases |
|
9,657 |
|
|
8,703 |
|
|
16,259 |
|
|||
Total nonaccrual loans held for investment |
|
122,141 |
|
|
182,650 |
|
|
205,089 |
|
|||
OREO |
|
43,798 |
|
|
66,586 |
|
|
83,060 |
|
|||
Other repossessed property |
|
3,550 |
|
|
3,470 |
|
|
5,357 |
|
|||
Other assets (1) |
|
2,894 |
|
|
2,928 |
|
|
- |
|
|||
Total non-performing assets (2) | $ |
172,383 |
|
$ |
255,634 |
|
$ |
293,506 |
|
|||
Past-due loans 90 days and still accruing (3) | $ |
148,322 |
|
$ |
144,262 |
|
$ |
146,889 |
|
|||
Allowance for credit losses on loans | $ |
288,360 |
|
$ |
324,958 |
|
$ |
385,887 |
|
|||
Allowance for credit losses on loans to total nonaccrual loans held for investment |
|
236.09 |
% |
|
177.91 |
% |
|
188.16 |
% |
|||
Allowance for credit losses on loans to total nonaccrual loans held for investment, excluding residential real estate loans |
|
468.48 |
% |
|
533.11 |
% |
|
484.04 |
% |
_______________ | |
(1) |
Residential pass-through MBS issued by the Puerto Rico Housing Finance Authority held as part of the available-for-sale investment securities portfolio with an amortized cost of $3.7 million, recorded on the Corporation's books at its fair value of $2.9 million. |
(2) |
Excludes PCD loans previously accounted for under ASC 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans accounted for under ASC 310-30 as "units of account" both at the time of adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans accrete interest income based on the effective interest rate of the loan pools determined at the time of adoption of CECL and will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The amortized cost of such loans as of September 30, 2021, June 30,2021, and December 31, 2020, amounted to $120.7 million, $125.2 million, and $130.9 million, respectively. |
(3) |
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $8.5 million (June 30, 2021 - $8.0 million; December 31, 2020 - $10.7 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability. |
Table 10 ? Non-Performing Assets by Geography
As of | ||||||||||
(In thousands) | September 30, |
June 30, |
December 31, |
|||||||
2021 |
2021 |
2020 |
||||||||
Puerto Rico: | ||||||||||
Nonaccrual loans held for investment: | ||||||||||
Residential mortgage | $ |
41,309 |
$ |
100,089 |
$ |
101,763 |
||||
Commercial mortgage |
|
16,839 |
|
17,172 |
|
18,733 |
||||
Commercial and Industrial |
|
16,799 |
|
16,632 |
|
18,876 |
||||
Construction |
|
4,604 |
|
4,679 |
|
5,323 |
||||
Finance leases |
|
698 |
|
598 |
|
1,466 |
||||
Consumer |
|
8,511 |
|
7,628 |
|
13,615 |
||||
Total nonaccrual loans held for investment |
|
88,760 |
|
146,798 |
|
159,776 |
||||
OREO |
|
39,375 |
|
61,976 |
|
78,618 |
||||
Other repossessed property |
|
3,333 |
|
3,262 |
|
5,120 |
||||
Other assets (1) |
|
2,894 |
|
2,928 |
|
- |
||||
Total non-performing assets (2) | $ |
134,362 |
$ |
214,964 |
$ |
243,514 |
||||
Past-due loans 90 days and still accruing (3) | $ |
146,823 |
$ |
142,622 |
$ |
144,619 |
||||
Virgin Islands: | ||||||||||
Nonaccrual loans held for investment: | ||||||||||
Residential mortgage | $ |
10,491 |
$ |
9,372 |
$ |
9,182 |
||||
Commercial mortgage |
|
9,973 |
|
10,070 |
|
10,878 |
||||
Commercial and Industrial |
|
1,415 |
|
1,400 |
|
1,444 |
||||
Construction |
|
1,489 |
|
1,496 |
|
7,648 |
||||
Consumer |
|
88 |
|
136 |
|
354 |
||||
Total nonaccrual loans held for investment |
|
23,456 |
|
22,474 |
|
29,506 |
||||
OREO |
|
4,189 |
|
4,610 |
|
4,411 |
||||
Other repossessed property |
|
175 |
|
112 |
|
109 |
||||
Total non-performing assets | $ |
27,820 |
$ |
27,196 |
$ |
34,026 |
||||
Past-due loans 90 days and still accruing | $ |
1,249 |
$ |
1,356 |
$ |
2,020 |
||||
United States: | ||||||||||
Nonaccrual loans held for investment: | ||||||||||
Residential mortgage | $ |
8,789 |
$ |
12,234 |
$ |
14,422 |
||||
Commercial mortgage |
|
- |
|
- |
|
- |
||||
Commercial and Industrial |
|
776 |
|
803 |
|
561 |
||||
Construction |
|
- |
|
- |
|
- |
||||
Consumer |
|
360 |
|
341 |
|
824 |
||||
Total nonaccrual loans held for investment |
|
9,925 |
|
13,378 |
|
15,807 |
||||
OREO |
|
234 |
|
- |
|
31 |
||||
Other repossessed property |
|
42 |
|
96 |
|
128 |
||||
Total non-performing assets | $ |
10,201 |
$ |
13,474 |
$ |
15,966 |
||||
Past-due loans 90 days and still accruing | $ |
250 |
$ |
284 |
$ |
250 |
(1) |
Residential pass-through MBS issued by the Puerto Rico Housing Finance Authority held as part of the available-for-sale investment securities portfolio with an amortized cost of $3.7 million, recorded on the Corporation's books at its fair value of $2.9 million. |
(2) |
Excludes PCD loans previously accounted for under ASC 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans accounted for under ASC 310-30 as "units of account" both at the time of adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans accrete interest income based on the effective interest rate of the loan pools determined at the time of adoption of CECL and will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The amortized cost of such loans as of September 30, 2021, June 30,2021, and December 31, 2020, amounted to $120.7 million, $125.2 million, and $130.9 million, respectively. |
(3) |
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $8.5 million (June 30, 2021 - $8.0 million; December 31, 2020 - $10.7 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability. |
Table 11 ? Allowance for Credit Losses for Loans and Finance Leases
Quarter Ended | Nine-Month Period Ended | |||||||||||||||||||
(Dollars in thousands) | September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||||
2021 |
2021 |
2020 |
2021 |
2020 |
||||||||||||||||
Allowance for credit losses on loans and finance leases, beginning balance | $ |
324,958 |
|
$ |
358,936 |
|
$ |
319,297 |
|
$ |
385,887 |
|
$ |
155,139 |
|
|||||
Impact of adopting CECL |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
81,165 |
|
|||||
Allowance for credit losses on loans and finance leases, beginning balance after CECL adoption |
|
324,958 |
|
|
358,936 |
|
|
319,297 |
|
|
385,887 |
|
|
236,304 |
|
|||||
Provision for credit losses on loans and finance leases (benefit) expense |
|
(8,734 |
) |
|
(26,302 |
) |
|
48,078 |
|
|
(49,479 |
) |
|
158,531 |
|
|||||
Initial allowance on PCD loans |
|
- |
|
|
- |
|
|
28,744 |
|
|
- |
|
|
28,744 |
|
|||||
Net (charge-offs) recoveries of loans: | ||||||||||||||||||||
Residential mortgage |
|
(23,450 |
)(1) |
|
|
(1,987 |
) |
|
(2,283 |
) |
|
(27,529 |
)(1) |
|
|
(7,856 |
) |
|||
Commercial mortgage |
|
(386 |
) |
|
(31 |
) |
|
(3,104 |
) |
|
(1,157 |
) |
|
(3,163 |
) |
|||||
Commercial and Industrial |
|
327 |
|
|
5,809 |
|
|
(70 |
) |
|
5,591 |
|
|
(75 |
) |
|||||
Construction |
|
35 |
|
|
38 |
|
|
36 |
|
|
64 |
|
|
6 |
|
|||||
Consumer and finance leases |
|
(4,390 |
) |
|
(11,505 |
) |
|
(5,980 |
) |
|
(25,017 |
) |
|
(27,773 |
) |
|||||
Net charge-offs |
|
(27,864 |
) |
|
(7,676 |
) |
|
(11,401 |
) |
|
(48,048 |
) |
|
(38,861 |
) |
|||||
Allowance for credit losses on loans and finance leases, end of period | $ |
288,360 |
|
$ |
324,958 |
|
$ |
384,718 |
|
$ |
288,360 |
|
$ |
384,718 |
|
|||||
Allowance for credit losses on loans and finance leases to period end total loans held for investment |
|
2.59 |
% |
|
2.85 |
% |
|
3.25 |
% |
|
2.59 |
% |
|
3.25 |
% |
|||||
Net charge-offs (annualized) to average loans outstanding during the period (2) |
|
0.99 |
% |
|
0.27 |
% |
|
0.45 |
% |
|
0.56 |
% |
|
0.55 |
% |
|||||
Provision for credit losses on loans and finance leases to net charge-offs during the period | -0.31x |
-3.43x |
4.22x |
-1.03x |
4.08x |
(1) |
Includes net charge-offs totaling $23.1 million associated with the bulk sale of residential mortgage nonaccrual loans and related servicing advance receivables. | |
(2) |
Excluding net charge-offs associated with the bulk sale, total net charge-offs to average loans for the third quarter and first nine months of 2021 was 0.17% and 0.29%, respectively. |
Table 12 ? Net Charge-Offs to Average Loans
Nine-Month Period Ended |
Year Ended | |||||||||||
September 30, 2021 |
December 31, |
December 31, |
December 31, |
December 31, |
||||||||
(annualized) | 2020 |
2019 |
2018 |
2017 |
||||||||
Residential mortgage | 1.10% |
(1) |
0.30% |
0.66% |
0.67% |
0.79% |
||||||
Commercial mortgage | 0.07% |
0.08% |
0.97% |
1.03% |
2.42% |
|||||||
Commercial and Industrial | -0.24% |
0.02% |
0.16% |
0.38% |
0.66% |
|||||||
Construction | -0.05% |
-0.06% |
-0.28% |
6.75% |
2.05% |
|||||||
Consumer and finance leases | 1.24% |
1.53% |
2.05% |
2.31% |
2.12% |
|||||||
Total loans | 0.56% |
(1) |
0.48% |
0.91% |
1.09% |
1.33% |
(1) |
Includes net charge-offs totaling $23.1 million associated with the bulk sale of residential mortgage nonaccrual loans and related servicing advance receivables. Excluding net charge-offs associated with the bulk sale, residential mortgage and total net charge-offs to related average loans for the first nine months of 2021 was 0.18% and 0.29%, respectively. |
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