SAN JUAN, Puerto Rico--(BUSINESS WIRE)-- 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 $82.6 million, or $0.41 per diluted share, for the first quarter of 2022, compared to $73.6 million, or $0.35 per diluted share, for the fourth quarter of 2021, and $61.2 million, or $0.28 per diluted share, for the first quarter of 2021. Financial results for the first quarter of 2022 include a net benefit of $13.8 million ($8.6 million after-tax, or an increase of $0.07 per diluted share) recorded to the provision for credit losses, compared to a net benefit of $12.2 million ($7.6 million after-tax, or an increase of $0.06 per diluted share) for the fourth quarter of 2021. In addition, during the first quarter of 2022, the Corporation repurchased 3,409,697 shares of its common stock at a cost of approximately $50.0 million or $14.66 per share, completing the $300 million repurchase program authorized during 2021.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We are pleased to announce another record quarter of exceptional results for our franchise as we continue to deliver sustainable value to our stakeholders. Net income for the quarter was $82.6 million or $0.41 per diluted share, up $9 million or 12% when compared to 4Q 2021, and pre-tax pre-provision income reached a record $111.8 million, up 7% when compared to 4Q 2021. Sequential increases in pre-tax pre-provision income over the last 5 quarters are partially attributed to our disciplined approach to execute on identified operational efficiencies related to the 2020 acquisition as well as additional business rationalization opportunities that have been identified during the integration process.
The economic backdrop continues to benefit franchise performance as stabilized asset quality and low delinquency rates, coupled with an improved long-term economic outlook, prompted the recognition of a provision benefit of $13.8 million during the quarter. Core deposits, net of government and brokered deposits, registered a slight increase of $55 million when compared to 4Q 2021 primarily related to higher balances in demand deposit accounts in the Puerto Rico region. Most importantly, we reached a loan growth inflection point during the quarter, with loan portfolio balances other than PPP loans up $85 million when compared to 4Q 2021. Excluding PPP loans, commercial and construction loan balances increased by $91 million and consumer loans were higher by $88 million when compared to 4Q 2021. Total loan originations, other than credit card utilization activity, were healthy at $1.1 billion although lower than 4Q 2021 originations primarily due to a lower dollar amount of commercial refinancing and renewals completed in the first quarter. We expect loan growth to accelerate during the year as loan pipelines begin to close and disaster recovery funds flow into the Puerto Rico economy.
We are deeply committed to continue improving the banking experience for our customers and enhancing our relationship with the communities we serve, while delivering value to our shareholders. Earlier this month, we continued evolving our corporate sustainability practices and disclosures by formally adopting an environmental, social, and governance (ESG) framework and publishing our inaugural ESG Report. This report highlights our ESG strategic path and community outreach efforts while standardizing our sustainability disclosures. Also, we continued to deliver innovative self-service solutions to our clients by deploying the new mobile Business Digital Banking application with remote deposit capture functionalities. This application allows commercial customers to perform transactions 24/7 in a safe and reliable digital environment.
Finally, during the quarter we completed our 2021 approved capital deployment plan by repurchasing 3.4 million shares of common stock through open market transactions amounting to approximately $50 million. In addition, we are very pleased to announce a new $350 million share repurchase program to be executed through the next four quarters and an increase in the quarterly dividend to $0.12 per share. We are steadfastly committed to preserving shareholder value while investing in our franchise and improving our competitive position in the markets we serve.”
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 fourth and first quarters of 2021 included the significant Special Items discussed below. The financial results for the first quarter of 2022 did not include any significant Special items.
Quarter ended December 31, 2021
- Merger and restructuring costs of $1.9 million ($1.2 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the fourth quarter were primarily related to certain branch consolidations completed during the first quarter of 2022.
Quarter ended March 31, 2021
- Merger and restructuring costs of $11.3 million ($7.0 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the first quarter of 2021 included approximately $4.8 million related to voluntary and involuntary employee separation programs implemented in the Puerto Rico region. In addition, merger and restructuring costs in the first quarter of 2021 included consulting fees, expenses related to system conversions and other integration related efforts, and accelerated depreciation charges related to planned closures and consolidation of branches in accordance with the Corporation’s integration and restructuring plan.
- Costs of $1.2 million ($0.8 million after-tax) related to the COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security measures.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)
Net income was $82.6 million for the first quarter of 2022, or $0.41 per diluted share, compared to $73.6 million for the fourth quarter of 2021, or $0.35 per diluted share. Adjusted net income was $74.8 million, or $0.36 per diluted share, for the fourth quarter of 2021. The following table shows the net income and earnings per diluted share for the first quarter of 2022 and reconciles for the fourth and first quarters of 2021 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.
$
82,600
73,639
61,150
-
1,853
11,267
4
1,209
(696
)
(4,679
74,800
68,947
(446
(669
(1,234
73,120
68,278
199,537
204,705
218,277
0.41
0.35
0.28
0.36
0.31
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $125.6 million for the first quarter or 2022, compared to $115.3 million for the fourth quarter of 2021. Adjusted pre-tax, pre-provision income was $111.8 million for the first quarter of 2022, compared to $104.9 million for the fourth quarter of 2021. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:
Quarter Ended
March 31,
December 31,
September 30,
June 30,
2022
2021
125,625
115,260
112,735
110,650
89,172
(13,802
(12,209
(12,082
(26,155
(15,252
640
1,105
2,268
11,047
111,823
104,908
103,561
96,647
86,396
6,915
1,347
6,914
10,251
(437
6.6
%
1.3
7.2
11.9
-0.5
NET INTEREST INCOME
The following table sets forth information concerning net interest income for the last five quarters:
197,854
198,435
200,172
201,459
194,642
12,230
14,297
15,429
16,676
18,377
185,624
184,138
184,743
184,783
176,265
11,106,855
11,108,997
11,223,926
11,560,731
11,768,266
8,647,087
9,140,313
9,134,121
7,898,975
6,510,960
19,753,942
20,249,310
20,358,047
19,459,706
18,279,226
11,211,780
11,467,480
11,718,557
12,118,631
11,815,179
4.06
3.89
3.90
4.15
4.32
0.44
0.49
0.52
0.55
0.63
3.62
3.40
3.38
3.60
3.69
3.81
3.61
3.91
Net interest income amounted to $185.6 million for the first quarter of 2022, an increase of $1.5 million, compared to $184.1 million for the fourth quarter of 2021. The increase in net interest income was mainly due to:
Partially offset by:
Net interest margin for the first quarter of 2022 increased to 3.81%, when compared to 3.61% for the fourth quarter of 2021. The improvement on the net interest margin was primarily attributable to higher yields on U.S. agencies MBS and debt securities favorably affected by both lower prepayments and higher reinvestment yields, as well as a reductions in the average balance of low-yielding cash balances as a result of the repayment of long-term debt such as matured FHLB advances and repurchase agreement, as noted above.
The first quarter results continue to reflect the effect of the reductions in the SBA PPP loans. Interest and earned deferred fees on SBA PPP loans in the first quarter of 2022 amounted to $3.2 million, compared to $5.0 million in the fourth quarter of 2021. As of March 31, 2022, SBA PPP loans, net of unearned fees of $5.1 million, totaled $89.7 million.
NON-INTEREST INCOME
The following table sets forth information concerning non-interest income for the last five quarters:
9,363
9,502
8,690
8,788
8,304
5,206
5,223
6,098
6,404
7,273
18,289
15,653
15,158
14,692
15,379
32,858
30,378
29,946
29,884
30,956
Non-interest income amounted to $32.9 million for the first quarter of 2022, compared to $30.4 million for the fourth quarter of 2021. The $2.5 million increase in non-interest income was mainly due to:
NON-INTEREST EXPENSES
The following table sets forth information concerning non-interest expenses for the last five quarters:
49,554
49,681
50,220
49,714
50,842
22,386
21,589
23,306
24,116
24,242
1,673
1,253
1,381
1,922
1,988
2,235
2,127
2,249
2,360
2,362
5,018
5,138
5,238
5,576
6,199
909
874
1,451
1,080
1,310
6,905
7,909
8,878
11,946
12,373
2,780
3,154
3,225
3,738
4,018
4,121
5,523
5,573
6,795
4,278
3,463
5,794
3,370
2,970
2,151
2,250
2,407
2,462
(720
(1,631
(2,288
(139
1,898
0
6,184
5,933
6,385
7,092
106,659
111,465
114,036
130,172
133,301
Non-interest expenses amounted to $106.7 million in the first quarter of 2022, a decrease of $4.8 million from $111.5 million in the fourth 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 $109.6 million for the fourth quarter of 2021. The $2.9 million decrease in the first quarter of 2022 in adjusted non-interest expenses reflects, among other things, the following significant variances:
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 $43.0 million for the first quarter of 2022, compared to $41.6 million for the fourth quarter of 2021. The variance was primarily related to higher pre-tax income when compared to prior quarter.
The Corporation’s estimated effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, decreased to 32.9% compared to 33.9% for the fourth quarter of 2021, mostly attributable to a higher proportion of exempt to taxable income when compared to prior quarter. As of March 31, 2022, the Corporation had a deferred tax asset of $176.8 million, net of a valuation allowance of $147.0 million against the deferred tax assets. The Corporation’s banking subsidiary, FirstBank, had a deferred tax asset of $176.7 million net of a valuation allowance of $107.5 million.
CREDIT QUALITY
Non-Performing Assets
The following table sets forth information concerning non-performing assets for the last five quarters:
48,818
55,127
60,589
121,695
132,339
26,576
25,337
26,812
27,242
28,548
18,129
17,135
18,990
18,835
19,128
2,543
2,664
6,093
6,175
6,378
10,964
10,454
9,657
8,703
14,708
107,030
110,717
122,141
182,650
201,101
42,894
40,848
43,798
66,586
79,207
3,823
3,687
3,550
3,470
4,544
2,727
2,850
2,894
2,928
156,474
158,102
172,383
255,634
284,852
118,798
115,448
148,322
144,262
160,884
0.96
1.00
1.10
1.60
1.73
1.09
1.72
0.79
0.76
0.81
1.20
1.47
(1)
(2)
(3)
Variances in credit quality metrics:
- A $6.3 million decrease in nonaccrual residential mortgage loans, mainly related to payoffs and paydowns received during the first quarter across all regions, including the payoff of an individual loan of approximately $1.3 million and foreclosures.
- A $2.1 million increase in nonaccrual commercial and construction loans mainly related to the inflow to nonaccrual status of two loans in the Puerto Rico region totaling $4.0 million, partially offset by collections and foreclosures.
- A $2.0 million increase in the OREO portfolio balance, mainly attributable to the foreclosure of residential properties in the Puerto Rico region.
- A $0.5 million increase in nonaccrual consumer loans, primarily auto loans. Notwithstanding, the ratio of nonaccrual consumer loans to total consumer loans continued to decrease by virtue of the underlying loan growth.
Early Delinquency
Total loans in early delinquency (i.e., 30-89 days past due loans, as defined in regulatory reporting instructions) amounted to $100.4 million as of March 31, 2022, an increase of $10.1 million, compared to $90.3 million as of December 31, 2021. The variances by major portfolio categories are as follows:
- Commercial and construction loans in early delinquency increased in the first quarter by $17.9 million to $24.6 million as of March 31, 2022 primarily as a result of the migration of five commercial and construction loans totaling $17.2 million that matured and are in the process of renewal but with respect to which the Corporation continues to receive interest and principal payments from the borrowers.
- Residential mortgage loans in early delinquency decreased by $2.1 million to $32.1 million as of March 31, 2022, and consumer loans in early delinquency decreased by $5.7 million to $43.7 million as of March 31, 2022.
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 first quarter of 2022 and fourth quarter of 2021:
269,030
1,537
8,571
280,243
(16,989
(178
3,753
(388
(6,594
(6
(6,600
245,447
1,359
12,324
711
259,841
288,360
1,759
8,317
1,157
299,593
(12,241
(222
254
(7,089
(52
(7,141
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:
324,958
358,936
385,887
(8,734
(26,302
(14,443
(1,146
(988
(23,450
)(1)
(1,987
(2,092
7
(56
(386
(31
(740
745
(702
327
5,809
(545
8
12
35
38
(9
(6,208
(5,355
(4,390
(11,505
(9,122
(27,864
(7,676
(12,508
2.21
2.43
2.59
2.85
3.08
0.24
0.26
0.99
0.27
0.43
-2.58
x
-1.73
-0.31
-3.43
-1.15
(4,871
(23,099
10,981
(7,401
(14,224
9,384
- Provision for credit losses for the commercial and construction loan portfolio was a net benefit of $23.1 million for the first quarter of 2022, compared to a net benefit of $14.2 million in the fourth quarter of 2021. The net benefit recorded in the first quarter of 2022, reflects among other things, reductions in qualitative reserves mostly associated with a continued positive long-term outlook of forecasted macroeconomic variables, primarily in the commercial real estate price index, as a result of a reduced impact of the Omicron variant, particularly on loans in the hotel, transportation and entertainment industries, and to a lesser extent, improvements in updated financial information received from borrowers during the first quarter of 2022.
- Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $4.9 million for the first quarter of 2022, compared to a benefit of $7.4 million in the fourth quarter of 2021. The net benefit recorded for the first quarter of 2022 was primarily related to the overall decrease in the size of the residential mortgage portfolio and continued improvements in the long-term outlook of forecasted macroeconomic variables, such as the housing price index.
- Provision for credit losses for the consumer loans and finance leases portfolio was an expense of $11.0 million for the first quarter of 2022, compared to an expense of $9.4 million in the fourth quarter of 2021. The charges to the provision in the first quarter of 2022 were primarily related to the increase in the size of the auto and finance leases loan portfolios and an increase in cumulative historical charge-off levels related to the personal and credit card loans.
The following table sets forth information concerning the composition of the Corporation’s ACL for loans and finance leases as of March 31, 2022 and December 31, 2021 by loan category:
2,891,699
5,229,866
2,976,140
11,097,705
68,820
68,764
107,863
2.38
1.31
2,978,895
5,193,719
2,888,044
11,060,658
74,837
91,103
103,090
2.51
1.75
3.57
Net Charge-Offs
The following table presents ratios of annualized net charge-offs (recoveries) to average loans held-in-portfolio:
0.15%
0.13%
2.94%
0.24%
0.00%
0.01%
0.07%
-0.10%
0.10%
-0.04%
-0.74%
-0.03%
-0.08%
-0.09%
0.02%
0.85%
0.75%
0.64%
1.72%
1.39%
0.26%
0.99%
0.27%
0.43%
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 $6.6 million for the first quarter of 2022, or an annualized 0.24% of average loans, compared to $7.1 million, or an annualized 0.26% of average loans, in the fourth quarter of 2021. The decrease of $0.5 million in net charge-offs included the following:
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 March 31, 2022, the ACL for off-balance sheet credit exposures was $1.4 million, down $0.1 million from $1.5 million as of December 31, 2021.
Allowance for Credit Losses for Held-to-Maturity Debt Securities
As of March 31, 2022, the held-to-maturity debt securities portfolio consisted of Puerto Rico municipal bonds. As of March 31, 2022, the ACL for held-to-maturity debt securities was $12.3 million compared to $8.6 million as of December 31, 2021.
Allowance for Credit Losses for Available-for-Sale Debt Securities
The ACL for available-for-sale debt securities was $0.7 million as of March 31, 2022, compared to $1.1 million as of December 31, 2021. The decrease on the ACL is mostly related to a continued positive long-term outlook of forecasted macroeconomic variables, such as unemployment and housing price index.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $19.9 billion as of March 31, 2022, down $856.2 million from December 31, 2021.
The following variances within the main components of total assets are noted:
Total liabilities were approximately $18.1 billion as of March 31, 2022, down $535.6 million from December 31, 2021.
The decrease in total liabilities was mainly due to:
Total stockholders’ equity amounted to $1.8 billion as of March 31, 2022, a decrease of $320.7 million from December 31, 2021. The decrease was driven by a $331.8 million decline in Other Comprehensive Income (“OCI”) directly related to the change in value of available-for-sale investment due to changes in market interest rates. The decrease in total stockholder’s equity also reflects the effect of the repurchase of 3.4 million shares of common stock for a total purchase price of approximately $50.0 million, and the payment of $19.9 million in quarterly dividends to common stock shareholders. These variances were partially offset by earnings generated in the first quarter of 2022.
As of March 31, 2022, 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 17.71%, 17.71%, 20.44%, and 10.35%, respectively, as of March 31, 2022, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 17.80%, 17.80%, 20.50%, and 10.14%, respectively, as of December 31, 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 18.09%, 18.93%, 20.17%, and 11.07%, respectively, as of December 31, 2021, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 18.12%, 19.03%, 20.23%, and 10.85%, respectively, as of December 31, 2021
Tangible Common Equity
The Corporation’s tangible common equity ratio decreased to 8.63% as of March 31, 2022, compared to 9.81% as of December 31, 2021. The decrease in tangible common equity is mostly related to the $331.8 million or $1.67 per share decrease in OCI.
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:
1,781,102
2,101,767
2,197,965
2,204,955
2,220,425
(36,104
(38,611
(873
(1,198
(1,992
(2,855
(3,768
(26,648
(28,571
(30,494
(32,416
(34,339
(127
(165
(203
(241
(280
1,714,843
2,033,222
2,090,561
2,094,728
2,107,323
19,929,037
20,785,275
21,256,154
21,369,962
19,413,734
19,862,778
20,716,730
21,184,854
21,295,839
19,336,736
198,701
201,827
206,496
210,649
218,629
8.63
9.81
9.87
9.84
10.90
10.07
10.12
9.94
9.64
Exposure to Puerto Rico Government
As of March 31, 2022, the Corporation had $356.8 million of direct exposure to the Puerto Rico government, its municipalities and public corporations, compared to $360.1 million as of December 31, 2021. As of March 31, 2022, approximately $187.9 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 $121.7 million consisted of municipal revenue or special obligation bonds. The Corporation’s total direct exposure to the Puerto Rico government also included $12.3 million in loans extended to an affiliate of a public corporation, $31.4 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 Puerto Rico Housing Finance Authority (“PRHFA”), at an amortized cost of $3.5 million (fair value of $2.7 million as of March 31, 2022), 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 March 31, 2022, 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 $178.1 million of financing arrangements with Puerto Rico municipalities that were issued in bond form but underwritten as loans with features that are typically found in commercial loans. These bonds are accounted for as held-to-maturity investment securities. As of March 31, 2022, the ACL for these securities was $12.3 million, compared to $8.5 million as of December 31, 2021.
As of March 31, 2022, the Corporation had $2.3 billion of public sector deposits in Puerto Rico, compared to $2.7 billion as of December 31, 2021. Approximately 22% of the public sector deposits as of March 31, 2022, was from municipalities and municipal agencies in Puerto Rico and 78% 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 Thursday, April 28, 2022, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast through the investor relations section of the Corporation’s web site: fbpinvestor.com or through a dial-in telephone number at (844) 200-6205 or (929) 526–1599 for international callers. The participant access code is 130691. The Corporation recommends that listeners go to the web site at least 15 minutes prior to the call to download and install any necessary software. Following the webcast presentation, a question and answer session will be made available to research analysts and institutional investors. A replay of the webcast will be archived in the investor relations section of First BanCorp.’s website, fbpinvestor.com, until April 28, 2023. A telephone replay will be available one hour after the end of the conference call through May 28, 2022 at (929) 458-6194 or (866) 813-9403 for international callers. The replay access code is 057441.
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 uncertainties more fully discussed in Part I, Item 1A, “Risk Factors of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 and 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 and mutations of the virus, such as the Omicron 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 as a result of unexpected factors or events, including those that are outside of our control; uncertainty as to the ultimate outcome of the recently approved Puerto Rico’s debt restructuring plan (“Plan of Adjustment” or “PoA”) and its 2022 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 CD; 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; the impact of rising interest rates and inflation on the Corporation, including a decrease in demand for new mortgage loan originations and refinancings and increased competition for borrowers, which would have an impact the Corporation’s margins and have an adverse impact on origination volumes and financial performance; 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 cessation of the London Interbank Offered Rate, 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 available-for-sale securities portfolio uncertainty about legislative, tax or regulatory changes that affect financial services companies in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, which could affect the Corporation’s financial condition or performance and could cause the Corporation’s actual results for future periods to differ materially from prior results and anticipated or projected results; changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments, including those determined by the Federal Reserve Board, the Federal Reserve Bank of New York, 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, 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 BSPR acquisition, 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 GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are used when management believes it to 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 first quarter of 2022 and the fourth and first quarters of 2021. The table also reconciles netinterest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.
(15
(2
(25
197,839
198,433
194,617
7,219
6,208
4,552
205,058
204,641
199,169
185,609
184,136
176,240
192,828
190,344
180,792
4.21
4.01
4.42
3.77
3.52
3.79
3.96
3.73
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.
109,608
20
49,661
21,595
11,937
(10
5,148
3,380
13,724
89,723
11,007,982
2.23
145,019
10,915,639
2.46
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.
1,694,066
2,540,376
300
1,883
2,382
2,183
2,682
6,424,660
6,453,761
165,735
169,562
32,014
32,169
6,622,409
6,655,492
10,852,258
10,791,628
27,905
35,155
10,880,163
10,826,783
145,850
146,417
57,425
61,507
176,775
208,482
38,611
27,648
29,934
241,013
234,143
6,344,385
7,027,513
10,991,018
10,757,381
17,335,403
17,784,894
200,000
300,000
183,762
228,770
214,852
18,147,935
18,683,508
22,366
(2,496
(2,183
19,870
20,183
687,070
738,288
1,489,995
1,427,295
(415,833
(83,999
(In thousands, except per share information)
Net interest income:
Interest income
Interest expense
Net interest income
Provision for credit losses (benefit) expense:
Loans
Unfunded loan commitments
(706
Debt securities
3,365
(103
Provision for credit losses (benefit)
Net interest income after provision for credit losses
199,426
196,347
191,517
Non-interest income:
Service charges on deposit accounts
Mortgage banking activities
Other non-interest income
Total non-interest income
Non-interest expenses:
Employees' compensation and benefits
Occupancy and equipment
Business promotion
Professional service fees
10,594
17,701
Taxes, other than income taxes
Insurance and supervisory fees
3,908
4,350
Net (gain) loss on other real estate owned operations
Merger and restructuring costs
Other non-interest expenses
12,456
13,832
Total non-interest expenses
Income before income taxes
Income tax expense
(43,025
(41,621
(28,022
Net income
Net income attributable to common stockholders
71,959
60,481
Earnings per common share:
Basic
0.42
Diluted
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
115,259
0.10
0.07
198,130
203,344
217,033
8.96
10.41
9.99
1.65
1.40
1.30
16.64
13.40
10.82
13.24
10.88
10.46
120.05
20.44
20.50
20.73
17.71
17.80
17.68
17.99
10.35
10.14
11.36
23.81
28.26
25.12
48.82
51.96
64.33
-257.64
-172.67
-115.47
229.33
242.99
178.49
421.64
483.95
522.00
13.12
13.78
11.26
1-
2-
3-
Table 2 – Quarterly Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis)
1,835,766
2,350,719
1,428,038
820
912
349
0.18
0.15
2,736,095
2,585,069
1,439,872
8,232
7,431
5,974
1.22
1.14
1.68
4,041,975
4,166,861
3,604,584
19,420
15,986
9,730
1.95
1.52
21,465
26,103
31,228
287
401
5.42
4.56
5.21
11,786
11,561
7,238
21
16
9
0.72
0.53
0.50
28,780
24,645
16,463
1.35
1.07
1.03
2,961,456
3,069,075
3,493,822
40,687
42,633
45,586
5.57
5.51
5.29
114,732
165,067
212,676
1,524
2,236
3,244
5.39
5.37
6.19
5,103,870
5,028,753
5,431,614
62,004
63,202
66,269
4.93
4.99
4.95
588,200
561,423
481,995
10,912
10,395
8,870
7.52
7.35
7.46
2,338,597
2,284,679
2,148,159
61,151
61,530
58,737
10.60
10.68
11.09
176,278
179,996
182,706
6.44
6.43
6.30
91,713
106,275
188,949
477
561
989
2.11
2.09
2.12
10,495,194
10,573,790
10,702,468
7,175
8,115
11,353
0.30
424,873
485,676
483,762
3,515
3,850
3,572
3.36
3.15
2.99
301,739
440,000
1,063
1,771
2,463
2.16
2.33
2.27
4-
5-
Table 3 – Non-Interest Income
5,275
2,170
5,241
13,014
13,483
10,138
Table 5 – Selected Balance Sheet Data
11,125,610
11,095,813
6,624,592
6,658,174
66,259
68,545
583,762
683,762
2,196,935
2,185,766
Table 6 – Loan Portfolio
Composition of the loan portfolio including loans held for sale, at period-end.
As of
111,908
138,999
2,237,702
2,167,469
2,880,256
2,887,251
606,266
575,005
2,369,874
2,313,039
2,305,461
181,632
404,606
41,176
4,244
66,488
1,667,028
66,829
503,845
1,851,527
75,399
953,330
3,559,731
146,472
1,523,663
2,302,480
53,253
14,141
8,773,938
381,357
1,942,410
27,151
232
522
8,801,089
381,589
1,942,932
2,361,322
188,251
429,322
38,789
4,344
95,866
1,635,137
67,094
465,238
1,867,082
79,515
940,654
3,541,008
150,953
1,501,758
2,245,097
52,282
15,660
8,722,432
391,486
1,946,740
33,002
177
1,976
8,755,434
391,663
1,948,716
Table 8 – Non-Performing Assets
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 $3.5 million, recorded on the Corporation's books at its fair value of $2.7 million.
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 March 31,2022, and December 31, 2021, amounted to $113.5 million, and $117.5 million, respectively.
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $9.5 million (December 31, 2021 - $7.2 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
Table 9 – Non-Performing Assets by Geography
36,348
39,256
16,861
15,503
15,582
1,119
1,198
960
866
9,683
9,311
80,553
80,842
39,124
36,750
3,654
3,456
126,058
123,898
115,029
114,001
6,851
8,719
9,715
9,834
1,623
1,476
1,424
1,466
168
144
19,781
21,639
3,770
3,450
107
187
23,658
25,276
3,638
1,265
5,619
7,152
924
951
153
133
6,696
8,236
648
62
44
6,758
8,928
131
182
Table 10 – Allowance for Credit Losses for Loans and Finance Leases
Table 11 – Net Charge-Offs to Average Loans
2020
2019
2018
0.87%
0.30%
0.66%
0.67%
0.08%
0.97%
1.03%
-0.16%
0.16%
0.38%
-0.06%
-0.28%
6.75%
1.11%
1.53%
2.05%
2.31%
0.48%
0.91%
1.09%
First BanCorp. Ramon Rodriguez Senior Vice President Corporate Strategy and Investor Relations ramon.rodriguez@firstbankpr.com (787) 729-8200 Ext. 82179