SAN JUAN, Puerto Rico--(BUSINESS WIRE)-- First BanCorp (the "Corporation") (NYSE:FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank"), today reported results for the fourth quarter and year ended December 31, 2009. The net loss for the quarter totaled $53.2 million, or $(0.64) per diluted share, compared to a net loss of $165.2 million, or $(1.89) per diluted share for the third quarter ended September 30, 2009. As previously reported, the net loss for the third quarter ended September 30, 2009 included a non-cash charge of $152.2 million, or $(1.65) per share, for an increase in the valuation allowance against the Corporation's deferred tax assets. Net loss for the year ended December 31, 2009 was $275.2 million, or $(3.48) per diluted share, compared to net income of $109.9 million, or $0.75 per diluted share for 2008.
Total assets decreased by $452.7 million to $19.6 billion as of December 31, 2009 from $20.1 billion as of September 30, 2009. Non-performing loans increased by $25.0 million, or 2%, to $1.56 billion as of December 31, 2009 from $1.54 billion as of September 30, 2009. Meanwhile, the allowance to total loans ratio increased to 3.8% as of December 31, 2009 from 3.4% as of September 30, 2009.
This press release should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release.
Aurelio Aleman, Chief Executive Officer of First BanCorp commented, "First BanCorp's results in the fourth quarter reflect the management team's concerted efforts towards stabilizing the credit portfolios, as seen in the slowdown in growth of non-performing loans and slight improvements in both net charge-offs and provision for loan losses, while the Puerto Rico and United States economies remain pressured. Our core business continued to progress as evidenced by net interest margin expansion and controllable expense reduction."
Mr. Aleman continued, "Results for 2009 were mostly driven by the high level of reserves on our loan portfolios taken during the year. However, during 2009 the Corporation was very successful in its core deposit growth initiatives, as evidenced by a 10% growth in non-brokered deposits in 2009, while reducing funding costs. Furthermore, non-interest income increased and we achieved reductions in controllable expenses. The difficult economic environment continued throughout all of 2009 and is expected to persist in Puerto Rico for most of 2010; therefore, we expect to see continued pressure on credit quality. Our markets have suffered decreasing real estate values and low absorption of housing units that demanded incremental reserves primarily in our construction and mortgage portfolios."
"The First BanCorp management team is focused on improving the financial performance of the Corporation. In the fourth quarter of 2009, the Management Team and the Board of Directors realigned the strategic focus of the Corporation and defined the key strategies to achieve a turnaround in financial results. The focus is primarily on: reducing loan portfolio risk to improve asset quality while increasing loan spreads; expanding initiatives for greater core deposit growth; increasing non-interest income including deployment of identified opportunities in transaction banking services; continuing reduction of expenses by expanding our business rationalization initiative; improving overall efficiency and enhancing our technological infrastructure through targeted investments. In line with market trends and conditions, the Corporation is beginning to execute strategies to reduce the balance sheet into 2010. The revised strategies are aligned with the fundamental objective of improving our capital position to successfully overcome anticipated challenges in 2010. To achieve these objectives, we will continue to develop and retain the best human capital, while restructuring the organization as needed to compete in the markets we serve," said Mr. Aleman.
"First BanCorp continues to exceed well-capitalized thresholds with Tier 1 and Total risk-based capital ratios of approximately 12.2% and 13.5%, respectively. Our Tier 1 common equity to risk-weighted assets ratio is approximately 4.16%. Given the present economic outlook, the Corporation must enhance its capital structure to absorb potential future credit losses, maintain a leadership position, and situate the Corporation to benefit from the expected consolidation of the Puerto Rico banking industry. Therefore, we are taking actions to fortify our common capital levels and will evaluate other capital improvement alternatives as needed," concluded Mr. Aleman.
In a separate press release, the Corporation announced today actions intended to improve its capital position.
2009 Fourth Quarter versus 2009 Third Quarter
Net Interest Income
Compared with the third quarter of 2009, net interest income, excluding fair value adjustments ("valuations") on derivatives and financial liabilities measured at fair value, increased $2.6 million, or 2%. This reflected a 9 basis point increase in the net interest margin to 2.77% from 2.68% last quarter. Net interest income excluding valuations on derivative instruments and financial liabilities and net interest income on a tax-equivalent basis are non-GAAP measures. (See Basis of Presentation below for additional information.) The following table reconciles net interest income in accordance with generally accepted accounting principles in the United States of America (GAAP) to net interest income, excluding valuations, and to net interest income on a tax-equivalent basis and net interest spread and net interest margin on a GAAP basis to these items excluding valuations and on a tax-equivalent basis.
(Dollars in Quarter Ended Year ended thousands) December 31, September 30, December 31, December 31, December 31, 2009 2009 2008 2009 2008 Net interest $ 137,297 $ 129,133 $ 124,196 $ 519,042 $ 527,881 income - GAAP Unrealized loss (gain) on derivative instruments and (2,517 ) 3,074 5,261 (5,474 ) (5,177 ) liabilities measured at fair value Net interest income excluding 134,780 132,207 129,457 513,568 522,704 valuations Tax-equivalent 12,311 12,925 15,706 53,617 56,408 adjustment Net interest income on a tax-equivalent $ 147,091 $ 145,132 $ 145,163 $ 567,185 $ 579,112 basis excluding valuations Average interest-earning $ 19,283,455 $ 19,541,256 $ 18,853,837 $ 19,326,224 $ 18,082,806 assets Net interest 2.55 % 2.32 % 2.27 % 2.36 % 2.55 % spread - GAAP Net interest spread excluding 2.50 % 2.39 % 2.37 % 2.34 % 2.52 % valuations Net interest spread on a tax-equivalent 2.75 % 2.66 % 2.71 % 2.62 % 2.83 % basis excluding valuations Net interest 2.82 % 2.62 % 2.62 % 2.69 % 2.92 % margin - GAAP Net interest margin excluding 2.77 % 2.68 % 2.73 % 2.66 % 2.89 % valuations Net interest margin on a tax-equivalent 3.03 % 2.95 % 3.06 % 2.93 % 3.20 % basis excluding valuations
The increase in the net interest margin, excluding valuations, resulted from lower funding costs, continuing measures taken to improve loan pricing and spreads and a lower volume of loans entering into non-accrual status.
The decrease in the Corporation's average cost of funds is related to the continued low level of interest rates and changes in the mix of financing sources. The current low interest rate levels is reflected in the pricing of newly issued brokered CDs at rates significantly lower than those that matured during the quarter. The average cost of brokered CDs decreased by 27 basis points from 2.79% for the third quarter to 2.52% for the fourth quarter. Also, the Corporation was able to reduce the average cost of its core deposits from 2.07% for the third quarter to 1.95% for the fourth quarter.
Partially offsetting the aforementioned positive factors was a decline in the average volume of interest-earning assets. This includes a decrease of $714.6 million in the average volume of investment securities, driven by the sale of approximately $460 million of U.S. agency mortgage-backed securities ("MBS") during the fourth quarter and the full impact of $456 million of MBS sold in the last week of the third quarter. The decrease in the average volume of investments more than offset the $456.8 million increase in the average volume of loans resulting mainly from additional credit facilities extended to the Government of Puerto Rico.
Provision for Loan and Lease Losses
The provision for loan and lease losses for the fourth quarter declined by $10.9 million to $137.2 million compared to a provision of $148.1 million in the third quarter. (See the Credit Quality Performance section below for a full discussion.)
Non-Interest Income
Non-interest income decreased $11.2 million to $38.8 million in the fourth quarter largely driven by a $24.4 million gain on the sale of U.S. Agency MBS versus a realized gain on the sale of MBS of $28.3 million in the third quarter. The recent drop in mortgage pre-payments, as well as future pre-payment estimates, could result in the extension of the MBS portfolio's average life, which in turn would shift the balance sheet's interest rate gap position. In an effort to manage such risk, and taking advantage of market opportunities, approximately $460 million of U.S. Agency MBS (mainly 30 and 15 Year fixed rate MBS with an aggregate weighted average yield of 5.33%) were sold in the fourth quarter, compared to approximately $613 million of 30 Year U.S. Agency MBS sold in the third quarter. Also, results for the third quarter of 2009 were impacted by gains of $5.7 million on the sale of U.S. Treasury Notes and VISA shares.
Non-interest income was further impacted by a $0.6 million decrease in income from insurance activities and a $0.6 million decrease in gains from mortgage banking activities as a result of a lower amount of loan sales and securitizations.
Non-Interest Expenses
Non-interest expenses increased $6.0 million to $88.8 million in the fourth quarter primarily reflecting:
-- A $7.0 million increase in the federal deposit insurance premium, -- A $1.4 million increase in business promotion expenses, due to a higher seasonal level of marketing and advertising activities for the Corporation's deposit and loan products, -- A $1.1 million increase in professional service fees, and -- A $1.3 million increase in the reserve for probable losses on outstanding unfunded loan commitments.
The aforementioned increases were partially offset by a decline in certain controllable expenses as management continued to reduce costs through its corporate-wide Business Rationalization initiative. Compared to the third quarter, employee compensation and benefit expenses decreased $4.8 million, mainly due to reductions in bonuses and incentive compensation as well as a lower headcount. The number of full-time equivalent employees decreased by approximately 57, or 2%, in the fourth quarter and occupancy costs decreased by $0.5 million.
Income Taxes
For the fourth quarter ended December 31, 2009, the Corporation recognized income tax expense of $3.3 million, mainly related to the operations of profitable subsidiaries. As previously reported, the third quarter income tax expense of $113.5 million included a non-cash charge of $152.2 million for an increase in the valuation allowance against the Corporation's deferred tax asset. The valuation allowance increased by approximately $35 million related to deferred tax assets created during the fourth quarter. (See Full Year 2009 Compared to 2008 - Income Taxes discussion below for additional information.)
Pre-Tax, Pre-Provision Earnings
One performance metric that management believes is useful in analyzing performance in times of economic stress is the level of pre-tax earnings adjusted to exclude the provision for loan and lease losses and certain other items. (See Pre-tax, Pre-Provision earnings in Basis of Presentation for a full description of this non-GAAP financial measure.)
The following table shows pre-tax, pre-provision earnings of $62.9 million in fourth quarter of 2009, up $0.6 million from the prior quarter.
(In Quarter Ended Year ended thousands) December September December December 31, December 31, 30, 31, 31, 2009 2009 2008 2009 2008 Net (loss) $ (53,202 ) $ (165,218 ) $ 18,808 $ (275,187 ) $ 109,937 income - GAAP Less: Income tax expense 3,311 113,473 (10,780 ) 4,534 (31,732 ) (benefit) Add: Provision for 137,187 148,090 48,513 579,858 190,948 loan and lease losses Net (gain) loss on sale and OTTI of (24,387 ) (30,281 ) (6,243 ) (81,362 ) (11,719 ) investment securities Gain on VISA shares and - (3,784 ) - (3,784 ) (9,474 ) related proceeds FDIC special - - - 8,894 - assessment Core deposit - - - 3,988 - impairment Pre-tax, pre-provision $ 62,909 $ 62,280 $ 50,298 $ 236,941 $ 247,960 earnings
This improvement primarily reflects higher net interest margin, partially offset by higher operating expenses as well as lower income from insurance, rental and mortgage banking activities.
Full Year 2009 Compared to 2008
Net loss for the year ended December 31, 2009 amounted to $275.2 million, or $(3.48) per diluted share, compared to net income of $109.9 million, or $0.75 per diluted share for 2008.
Significant income statement items for 2009 include:
-- A provision for loan and lease losses of $579.9 million, an increase of $388.9 million, as compared to $190.9 million for 2008, mainly due to sustained weak economic conditions which have resulted in higher non-performing loan levels, declines in collateral values and increases in charge-offs. -- An income tax expense of $4.5 million compared to an income tax benefit of $31.7 million for 2008, mainly due to a non-cash charge of $152.2 million to increase the valuation allowance against deferred tax assets. -- An increase of $18.7 million in non-interest expenses, driven by non-controllable expenses such as increases in the deposit insurance premium and impairment charges to intangible assets. -- A decrease of $8.8 million in net interest income, reflecting significant increases in non-performing loans. -- An increase of $67.6 million in non-interest income, driven by gains on sale of investment securities and higher gains from mortgage banking activities.
Net interest income, excluding valuations on derivative instruments and financial liabilities, decreased 2% to $513.6 million for 2009 from $522.7 million for 2008. This resulted in net interest margin of 2.66%, compared to 2.89% for 2008. The decrease is mainly associated with a significant increase in non-performing loans and the repricing of floating-rate commercial and construction loans at lower rates due to decreases in market interest rates such as three-month LIBOR and the Prime rate, even though the Corporation is actively increasing spreads on loan renewals. Lower loan yields more than offset the benefit of lower short-term rates in the average cost of funding and the increase in average interest-earning assets. The lower average cost of funding was primarily reflected by a 103 basis points decreased in the average cost of brokered CDs while the volume of brokered CDs significantly decreased during 2009. The Corporation was able to decrease brokered deposits by $868.4 million since December 31, 2008 while the average volume of brokered CDs decreased by $1.1 billion and $370.4 million for the quarter and year ended December 31, 2009 compared to the corresponding periods in 2008.
For 2009, the Corporation recorded a provision for loan and lease losses of $579.9 million, compared to $190.9 million in 2008. The increase is mainly attributable to:
-- The significant increase in the level of non-performing loans. -- The migration of loans to higher risk categories, thus requiring higher general or specific reserves (if also considered impaired). -- The continued weak economic conditions and declines in collateral values that contributed to a surge in net charge-offs and resulted in changes to reserve factors used to determine the general reserve, and -- The overall growth of the loan portfolio.
Even though deterioration in credit quality was observed in all of the Corporation's portfolios, it was more significant in the construction and commercial loan portfolios, which were affected by both the stagnant housing market and further weakening in the economies of the markets served during most of 2009.
Non-interest income increased $67.6 million to $142.3 million for 2009, primarily reflecting:
-- A $59.6 million increase in realized gains on the sale of investment securities, primarily reflecting a $79.9 million gain on the sale of MBS (mainly U.S. agency fixed-rate MBS), compared to realized gains on the sale of MBS of $17.7 million in 2008. In an effort to manage interest rate risk, and taking advantage of favorable market valuations, approximately $1.8 billion of U.S. agency MBS (mainly 30 and 15 Year fixed-rate U.S. agency MBS) were sold in 2009, compared to approximately $526 million of U.S. agency MBS sold in 2008. -- A $5.3 million increase in gains from mortgage banking activities, due to the increased volume of loan sales and securitizations. Servicing assets recorded at the time of sale amounted to $6.1 million for 2009 compared to $1.6 million for 2008. The increase is mainly related to $4.6 million of capitalized servicing assets in connection with the securitization of approximately $305 million FHA/VA mortgage loans into GNMA MBS. For the first time in several years, the Corporation has been engaged in the securitization of mortgage loans in 2009. -- A $5.6 million decrease in other-than-temporary impairment charges (OTTI) to equity securities, partially offset by OTTI charges through earnings of $1.3 million in 2009 related to the credit loss portion of available-for-sale private label MBS.
Also contributing to the increase in non-interest income was higher fee income, mainly fees on loans and service charges on deposit accounts offset by lower income from insurance activities and a reduction in income from vehicle rental activities. During the first three quarters of 2009, income from rental activities decreased by $0.5 million due to a lower volume of business. A further reduction of $0.4 million was observed in the fourth quarter of 2009, as compared to the comparable period in 2008, mainly related to the disposition of the Corporation's vehicle rental business early in the quarter that was partially offset by a $0.2 million gain recorded for the disposition of the business. As part of its Business Rationalization strategies, the Corporation divested its short-term rental business during the fourth quarter of 2009.
Non-interest expenses increased $18.7 million to $352.1 million for 2009 primarily reflecting:
-- An increase of $30.5 million in the FDIC deposit insurance premium, including $8.9 million for the special assessment levied by the FDIC in 2009 and increases in regular assessment rates. -- A $4.0 million core deposit intangible impairment charge in 2009. -- A $1.8 million increase in the reserve for probable losses on outstanding unfunded loan commitments.
The aforementioned increases were partially offset by decreases in certain controllable expenses such as:
-- A $9.1 million decrease in employees' compensation and benefit expenses, mainly due to a lower headcount and reductions in bonuses, incentive compensation and overtime costs. The number of full time equivalent employees decreased by 163, or 6%, during 2009. -- A $3.4 million decrease in business promotion expenses due to a lower level of marketing activities. -- A $1.1 million decrease in taxes, other than income taxes, mainly driven by a decrease in municipal taxes which are assessed based on taxable gross revenues.
For 2009, the Corporation recorded income tax expense of $4.5 million compared to an income tax benefit of $31.7 million for 2008. The income tax expense for 2009 mainly resulted from the aforementioned $152.2 million non-cash increase of the valuation allowance for the Corporation's deferred tax asset. The increase in the valuation allowance does not have any impact on the Corporation's liquidity or cash flow, nor does such an allowance preclude the Corporation from using tax losses, tax credits or other deferred tax assets in the future. As of December 31, 2009, the deferred tax asset, net of a valuation allowance of $191.7 million, amounted to $109.2 million compared to $128.0 million as of December 31, 2008.
Accounting for income taxes requires that companies assess whether a valuation allowance should be recorded against their deferred tax assets based on the consideration of all available evidence, using a "more likely than not" realization standard. In making such assessment, significant weight is to be given to evidence that can be objectively verified, including both positive and negative evidence. The accounting for income taxes guidance requires the consideration of all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. As previously reported, in assessing the weight of positive and negative evidence, a significant negative factor that resulted in the increase of the valuation allowance was that FirstBank was in a three-year historical cumulative loss as of the end of the third quarter of 2009, mainly as a result of charges to the provision for loan and lease losses resulting from the economic downturn. However, as of December 31, 2009, management concluded that $109.2 million of the deferred tax assets will be realized. In assessing the likelihood of realizing the deferred tax assets, management has considered all four sources of taxable income mentioned above and has identified tax planning strategies as the main source of taxable income to realize the deferred tax asset amount. Management will continue monitoring the likelihood of realizing the deferred tax assets in future periods. If future events differ from management's December 31, 2009 assessment, an additional valuation allowance may need to be established which may have a material adverse effect on the Corporation's results of operations. Similarly, to the extent the realization of a portion, or all, of the tax asset becomes "more likely than not" based on changes in circumstances (such as improved earnings, changes in tax laws or other relevant changes), a reversal of that portion of the deferred tax asset valuation allowance will then be recorded.
Credit Quality
Credit quality showed some positive signs in the fourth quarter of 2009 reflected by a slower growth rate in non-performing assets and reductions in net charge-offs and the provision for loan and lease losses.
Non-Performing Assets
Total non-performing assets increased by $26.4 million to $1.71 billion as of December 31, 2009. The increase in non-performing assets was mainly related to the construction loan portfolio in Puerto Rico adversely impacted by reduced absorption rates and weak economic conditions. However, there was a slower growth rate in the amount of loans entering into non-accrual status during the fourth quarter as compared to the trailing quarter. Partially offsetting the migration of loans to non-accrual status was the result of actions taken by the Corporation to reduce its non-performing credits including note sales, restructuring of loans into two separate agreements (loan splitting) and restructured loans restored to accrual status after a sustained period of repayment and that have been deemed collectible.
Total non-performing construction loans increased by $24.5 million, or 4% from the prior quarter. The non-performing construction loan portfolio for Puerto Rico increased by $133.1 million in the fourth quarter. Approximately 63% of the increase was concentrated on two relationships dedicated to the development of residential projects.
Non-performing construction loans in Florida decreased by $108.7 million from the end of the third quarter of 2009 due to note sales, loans restructured into two notes and loans that were brought current. During the fourth quarter of 2009, the Corporation completed the sales of non-performing construction loans in Florida totaling approximately $40.4 million and also completed the restructuring of condo-conversion loans with an aggregate book value of $38.1 million. Also contributing to the decrease in non-performing construction loans in Florida, were other construction projects amounting to approximately $19.5 million that were brought current during the fourth quarter and are expected to be fully collectible.
Non-performing commercial mortgage loans in Florida decreased by $6.6 million, spread across several industries. These are primarily related to restructured loans restored to accrual status after a sustained period of repayment and that have been deemed collectible. The decrease was partially offset by an increase of $6.0 million and $0.4 million in non-performing commercial mortgage loans in Puerto Rico and the Virgin Islands, respectively, for a net decrease in total non-performing commercial mortgage loans of $0.2 million.
The commercial and industrial (C&I) non-performing loan portfolio remained stable with a slight net increase of $0.9 million during the fourth quarter resulting from a $1.0 million increase in Puerto Rico and a $0.1 million decrease in the Virgin Islands.
At the close of 2009, approximately $229.4 million of loans placed in non-accrual status, mainly construction and commercial loans, were current or had delinquencies less than 90 days in their interest payments. Further, collections are being recorded on a cash basis through earnings, or on a cost-recovery basis, as conditions warrant. In Florida, as sales of units within condo-conversion projects continue to lag, some borrowers reverted to rental projects. For several of these loans, cash collections cover interest, property taxes, insurance and other operating costs associated with the projects.
During the fourth quarter and year ended December 31, 2009, interest income of approximately $3.1 million and $4.7 million, respectively, related to $761.5 million of non-performing loans, mainly non-performing construction and commercial loans, was applied against the related principal balances under the cost-recovery method. The Corporation will continue to evaluate restructuring alternatives to mitigate losses and enable borrowers to repay their loans under revised terms in an effort to preserve the value of the Corporation's interests over the long-term.
Non-performing residential mortgage loans increased by $1.9 million during the fourth quarter, mainly attributable to the Puerto Rico portfolio, which has been adversely affected by the continued trend of higher unemployment rates affecting consumers. The non-performing residential mortgage loan portfolio in Puerto Rico increased by $10.3 million during the fourth quarter, which was 44% lower than the $23.2 million increase observed in the third quarter. The Corporation continues to address loss mitigation and loan modifications by offering alternatives to avoid foreclosures through internal programs and programs sponsored by the Federal Government. In Florida, non-performing residential mortgage loans decreased by $10.3 million, of which $7.4 million is related to modified loans that have been restored to accrual status after a sustained repayment performance and are deemed collectible. During the fourth quarter, the non-performing residential mortgage loan portfolio in the Virgin Islands increased by $1.9 million.
The levels of non-performing consumer loans and finance leases also remained stable showing a $2.1 million decrease during the fourth quarter.
As of December 31, 2009, approximately $517.7 million, or 33%, of total non-performing loans have been charged-off to their net realizable value. (See Allowance for Loan and Lease Losses discussion below for additional information.)
Allowance for Loan and Lease Losses
The following table sets forth an analysis of the allowance for loan and lease losses during the periods indicated:
Quarter Ended Year ended (Dollars in December September December December 31, December 31, thousands) 31, 30, 31, 2009 2009 2008 2009 2008 Allowance for loan and lease losses, $ 471,484 $ 407,746 $ 261,170 $ 281,526 $ 190,168 beginning of period Provision for loan and lease losses: Residential 8,206 6,896 4,231 45,010 13,032 mortgage Commercial 22,406 19,432 6,463 71,401 7,740 mortgage Commercial and 28,003 44,609 2,135 146,157 35,561 Industrial Construction 64,196 56,883 11,917 264,246 53,109 Consumer and finance 14,376 20,270 23,767 53,044 81,506 leases Total provision for 137,187 148,090 48,513 579,858 190,948 loan and lease losses Loans net charge-offs: Residential (7,488 ) (10,882 ) (2,239 ) (28,861 ) (6,256 ) mortgage Commercial (5,221 ) (5,263 ) (1,766 ) (25,204 ) (3,664 ) mortgage Commercial and (7,739 ) (5,615 ) (4,800 ) (34,508 ) (24,233 ) Industrial Construction (44,906 ) (47,324 ) (402 ) (183,600 ) (7,735 ) Consumer and finance (15,197 ) (15,268 ) (18,950 ) (61,091 ) (66,433 ) leases Net (80,551 ) (84,352 ) (28,157 ) (333,264 ) (108,321 ) charge-offs Other adjustments - - - - 8,731 (1) Allowance for loan and $ 528,120 $ 471,484 $ 281,526 $ 528,120 $ 281,526 lease losses, end of period Allowance for loan and lease losses 3.79 % 3.43 % 2.15 % 3.79 % 2.15 % to period end total loans receivable Net charge-offs (annualized) to average 2.34 % 2.53 % 0.87 % 2.48 % 0.87 % loans outstanding during the period Provision for loan and lease losses to net 1.70x 1.76x 1.72x 1.74x 1.76x charge-offs during the period (1) Carryover of the allowance for loan losses related to the $218 million auto loan portfolio acquired from Chrysler.
The provision for loan and lease losses decreased $10.9 million to $137.2 million, or by 7%, compared to the provision recorded for the third quarter of 2009. The decrease is mainly related to:
-- The lower charges to specific reserves for C&I impaired loans in Puerto Rico. -- Some positive trends in non-performing and net charge-off levels. -- A smaller increase in the overall loan portfolio, compared to the increase in the third quarter, due to lower loan originations. (See Financial Condition and Operating Data discussion below for additional information about loan originations.)
The Corporation recorded a $79.1 million provision in the fourth quarter for its loan portfolio in Puerto Rico compared to $107.4 million recorded for the third quarter, a decrease of $28.3 million mainly related to the C&I and construction loans portfolio. The provision for C&I loans in Puerto Rico decreased by $15.4 million because the Corporation experienced a slowdown in the growth rate of impaired C&I loans. Meanwhile, the provision for construction loans in Puerto Rico decreased by $9.4 million, as general reserves for non-classified construction loans increased at a slower rate, compared to the third quarter, driven by lower net charge-offs. In addition, the provision for consumer loans in Puerto Rico decreased by $4.7 million also driven by positive trends in loss rates.
With respect to the United States loan portfolio, the Corporation recorded a $55.5 million provision for the fourth quarter of 2009 compared to $32.3 million provision for the third quarter of 2009, an increase of $23.2 million mainly related to the construction loan portfolio. The increase was largely driven by a provision of $21.9 million charged against specific reserves of two construction projects. As of December 31, 2009, approximately 89%, or $265.1 million of the total exposure to construction loans in Florida was individually measured for impairment.
The provision recorded for the loan portfolio in the Virgin Islands amounted to $2.5 million in the fourth quarter, a decrease of $5.9 million compared to the third quarter mainly related to the construction loan portfolio.
The Corporation has consistently added to its reserves across the entire loan portfolio during a weak economic environment. Negative trends in charge-offs and the sustained deterioration of economic conditions have caused increases in reserve factors for criticized loans during 2009. As loans are assigned to higher risk categories, the calculated reserve increases accordingly, consistent with the Corporation's reserving methodology.
The allowance for loans and lease losses increased to $528.1 million, or 3.79% of total loans receivable, as of December 31, 2009 from $471.5 million, or 3.43% of total loans receivable as of September 30, 2009. The allowance to non-performing loans ratio as of December 31, 2009 was 33.77%, compared to 30.64% as of September 30, 2009. The increase in the ratio is attributable in part to increases in reserve factors for classified loans and additional charges to specific reserves.
The following table sets forth information concerning the ratio of the allowance to non-performing loans as of December 31, 2009 and September 30, 2009 by loan category:
Consumer (Dollars in Residential Commercial Construction and thousands) Mortgage Mortgage C&I Loans Loans Total Loans Loans Finance Leases As of December 31, 2009 Non-performing loans charged-off to $ 320,224 $ 38,421 $ 19,244 $ 139,787 $ - $ 517,676 realizable value Other non-performing 121,418 158,114 222,072 494,542 50,041 1,046,187 loans Total non-performing $ 441,642 $ 196,535 $ 241,316 $ 634,329 $ 50,041 $ 1,563,863 loans Allowance to non-performing 7.06 % 32.55 % 77.08 % 25.87 % 165.56 % 33.77 % loans Allowance to non-performing loans, excluding non-performing 25.67 % 40.46 % 83.76 % 33.19 % 165.56 % 50.48 % loans charged-off to realizable value As of September 30, 2009 Non-performing loans charged-off to $ 291,520 $ 23,214 $ 22,045 $ 287,400 $ - $ 624,179 realizable value Other non-performing 148,200 173,494 218,379 322,465 52,104 914,642 loans Total non-performing $ 439,720 $ 196,708 $ 240,424 $ 609,865 $ 52,104 $ 1,538,821 loans Allowance to non-performing 6.92 % 23.79 % 68.94 % 23.75 % 160.58 % 30.64 % loans Allowance to non-performing loans, excluding non-performing 20.54 % 26.97 % 75.90 % 44.92 % 160.58 % 51.55 % loans charged-off to realizable value
The following table sets forth information concerning the composition of the Corporation's allowance for loan and lease losses as of December 31, 2009 and September 30, 2009 by loan category and by whether the allowance and related provisions were calculated individually for impairment purposes or through a general valuation allowance.
Residential Commercial Consumer and (Dollars in Mortgage Mortgage C&I Loans Construction Total thousands) Loans Loans Loans Finance Leases As of December 31, 2009 Impaired loans without specific reserves: Principal balance of loans, net $ 384,285 $ 62,920 $ 48,943 $ 100,028 $ - $ 596,176 of charge-offs Impaired loans with specific reserves: Principal balance of loans, net 60,040 159,284 243,123 597,641 - 1,060,088 of charge-offs Allowance for loan 2,616 30,945 62,491 86,093 - 182,145 and lease losses Allowance for loan and lease 4.36 % 19.43 % 25.70 % 14.41 % 0.00 % 17.18 % losses to principal balance Loans with general allowance: Principal balance of 3,151,183 1,368,617 5,059,363 794,920 1,898,104 12,272,187 loans Allowance for loan 28,548 33,030 123,513 78,035 82,849 345,975 and lease losses Allowance for loan and lease 0.91 % 2.41 % 2.44 % 9.82 % 4.36 % 2.82 % losses to principal balance Total portfolio, excluding loans held for sale: Principal balance of $ 3,595,508 $ 1,590,821 $ 5,351,429 $ 1,492,589 $ 1,898,104 $ 13,928,451 loans Allowance for loan 31,164 63,975 186,004 164,128 82,849 528,120 and lease losses Allowance for loan and lease 0.87 % 4.02 % 3.48 % 11.00 % 4.36 % 3.79 % losses to principal balance As of September 30, 2009 Impaired loans without specific reserves: Principal balance of loans, net $ 330,917 $ 64,102 $ 51,087 $ 160,163 $ - $ 606,269 of charge-offs Impaired loans with specific reserves: Principal balance of loans, net 63,271 123,034 231,739 501,268 - 919,312 of charge-offs Allowance for loan 2,488 20,929 60,663 65,876 - 149,956 and lease losses Allowance for loan and lease 3.93 % 17.01 % 26.18 % 13.14 % 0.00 % 16.31 % losses to principal balance Loans with general allowance: Principal balance of 3,199,965 1,355,798 4,784,746 909,020 1,955,161 12,204,690 loans Allowance for loan 27,958 25,861 105,077 78,962 83,670 321,528 and lease losses Allowance for loan and lease 0.87 % 1.91 % 2.20 % 8.69 % 4.28 % 2.63 % losses to principal balance Total portfolio, excluding loans held for sale: Principal balance of $ 3,594,153 $ 1,542,934 $ 5,067,572 $ 1,570,451 $ 1,955,161 $ 13,730,271 loans Allowance for loan 30,446 46,790 165,740 144,838 83,670 471,484 and lease losses Allowance for loan and lease 0.85 % 3.03 % 3.27 % 9.22 % 4.28 % 3.43 % losses to principal balance
Net Charge-Offs
Total net charge-offs for the fourth quarter of 2009 were $80.6 million or 2.34% of average loans on an annualized basis, compared to $84.4 million or an annualized 2.53% of average loans for the third quarter of 2009.
Construction loans net charge-offs in the fourth quarter were $44.9 million, or an annualized 11.34%, down from $47.3 million, or an annualized 11.80% of related loans, in the third quarter of 2009. Condo-conversion and residential development projects in Florida continued to represent a significant portion of the losses. There were $29.1 million and $13.9 million in net charge-offs during the fourth quarter of 2009 related to condo-conversion and residential construction projects in Florida, respectively. The Corporation is engaged in continuous efforts to identify alternatives that enable borrowers to repay their loans while protecting the Corporation's investments. Approximately $24.4 million of the charge-offs for the fourth quarter was recorded in connection with loans sold and loans restructured during the fourth quarter. Net charge-offs of $1.9 million were recorded in connection with the construction loan portfolio in Puerto Rico, mainly on a single residential housing project.
Commercial mortgage loans net charge-offs in the fourth quarter of 2009 were $5.2 million, or an annualized 1.35%, relatively unchanged from the third quarter of 2009. The charge-offs for the fourth quarter were spread over several loans across our geographic markets.
C&I loans net charge-offs in the fourth quarter of 2009 were $7.7 million, or an annualized 0.60%, up from $5.6 million, or an annualized 0.49% of related loans, in the 2009 third quarter. C&I loans net charge-offs in the fourth quarter of 2009 were distributed across several industries, principally in Puerto Rico, and the largest individual charge-off amounted to $2.5 million.
Residential mortgage net charge-offs were $7.5 million, or an annualized 0.84% of related average loans. This was down from $10.9 million, or an annualized 1.21% of related average balances in the third quarter of 2009. The lower loss level compared with the prior quarter was a result of positive trends in delinquency levels. Approximately $4.3 million in charge-offs for the fourth quarter ($1.8 million in Puerto Rico and $2.5 million in Florida) resulted from valuations, for impairment purposes, of residential mortgage loan portfolios considered homogeneous given high delinquency and loan-to-value levels, compared to $8.4 million recorded in the third quarter. Total residential mortgage loan portfolios evaluated for impairment purposes amounted to $320.2 million as of December 31, 2009 and have been charged-off to their net realizable value, representing approximately 73% of the total non-performing residential mortgage loan portfolio outstanding as of December 31, 2009. Net charge-offs for residential mortgage loans also includes $3.0 million related to loans foreclosed during the fourth quarter, up from $1.8 million recorded for loans foreclosed in the third quarter. Consistent with the Corporation's assessment of the value of properties, current and future market conditions, management is executing strategies to accelerate the sale of the real estate acquired in satisfaction of debt (REO). The ratio of net charge-offs to average loans on the Corporation's residential mortgage loan portfolio of 0.84% for the quarter ended December 31, 2009 is lower than the approximately 2.4% average charge-off rate for commercial banks in the U.S. mainland for the third quarter of 2009 as per statistical releases published by the Federal Reserve on its website.
Net charge-offs of consumer loans and finance leases in the fourth quarter of 2009 were $15.2 million compared to net charge-offs of $15.3 million for the third quarter of 2009. Net charge-offs for the fourth quarter were down on an absolute basis from net charge-offs for the third quarter. However, as a result of a 3% decline in average loans, annualized net charge-offs as a percent of related loans increased to 3.16% from 3.09% for the third quarter.
The following table presents annualized net charge-offs to average loans held-in-portfolio:
Quarter Ended December 31, September 30, June 30, March 31, December 31, 2009 2009 2009 2009 2008 Residential 0.84 % 1.21 % 0.39 % 0.82 % 0.26 % mortgage Commercial 1.35 % 1.35 % 3.71 % 0.13 % 0.47 % mortgage Commercial and 0.60 % 0.49 % 1.12 % 0.65 % 0.31 % Industrial Construction 11.34 % 11.80 % 20.38 % 2.21 % 0.11 % Consumer and 3.16 % 3.09 % 3.12 % 2.84 % 3.54 % finance leases Total loans 2.34 % 2.53 % 3.85 % 1.16 % 0.87 %
The following table presents net charge-offs (annualized) to average loans held-in-portfolio by geographic segment:
Quarter Ended Year Ended December 31, September December 31, December 31, December 31, 30, 2009 2009 2008 2009 2008 PUERTO RICO: Residential 0.62 % 0.66 % 0.24 % 0.64 % 0.20 % mortgage Commercial 0.80 % 1.15 % 0.58 % 0.82 % 0.37 % mortgage Commercial and 0.63 % 0.54 % 0.31 % 0.72 % 0.32 % Industrial Construction 0.76 % 7.23 % 0.13 % 4.88 % 0.19 % Consumer and finance 3.05 % 2.97 % 3.32 % 2.93 % 3.10 % leases Total loans 1.03 % 1.64 % 0.87 % 1.44 % 0.82 % VIRGIN ISLANDS: Residential 0.00 % 0.10 % -0.01 % 0.08 % 0.02 % mortgage (1) Commercial 0.00 % 0.00 % 0.00 % 2.79 % 0.00 % mortgage Commercial and 0.06 % -0.69 % 0.03 % 0.59 % 6.73 % Industrial (2) Construction 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % Consumer and finance 3.44 % 3.79 % 4.47 % 3.50 % 3.54 % leases Total loans 0.33 % 0.33 % 0.60 % 0.73 % 1.48 % FLORIDA: Residential 3.42 % 6.26 % 0.66 % 2.84 % 0.30 % mortgage Commercial 2.58 % 1.92 % 0.33 % 3.02 % 0.09 % mortgage Commercial and 0.53 % 0.00 % 16.21 % 1.87 % 6.58 % Industrial Construction 44.34 % 27.23 % 0.10 % 29.93 % 1.08 % Consumer and finance 7.39 % 6.77 % 10.66 % 7.33 % 5.88 % leases Total loans 14.92 % 10.93 % 1.06 % 11.70 % 0.86 % 1- For the fourth quarter of 2008, recoveries in residential mortgage loans in the Virgin Islands exceeded charge-offs. 2- For the third quarter of 2009 recoveries in commercial and industrial loans in the Virgin Islands exceeded charge-offs.
Given the present economic outlook in the Corporation's principal markets and in spite of actions taken, the Corporation may experience further deterioration in its portfolios, which may result in higher credit losses and additions to reserve balances.
Financial Condition and Operating Data
Total assets decreased to approximately $19.6 billion as of December 31, 2009, down $452.7 million from approximately $20.1 billion as of September 30, 2009. The decrease in total assets is primarily related to a decrease of $636.7 million in investment securities, partially offset by an increase of $193.1 million in gross loans. The Corporation's net decrease in investment securities is mainly related to the sale of approximately $460 million in U.S. agency MBS during the fourth quarter of 2009 and principal repayments of MBS. Refer to the Non-interest income discussion above for additional information about sales of investment securities. The increase in gross loans was largely attributable to $456.1 million in credit facilities extended to the Puerto Rico Government and $17.2 million extended to the Government of the US Virgin Islands. Loan originations extended to the Puerto Rico Government during the fourth quarter of 2009 were $236.7 million lower than those extended in the third quarter and drive the reduction in total loan originations from $1.4 billion for the third quarter of 2009 to $1.2 billion for the fourth quarter.
As of December 31, 2009, liabilities totaled $18.0 billion, a decrease of approximately $353.0 million, as compared to $18.3 billion as of September 30, 2009. The decrease in total liabilities is mainly attributable to a decrease of $705.5 million in repurchase agreements, mainly short-term repurchase agreements, as well as a $222.0 decrease on FHLB advances. This was partially offset by an increase of $370.3 million in total deposits and a $200 million increase in short-term FED advances. Total deposits, excluding brokered CDs, increased by $302.9 million, reflecting an increase in certificates of deposit accounts of $191.2 million, primarily related to corporate customers. Also, a $111.8 million increase in non-time deposit accounts, primarily money market and demand deposit balances from the Florida operations, was among the drivers of the increase.
The Corporation's stockholders' equity amounted to $1.6 billion as of December 30, 2009, a decrease of $99.8 million compared to the balance as of September 30, 2009, driven by the net loss of $53.2 million for the quarter, as well as a decrease in the accumulated other comprehensive income of $46.6 million related to the aforementioned sale of investments and changes in the fair value of investment securities. As previously reported, the Corporation decided to suspend the payment of common and preferred dividends, effective with the preferred dividend for the month of August 2009.
The Corporation is well-capitalized, having approximately $501 million and $890 million of total capital and Tier 1 capital as of December 31, 2009, respectively, in excess of minimum well-capitalized requirements of 10% and 6%, respectively. As of December 31, 2009, the total regulatory capital ratio was an estimated 13.5% and the Tier 1 capital ratio was an estimated 12.2%. A key priority for the Corporation is to maintain a sound capital position to absorb any potential future credit losses due to the distressed economic environment and to provide for business expansion opportunities.
The Corporation's tangible common equity ratio was 3.20% as of December 31, 2009, compared to 3.62% as of September 30, 2009, and the Tier 1 common equity to risk-weighted assets ratio as of December 31, 2009 was 4.16% compared to 4.51% as of September 30, 2009. (See Basis of Presentation below for a discussion of these non-GAAP measures.) The following table is a reconciliation of the Corporation's tangible common equity and tangible assets for the periods ended December 31, 2009, September 30, 2009 and December 31, 2008, respectively:
(Dollars in thousands) As of December 31, September 30, December 31, 2009 2009 2008 Tangible Equity: Total equity - GAAP $ 1,599,063 $ 1,698,843 $ 1,548,117 Preferred equity (928,508 ) (927,374 ) (550,100 ) Goodwill (28,098 ) (28,098 ) (28,098 ) Core deposit intangible (16,600 ) (17,297 ) (23,985 ) Tangible common equity $ 625,857 $ 726,074 $ 945,934 Tangible Assets: Total assets - GAAP $ 19,628,448 $ 20,081,185 $ 19,491,268 Goodwill (28,098 ) (28,098 ) (28,098 ) Core deposit intangible (16,600 ) (17,297 ) (23,985 ) Tangible assets $ 19,583,750 $ 20,035,790 $ 19,439,185 Common shares outstanding 92,542 92,542 92,546 Tangible common equity ratio 3.20 % 3.62 % 4.87 % Tangible book value per common $ 6.76 $ 7.85 $ 10.22 share
The following table reconciles stockholders' equity (GAAP) to Tier 1 common equity:
(Dollars in thousands) As of December 31, September 30, December 31, 2009 2009 2008 Tier 1 Common Equity: Total equity - GAAP $ 1,599,063 $ 1,698,843 $ 1,548,117 Qualifying preferred stock (928,508 ) (927,374 ) (550,100 ) Unrealized (gain) loss on available-for-sale securities (26,617 ) (73,095 ) (57,389 ) (1) Disallowed deferred tax asset (1,745 ) (1,721 ) (69,810 ) (2) Goodwill (28,098 ) (28,098 ) (28,098 ) Core deposit intangible (16,600 ) (17,297 ) (23,985 ) Cumulative change gain in fair value of liabilities accounted (1,535 ) (1,647 ) (3,473 ) for under a fair value option Other disallowed assets (24 ) (514 ) (508 ) Tier 1 common equity $ 595,936 $ 649,097 $ 814,754 Total risk-weighted assets $ 14,315,903 $ 14,394,968 $ 13,762,378 Tier 1 common equity to 4.16 % 4.51 % 5.92 % risk-weighted assets ratio 1- Tier 1 capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with regulatory risk-based capital guidelines. In arriving at Tier 1 capital, institutions are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax. 2- Approximately $111 million of the Corporation's deferred tax assets at December 31, 2009 (September 30, 2009 - $112 million; December 31, 2008 - $58 million) were included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $2 million of such assets at December 31, 2009 (September 30, 2009 - $2 million; December 31, 2008 - $70 million) exceeded the limitation imposed by these guidelines and, as "disallowed deferred tax assets," were deducted in arriving at Tier 1 capital. According to regulatory capital guidelines, the deferred tax assets that are dependent upon future taxable income are limited for inclusion in Tier 1 capital to the lesser of: (i) the amount of such deferred tax asset that the entity expects to realize within one year of the calendar quarter end-date, based on its projected future taxable income for that year or (ii) 10% of the amount of the entity's Tier 1 capital. Approximately $4 million of the Corporation's other net deferred tax liability at December 31, 2009 (September 30, 2009 - $6 million; December 31, 2008 - $0) represented primarily the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.
Liquidity
The Corporation continued managing its liquidity in a proactive manner, and maintains an adequate position. Multiple measures are utilized to monitor the Corporation's liquidity position, including basic surplus and volatile liabilities measures. Among the actions taken in recent months to bolster the liquidity position and to safeguard the Corporation's access to credit was the posting of additional collateral to the FHLB, thereby increasing borrowing capacity. The Corporation has also maintained the basic surplus (cash, short-term assets minus short-term liabilities, and secured lines of credit) well in excess of the self-imposed minimum limit of 5% of total assets. As of December 31, 2009, the estimated basic surplus ratio of approximately 8.6% included un-pledged investment securities, FHLB lines of credit, and cash. At the end of the quarter, the Corporation had $378 million available for additional credit on FHLB lines of credit. Unpledged liquid securities as of December 31, 2009 mainly consisted of fixed-rate MBS and U.S. agency debentures totaling approximately $646.9 million. The Corporation does not rely on uncommitted inter-bank lines of credit (federal funds lines) to fund its operations and does not include them in the basic surplus computation.
Basis of Presentation
Use of Non-GAAP Financial Measures
This press release contains GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are set forth when management believes they will be helpful to an understanding of the Corporation's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the text or in the attached tables of this earnings release.
One non-GAAP performance metric that management believes is useful in analyzing underlying performance trends, particularly in times of economic stress, is pre-tax, pre-provision earnings. Pre-tax, pre-provision earnings, as defined by management, represents net (loss) income excluding income tax (benefit) expense, the provision for loan and lease losses, gains on sale and OTTI of investment securities, as well as certain items identified as unusual, non-recurring or non-operating.
From time to time, revenue and expenses are impacted by items judged by management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that management believes them to be non-recurring. These items result from factors originating outside the Corporation such as regulatory actions/assessments, and may result from unusual management decisions, such as the impairment of intangibles.
Management believes the disclosure of items identified as unusual, non-recurring or non-operating in current and prior period results aids analysts/investors in better understanding corporate performance and trends so that they can evaluate the impact of these items on their expectations of the Corporation's performance, and in their estimates of the Corporation's future performance.
Items identified as unusual, non-recurring or non-operating for any particular period are not intended to be a complete list of items that have materially impacted current or may impact materially future period performance.
Net Interest Income, Excluding Valuations and on a Tax-Equivalent Basis
Net interest income, interest rate spread and net interest margin are reported on a tax equivalent basis and excluding the unrealized changes in the fair value of derivative instruments and financial liabilities elected to be measured at fair value. The presentation of net interest income excluding valuations provides additional information about the Corporation's net interest income and facilitates comparability and analysis. The changes in the fair value of derivative instruments and unrealized gains and losses on liabilities measured at fair value 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 certain loans, on a common basis that facilitates comparison of results to results of peers.
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 measures generally used by financial analysts and investment bankers to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill and core deposit intangibles. Tangible assets are total assets less goodwill and core deposit intangibles. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method of accounting for mergers and acquisitions. Neither tangible common equity nor tangible assets or 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.
Tier 1 Common Equity to Risk-Weighted Assets Ratio
The Tier 1 common equity to risk-weighted assets ratio is calculated by dividing (a) tier 1 capital less non-common elements including qualifying perpetual preferred stock and qualifying trust preferred securities, by (b) risk-weighted assets, which assets are calculated in accordance with applicable bank regulatory requirements. The Tier 1 common equity ratio is not required by GAAP or on a recurring basis by applicable bank regulatory requirements. However, this ratio was used by the Federal Reserve in connection with its stress test administered to the 19 largest U.S. bank holding companies under the Supervisory Capital Assessment Program (SCAP), the results of which were announced on May 7, 2009. Management is currently monitoring this ratio, along with the other ratios discussed above, in evaluating the Corporation's capital levels and believes that, at this time, the ratio may be of interest to investors.
FIRST BANCORP Condensed Consolidated Statements of (Loss) Income Quarter Ended Year ended December 31, September 30, December December 31, December 31, 31, (In thousands, except per 2009 2009 2008 2009 2008 share information) Net interest income: Interest $ 243,449 $ 242,022 $ 282,910 $ 996,574 $ 1,126,897 income Interest 106,152 112,889 158,714 477,532 599,016 expense Net interest 137,297 129,133 124,196 519,042 527,881 income Provision for loan and 137,187 148,090 48,513 579,858 190,948 lease losses Net interest income (loss) after 110 (18,957 ) 75,683 (60,816 ) 336,933 provision for loan and lease losses Non-interest income: Other service 1,982 1,796 1,966 6,830 6,309 charges on loans Service charges on 3,357 3,458 3,170 13,307 12,895 deposit accounts Mortgage banking 2,426 3,000 919 8,605 3,273 activities Net gain on sale of 24,387 34,065 6,243 85,146 21,193 investments Rental 100 390 541 1,346 2,246 income Other non-interest 6,555 7,280 6,551 27,030 28,727 income Total non-interest 38,807 49,989 19,390 142,264 74,643 income Non-interest expenses: Employees' compensation 29,617 34,403 34,904 132,734 141,853 and benefits Occupancy and 14,822 15,291 15,651 62,335 61,818 equipment Business 4,327 2,879 4,415 14,158 17,565 promotion Professional 4,883 3,806 3,107 15,217 15,809 fees Taxes, other than income 3,936 3,893 4,733 15,847 16,989 taxes Insurance and 15,114 7,197 3,848 45,605 15,990 supervisory fees Net loss on real estate 4,847 5,015 9,319 21,863 21,373 owned (REO) operations Other non-interest 11,262 10,293 11,068 44,342 41,974 expenses Total non-interest 88,808 82,777 87,045 352,101 333,371 expenses (Loss) income (49,891 ) (51,745 ) 8,028 (270,653 ) 78,205 before income taxes Income tax (expense) (3,311 ) (113,473 ) 10,780 (4,534 ) 31,732 benefit Net (loss) $ (53,202 ) $ (165,218 ) $ 18,808 $ (275,187 ) $ 109,937 income Net (loss) income attributable $ (59,334 ) $ (174,689 ) $ 8,739 $ (322,075 ) $ 69,661 to common stockholders Net (loss) income per common share: Basic $ (0.64 ) $ (1.89 ) $ 0.09 $ (3.48 ) $ 0.75 Diluted $ (0.64 ) $ (1.89 ) $ 0.09 $ (3.48 ) $ 0.75
FIRST BANCORP Condensed Consolidated Statements of Financial Condition As of December 31, September 30, December 31, (In thousands, except for share 2009 2009 2008 information) ASSETS Cash and due from banks $ 679,798 $ 124,131 $ 329,730 Money market investments: Federal funds sold 1,140 71,264 54,469 Time deposits with other 600 600 600 financial institutions Other short-term investments 22,546 20,127 20,934 Total money market investments 24,286 91,991 76,003 Investment securities available 4,170,782 4,754,989 3,862,342 for sale, at fair value Investment securities held to 601,619 645,100 1,706,664 maturity, at amortized cost Other equity securities 69,930 78,930 64,145 Total investment securities 4,842,331 5,479,019 5,633,151 Loans, net of allowance for loan and lease losses of $528,120 13,400,331 13,258,788 12,796,363 (September 2009 - $471,484; December 31, 2008 - $281,526) Loans held for sale, at lower of 20,775 25,896 10,403 cost or market Total loans, net 13,421,106 13,284,684 12,806,766 Premises and equipment, net 197,965 195,371 178,468 Other real estate owned 69,304 67,493 37,246 Accrued interest receivable on 79,867 77,532 98,565 loans and investments Due from customers on 954 622 504 acceptances Accounts receivable from - 464,910 - investment sales Other assets 312,837 295,432 330,835 Total assets $ 19,628,448 $ 20,081,185 $ 19,491,268 LIABILITIES Deposits: Non-interest-bearing deposits $ 697,022 $ 695,928 $ 625,928 Interest - bearing deposits 11,972,025 11,602,862 12,431,502 Total deposits 12,669,047 12,298,790 13,057,430 Advances from the Federal 900,000 700,000 - Reserve Securities sold under agreements 3,076,631 3,782,134 3,421,042 to repurchase Advances from the Federal Home 978,440 1,200,440 1,060,440 Loan Bank (FHLB) Notes payable 27,117 26,531 23,274 Other borrowings 231,959 231,959 231,914 Bank acceptances outstanding 954 622 504 Accounts payable and other 145,237 141,866 148,547 liabilities Total liabilities 18,029,385 18,382,342 17,943,151 STOCKHOLDERS' EQUITY Preferred stock, authorized 50,000,000 shares: issued and outstanding 22,404,000 shares 928,508 927,374 550,100 (2008 -22,004,000) at an aggregate liquidation value of $950,100 (2008 - $550,100) Common stock, $1 par value, authorized 250,000,000 shares; 102,440 102,440 102,444 issued 102,440,522 (2008 - 102,444,549) Less: Treasury stock (at cost) (9,898 ) (9,898 ) (9,898 ) Common stock outstanding, 92,542,722 shares outstanding 92,542 92,542 92,546 (2008 - 92,546,749) Additional paid-in capital 134,223 134,201 108,299 Legal surplus 299,006 299,006 299,006 Retained earnings 118,291 172,625 440,777 Accumulated other comprehensive 26,493 73,095 57,389 income Total stockholders' equity 1,599,063 1,698,843 1,548,117 Total liabilities and $ 19,628,448 $ 20,081,185 $ 19,491,268 stockholders' equity
About First BanCorp
First BanCorp is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida, and of FirstBank Insurance Agency. First BanCorp and FirstBank Puerto Rico all operate within U.S. banking laws and regulations. The Corporation operates a total of 186 branches, stand-alone offices and in-branch service centers throughout Puerto Rico, the U.S. and British Virgin Islands, and Florida. Among the subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp., a small loan company; First Leasing and Rental Corp., a leasing company; FirstBank Puerto Rico Securities, a broker-dealer subsidiary; First Management of Puerto Rico; and FirstMortgage, Inc., a mortgage origination company. In the U.S. Virgin Islands, FirstBank operates First Insurance VI, an insurance agency, and First Express, a small loan company. First BanCorp's common and publicly-held preferred shares trade on the New York Stock Exchange under the symbols FBP, FBPPrA, FBPPrB, FBPPrC, FBPPrD and FBPPrE. Additional information about First BanCorp may be found at www.firstbankpr.com.
Safe Harbor
This press release may contain "forward-looking statements" concerning the Corporation's future economic performance. The words or phrases "expect," "anticipate," "look forward," "should," "believes" and similar expressions are meant to identify "forward-looking statements" within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbor created by such section. The Corporation wishes to caution readers not to place undue reliance on any such "forward-looking statements," which speak only as of the date made, and to advise readers that various factors, including, but not limited to, the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and its impact on the credit quality of the Corporation's loans and other assets, including the Corporation's construction and commercial real estate loan portfolios, which have contributed and may continue to contribute to the increase in the levels of non-performing assets, charge-offs and the provision expense; adverse changes in general economic conditions in the United States and Puerto Rico, including the interest rate scenario, market liquidity, housing absorption rates and real estate prices, and disruptions in the U.S. capital markets, which may reduce interest margins, impact funding sources and affect demand for all of the Corporation's products and services and the value of the Corporation's assets, including the value of derivative instruments used for protection from interest rate fluctuations; an adverse change in the Corporation's ability to attract new clients and retain existing ones; a decrease in demand for the Corporation's products and services and lower revenues and earnings because of the continued recession in Puerto Rico and the current fiscal problems and budget deficit of the Puerto Rico government; uncertainty about the legislative and other measures adopted by the Puerto Rico government in response to its fiscal deficit situation and the impact of such measures on several sectors of the Puerto Rico economy; uncertainty about the effectiveness of the various actions undertaken to stimulate the United States economy and stabilize the United States financial markets, and the impact such actions may have on the Corporation's business, financial condition and results of operations; changes in the fiscal and monetary policies and regulations of the federal government, including those determined by the Federal Reserve System, the Federal Deposit Insurance Corporation, government-sponsored housing agencies and local regulators agencies in Puerto Rico and the U.S. and British Virgin Islands; risks of not being able to generate sufficient income to realize the benefit of the deferred tax asset; risks of not being able to recover the assets pledged to Lehman Brothers Special Financing, Inc.; risks associated with the soundness of other financial institutions; changes in the Corporation's expenses associated with acquisitions and dispositions; developments in technology; the impact of Doral Financial Corporation's financial condition on the repayment of its outstanding secured loans to the Corporation; the Corporation's ability to issue brokered certificates of deposit and fund operations; risks associated with downgrades in the credit ratings of the Corporation's securities; general competitive factors and industry consolidation; risks associated with regulatory and legislative changes for financial services companies in Puerto Rico, the United States, and the U.S. and British Virgin Islands, which could affect the Corporation's financial performance and could cause the Corporation's actual results for future periods to differ materially from those anticipated or projected; and the risk that the FDIC may further increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an increase in our non-interest expenses. 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.
EXHIBIT A Table 1 - Selected Financial Data (In thousands, except for per share and Quarter Ended Year ended financial ratios) December September December December 31, December 31, 30, 31, 31, 2009 2009 2008 2009 2008 Condensed Income Statements: Total interest $ 243,449 $ 242,022 $ 282,910 $ 996,574 $ 1,126,897 income Total interest 106,152 112,889 158,714 477,532 599,016 expense Net interest 137,297 129,133 124,196 519,042 527,881 income Provision for loan and lease 137,187 148,090 48,513 579,858 190,948 losses Non-interest 38,807 49,989 19,390 142,264 74,643 income Non-interest 88,808 82,777 87,045 352,101 333,371 expenses (Loss) income before income (49,891 ) (51,745 ) 8,028 (270,653 ) 78,205 taxes Income tax (expense) (3,311 ) (113,473 ) 10,780 (4,534 ) 31,732 benefit Net (loss) (53,202 ) (165,218 ) 18,808 (275,187 ) 109,937 income Net (loss) income attributable (59,334 ) (174,689 ) 8,739 (322,075 ) 69,661 to common stockholders Per Common Share Results: Net (loss) income per $ (0.64 ) $ (1.89 ) $ 0.09 $ (3.48 ) $ 0.75 share basic Net (loss) income per $ (0.64 ) $ (1.89 ) $ 0.09 $ (3.48 ) $ 0.75 share diluted Cash dividends $ - $ - $ 0.07 $ 0.14 $ 0.28 declared Average shares 92,514 92,511 92,511 92,511 92,508 outstanding Average shares outstanding 92,514 92,511 92,706 92,511 92,644 diluted Book value per $ 7.25 $ 8.34 $ 10.78 $ 7.25 $ 10.78 common share Tangible book value per $ 6.76 $ 7.85 $ 10.22 $ 6.76 $ 10.22 common share (1) Selected Financial Ratios (In Percent): Profitability: Return on (1.08 ) (3.27 ) 0.39 (1.39 ) 0.59 Average Assets Interest Rate 2.75 2.66 2.71 2.62 2.83 Spread (2) Net Interest 3.03 2.95 3.06 2.93 3.20 Margin (2) Return on Average Total (12.48 ) (35.47 ) 5.19 (14.84 ) 7.67 Equity Return on Average Common (30.54 ) (74.62 ) 3.88 (34.07 ) 7.89 Equity Average Total Equity to 8.67 9.22 7.54 9.36 7.74 Average Total Assets Tangible common equity 3.20 3.62 4.87 3.20 4.87 ratio (1) Dividend - - 74.13 (4.03 ) 37.19 payout ratio Efficiency 50.43 46.21 60.62 53.24 55.33 ratio (3) Asset Quality: Allowance for loan and lease losses to 3.79 3.43 2.15 3.79 2.15 loans receivable Net charge-offs (annualized) 2.34 2.53 0.87 2.48 0.87 to average loans Provision for loan and lease 170.31 175.56 172.29 173.99 176.28 losses to net charge-offs Non-performing assets to 8.71 8.39 3.27 8.71 3.27 total assets Non-performing loans to total 11.23 11.21 4.49 11.23 4.49 loans receivable Allowance to total 33.77 30.64 47.95 33.77 47.95 non-performing loans Allowance to total non-performing loans excluding residential real estate 47.06 42.90 90.16 47.06 90.16 loans Other Information: Common Stock Price: End of $ 2.30 $ 3.05 $ 11.14 $ 2.30 $ 11.14 period 1- Non-GAAP measure. See page 18 for GAAP to Non-GAAP reconciliations. 2- On a tax-equivalent basis. See page 2 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 and financial liabilities measured at fair value.
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) December 31, September December 31, December September December December September December 30, 31, 30, 31, 31, 30, 31, Quarter ended 2009 2009 2008 2009 2009 2008 2009 2009 2008 Interest-earning assets: Money market & other short-term $ 268,295 $ 161,491 $ 164,827 $ 184 $ 185 $ 309 0.27 % 0.45 % 0.75 % investments Government 1,316,211 1,382,167 1,015,554 9,109 9,709 17,610 2.75 % 2.79 % 6.90 % obligations (2) Mortgage-backed 3,843,609 4,595,678 4,671,053 51,971 63,588 73,911 5.36 % 5.49 % 6.29 % securities Corporate bonds 2,000 2,000 6,103 30 29 145 5.95 % 5.75 % 9.45 % FHLB stock 73,435 76,843 62,358 896 1,038 481 4.84 % 5.36 % 3.07 % Equity 1,977 1,977 2,996 72 18 18 14.45 % 3.61 % 2.39 % securities Total 5,505,527 6,220,156 5,922,891 62,262 74,567 92,474 4.49 % 4.76 % 6.21 % investments (3) Residential 3,568,367 3,602,562 3,476,924 54,200 53,617 55,269 6.03 % 5.90 % 6.32 % mortgage loans Construction 1,584,282 1,604,565 1,503,968 13,262 12,402 17,762 3.32 % 3.07 % 4.70 % loans C&I and commercial 6,698,689 6,137,781 5,811,459 70,610 62,379 81,866 4.18 % 4.03 % 5.60 % mortgage loans Finance leases 324,591 335,636 369,649 6,609 6,775 7,724 8.08 % 8.01 % 8.31 % Consumer loans 1,601,999 1,640,556 1,768,946 46,053 46,692 50,904 11.41 % 11.29 % 11.45 % Total loans (4) 13,777,928 13,321,100 12,930,946 190,734 181,865 213,525 5.49 % 5.42 % 6.57 % (5) Total interest-earning $ 19,283,455 $ 19,541,256 $ 18,853,837 $ 252,996 $ 256,432 $ 305,999 5.21 % 5.21 % 6.46 % assets Interest-bearing liabilities: Brokered CDs $ 7,398,276 $ 7,292,913 $ 8,459,932 $ 47,081 $ 51,305 $ 86,316 2.52 % 2.79 % 4.06 % Other interest-bearing 4,172,437 3,995,123 3,783,107 20,471 20,860 26,941 1.95 % 2.07 % 2.83 % deposits Loans payable 849,853 652,391 543 908 463 3 0.42 % 0.28 % 2.25 % Other borrowed 3,588,300 4,171,348 3,761,002 29,227 30,545 38,575 3.23 % 2.91 % 4.08 % funds FHLB advances 1,103,690 1,196,657 1,052,193 8,218 8,127 9,001 2.95 % 2.69 % 3.40 % Total interest-bearing $ 17,112,556 $ 17,308,432 $ 17,056,777 $ 105,905 $ 111,300 $ 160,836 2.46 % 2.55 % 3.75 % liabilities (6) Net interest $ 147,091 $ 145,132 $ 145,163 income Interest rate 2.75 % 2.66 % 2.71 % spread Net interest 3.03 % 2.95 % 3.06 % margin 1- On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less Puerto Rico statutory tax rate as adjusted for changes to enacted tax rates (40.95% for the Corporation's subsidiaries other than IBEs in 2009, 35.95% for the Corporation's IBEs in 2009 and 39% for all subsidiaries in 2008) 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 and unrealized gains or losses on liabilities measured at fair value are excluded from interest income and interest expense because the changes in valuation do not affect interest paid or received. 2- Government obligations include debt issued by government sponsored agencies. 3- Unrealized gains and losses in 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 $2.8 million, $2.8 million and $2.3 million for the fourth quarter of 2009, third quarter of 2009 and fourth quarter of 2008, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio. 6- Unrealized gains and losses on liabilities measured at fair value are excluded from the average volumes.
Table 3 - Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax Equivalent Basis) (Dollars in thousands) Average Volume Interest income (1) / Average rate (1) expense For the Year Ended December 2009 2008 2009 2008 2009 2008 31, Interest-earning assets: Money market & other short-term $ 182,205 $ 286,502 $ 577 $ 6,355 0.32 % 2.22 % investments Government 1,345,591 1,402,738 54,323 93,539 4.04 % 6.67 % obligations (2) Mortgage-backed 4,254,044 3,924,990 238,992 244,150 5.62 % 6.22 % securities Corporate bonds 4,769 6,144 294 570 6.16 % 9.28 % FHLB stock 76,982 65,081 3,082 3,710 4.00 % 5.70 % Equity 2,071 3,762 126 47 6.08 % 1.25 % securities Total 5,865,662 5,689,217 297,394 348,371 5.07 % 6.12 % investments (3) Residential 3,523,576 3,351,236 213,583 215,984 6.06 % 6.44 % mortgage loans Construction 1,590,309 1,485,126 52,908 82,513 3.33 % 5.56 % loans C&I and commercial 6,343,635 5,473,716 263,935 314,931 4.16 % 5.75 % mortgage loans Finance leases 341,943 373,999 28,077 31,962 8.21 % 8.55 % Consumer loans 1,661,099 1,709,512 188,775 197,581 11.36 % 11.56 % Total loans (4) 13,460,562 12,393,589 747,278 842,971 5.55 % 6.80 % (5) Total interest-earning $ 19,326,224 $ 18,082,806 $ 1,044,672 $ 1,191,342 5.41 % 6.59 % assets Interest-bearing liabilities: Brokered CDs $ 7,300,696 $ 7,671,094 $ 227,896 $ 318,199 3.12 % 4.15 % Other interest-bearing 4,087,262 3,611,259 89,966 105,296 2.20 % 2.92 % deposits Loans payable 643,618 10,792 2,331 243 0.36 % 2.25 % Other borrowed 3,745,980 3,864,189 124,340 148,753 3.32 % 3.85 % funds FHLB advances 1,322,136 1,120,782 32,954 39,739 2.49 % 3.55 % Total interest-bearing $ 17,099,692 $ 16,278,116 $ 477,487 $ 612,230 2.79 % 3.76 % liabilities (6) Net interest $ 567,185 $ 579,112 income Interest rate 2.62 % 2.83 % spread Net interest 2.93 % 3.20 % margin 1- On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less Puerto Rico statutory tax rate as adjusted for changes to enacted tax rates (40.95% for the Corporation's subsidiaries other than IBEs in 2009, 35.95% for the Corporation's IBEs in 2009 and 39% for all subsidiaries in 2008) 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 and unrealized gains or losses on liabilities measured at fair value are excluded from interest income and interest expense because the changes in valuation do not affect interest paid or received. 2- Government obligations include debt issued by government sponsored agencies. 3- Unrealized gains and losses in 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 $11.2 million and $10.2 million for the year ended December 31, 2009 and 2008, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio. 6- Unrealized gains and losses on liabilities measured at fair value are excluded from the average volumes.
Table 4 - Non-Interest Income Quarter Ended Year ended December 31, September 30, December 31, December 31, (In 2009 2009 2008 2009 2008 thousands) Other service $ 1,982 $ 1,796 $ 1,966 $ 6,830 $ 6,309 charges on loans Service charges on 3,357 3,458 3,170 13,307 12,895 deposit accounts Mortgage banking 2,426 3,000 919 8,605 3,273 activities Rental 100 390 541 1,346 2,246 income Insurance 1,753 2,316 2,247 8,668 10,157 income Other operating 4,802 4,964 4,304 18,362 18,570 income Non-interest income before net 14,420 15,924 13,147 57,118 53,450 gain on investments Gain on VISA shares and - 3,784 - 3,784 9,474 related proceeds Net gain on sale of 24,387 30,490 11,045 83,020 17,706 investments OTTI on equity - - (4,802 ) (388 ) (5,987 ) securities OTTI on debt - (209 ) - (1,270 ) - securities Net gain on 24,387 34,065 6,243 85,146 21,193 investments $ 38,807 $ 49,989 $ 19,390 $ 142,264 $ 74,643
Table 5 - Non-Interest Expenses Quarter Ended Year ended December 31, September 30, December 31, December 31, (In thousands) 2009 2009 2008 2009 2008 Employees' compensation $ 29,617 $ 34,403 $ 34,904 $ 132,734 $ 141,853 and benefits Occupancy and 14,822 15,291 15,651 62,335 61,818 equipment Deposit insurance 13,923 6,884 2,453 40,582 10,111 premium Other taxes, insurance and 5,127 4,206 6,128 20,870 22,868 supervisory fees Professional fees - 3,628 3,391 2,492 12,980 12,572 recurring Professional fees - 1,255 415 615 2,237 3,237 non-recurring Servicing and processing 2,832 2,784 2,264 10,174 9,918 fees Business 4,327 2,879 4,415 14,158 17,565 promotion Communications 2,055 2,083 2,160 8,283 8,856 Net loss on 4,847 5,015 9,319 21,863 21,373 REO operations Other (1) 6,375 5,426 6,644 25,885 23,200 Total $ 88,808 $ 82,777 $ 87,045 $ 352,101 $ 333,371 1- Includes core deposit intangible impairment charge of $4.0 million for the year ended December 31, 2009.
Table 6 - Selected Balance Sheet Data (In thousands) As of December 31, September 30, December 31, 2009 2009 2008 Balance Sheet Data: Loans and loans held for sale $ 13,949,226 $ 13,756,168 $ 13,088,292 Allowance for loan and lease losses 528,120 471,484 281,526 Money market and investment 4,866,617 5,571,010 5,709,154 securities Intangible assets 44,698 45,395 52,083 Deferred tax asset, net 109,197 107,955 128,039 Total assets 19,628,448 20,081,185 19,491,268 Deposits 12,669,047 12,298,790 13,057,430 Borrowings 5,214,147 5,941,064 4,736,670 Total preferred equity 928,508 927,374 550,100 Total common equity 644,062 698,374 940,628 Accumulated other comprehensive 26,493 73,095 57,389 income, net of tax Total equity 1,599,063 1,698,843 1,548,117
Table 7 - Loan Portfolio Composition of the loan portfolio including loans held for sale at period end. (In thousands) As of December 31, September 30, December 31, 2009 2009 2008 Residential mortgage loans $ 3,616,283 $ 3,620,050 $ 3,491,728 Commercial loans: Construction loans 1,492,589 1,570,451 1,526,995 Commercial mortgage loans 1,590,821 1,542,934 1,535,758 Commercial and Industrial loans (1) 5,029,907 4,738,080 3,857,728 Loans to a local financial institution collateralized by real 321,522 329,492 567,720 estate mortgages Commercial loans 8,434,839 8,180,957 7,488,201 Finance leases 318,504 329,418 363,883 Consumer loans 1,579,600 1,625,743 1,744,480 Total loans $ 13,949,226 $ 13,756,168 $ 13,088,292 1 - As of December 31, 2009, includes $1.2 billion of commercial loans that are secured by real estate but are not dependent upon the real estate for repayment.
Table 8 - Loan Portfolio by Geography (In thousands) As of December 31, 2009 Puerto Rico Virgin Islands Florida Consolidated Residential mortgage $ 2,790,829 $ 450,649 $ 374,805 $ 3,616,283 loans Commercial loans: Construction loans (1) 998,235 194,813 299,541 1,492,589 Commercial mortgage 983,125 73,114 534,582 1,590,821 loans Commercial and 4,756,297 241,497 32,113 5,029,907 Industrial loans Loans to a local financial institution 321,522 - - 321,522 collateralized by real estate mortgages Commercial loans 7,059,179 509,424 866,236 8,434,839 Finance leases 318,504 - - 318,504 Consumer loans 1,446,354 98,418 34,828 1,579,600 Total loans $ 11,614,866 $ 1,058,491 $ 1,275,869 $ 13,949,226 1 - Construction loans of Florida operations include approximately $70.4 million of condo-conversion loans.
Table 9 - Non-Performing Assets (Dollars in thousands) December 31, September 30, December 31, 2009 2009 2008 Non-performing loans: Residential mortgage $ 441,642 $ 439,720 $ 274,923 Commercial mortgage 196,535 196,708 85,943 Commercial and Industrial 241,316 240,424 58,358 Construction 634,329 609,865 116,290 Finance leases 5,207 4,744 6,026 Consumer 44,834 47,360 45,635 Total non-performing loans 1,563,863 1,538,821 587,175 REO 69,304 67,493 37,246 Other repossessed property 12,898 13,338 12,794 Investment securities (1) 64,543 64,543 - Total non-performing assets $ 1,710,608 $ 1,684,195 $ 637,215 Past due loans 90 days and still $ 165,936 $ 243,894 $ 471,364 accruing Allowance for loan and lease losses $ 528,120 $ 471,484 $ 281,526 Allowance to total non-performing 33.77 % 30.64 % 47.95 % loans Allowance to total non-performing loans, excluding residential real 47.06 % 42.90 % 90.16 % estate loans (1) Collateral pledged with Lehman Brothers Special Financing, Inc.
Table 10 - Non-Performing Assets by Geography (Dollars in thousands) December 31, September 30, December 31, 2009 2009 2008 Puerto Rico: Non-performing loans: Residential mortgage $ 376,018 $ 365,705 $ 244,843 Commercial mortgage 128,001 121,961 61,459 Commercial and Industrial 229,039 228,025 54,568 Construction 385,259 252,127 71,127 Finance leases 5,207 4,744 6,026 Consumer 40,132 42,816 40,313 Total non-performing loans 1,163,656 1,015,378 478,336 REO 49,337 47,137 22,012 Other repossessed property 12,634 12,821 12,221 Investment securities 64,543 64,543 - Total non-performing assets $ 1,290,170 $ 1,139,879 $ 512,569 Past due loans 90 days and still $ 128,016 $ 227,053 $ 220,270 accruing Virgin Islands: Non-performing loans: Residential mortgage $ 9,063 $ 7,116 $ 8,492 Commercial mortgage 11,727 11,370 1,476 Commercial and Industrial 8,300 8,404 2,055 Construction 2,796 2,727 4,113 Consumer 3,540 3,393 3,688 Total non-performing loans 35,426 33,010 19,824 REO 470 588 430 Other repossessed property 221 389 388 Total non-performing assets $ 36,117 $ 33,987 $ 20,642 Past due loans 90 days and still $ 23,876 $ 618 $ 27,471 accruing Florida: Non-performing loans: Residential mortgage $ 56,561 $ 66,899 $ 21,588 Commercial mortgage 56,807 63,377 23,007 Commercial and Industrial 3,977 3,995 1,736 Construction 246,274 355,011 41,050 Consumer 1,162 1,151 1,634 Total non-performing loans 364,781 490,433 89,015 REO 19,497 19,768 14,804 Other repossessed property 43 128 185 Total non-performing assets $ 384,321 $ 510,329 $ 104,004 Past due loans 90 days and still $ 14,044 $ 16,223 $ 223,623 accruing
Table 11 - Net Charge-Offs to Average Loans Year Ended December December 31, December 31, December 31, December 31, 31, 2009 2008 2007 2006 2005 Residential 0.82% 0.19% 0.03% 0.04% 0.05% mortgage Commercial 1.64% 0.27% 0.10% 0.00% 0.03% mortgage Commercial and 0.72% 0.59% 0.26% 0.06% 0.11% Industrial Construction 11.54% 0.52% 0.26% 0.00% 0.00% Consumer and finance 3.05% 3.19% 3.48% 2.90% 2.06% leases Total loans 2.48% 0.87% 0.79% 0.55% 0.39%
Source: First BanCorp