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 a net income of $73.7 million, or $0.45 per diluted share, for the third quarter of 2024, compared to $75.8 million, or $0.46 per diluted share, for the second quarter of 2024, and $82.0 million, or $0.46 per diluted share, for the third quarter of 2023.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp, commented: “Our third quarter results reflect our commitment to deliver consistent performance and our ability to generate organic capital on the back of a stable environment in our main market. We posted a strong return on assets of 1.55%, maintained positive credit performance and stable deposit trends, and made good progress on our capital deployment strategy.
The economy remains on solid footing driven by positive labor market trends and increased business activity. This environment continues to support credit demand and has enabled our strongest quarter of commercial loan originations this year. Our loan portfolio grew by $63 million despite higher levels of unexpected commercial prepayments that amounted to approximately $122 million in the third quarter. Our teams remain focused on expanding existing relationships, building loan pipelines, and adopting new platforms to enable future growth as we close out 2024 and enter 2025.
Net interest income and the margin continued to expand after reaching a trough in the first quarter. We continue to expect that our bond book repricing opportunities will allow for some net interest income expansion in 2025. Finally, consistent with our guidance, we deployed over 100% of our quarterly earnings for the redemption of $50 million in junior subordinated debentures and the payment of common stock dividends. Our franchise is delivering solid results, we have a strong capital base, and we have ample flexibility to prudently allocate that capital into opportunities that best serve the long-term interests of our clients, communities and shareholders.”
Q3
Q2
YTD
2024
2023
Financial Highlights (1)
Net interest income
$
202,064
199,628
199,728
598,212
600,428
Provision for credit losses
15,245
11,605
4,396
39,017
42,128
Non-interest income
32,502
32,038
30,296
98,523
99,085
Non-interest expenses
122,935
118,682
116,638
362,540
344,823
Income before income taxes
96,386
101,379
108,990
295,178
312,562
Income tax expense
22,659
25,541
26,968
72,155
89,187
Net income
73,727
75,838
82,022
223,023
223,375
Selected Financial Data (1)
Net interest margin
4.25
%
4.22
4.15
4.21
4.24
Efficiency ratio
52.41
51.23
50.71
52.03
49.29
Earnings per share - diluted
0.45
0.46
1.35
1.25
Book value per share
10.38
9.10
7.47
Tangible book value per share (2)
10.09
8.81
7.16
Return on average equity
18.31
20.80
20.70
19.52
19.00
Return on average assets
1.55
1.61
1.72
1.57
1.59
Results for Third Quarter of 2024 compared to Second Quarter of 2024
Profitability
Net income – $73.7 million, or $0.45 per diluted share compared to $75.8 million, or $0.46 per diluted share.
Income before income taxes – $96.4 million compared to $101.3 million.
Adjusted pre-tax, pre-provision income (Non-GAAP) (2) – $111.6 million, compared to $113.1 million.
Net interest income – $202.1 million compared to $199.6 million. The increase was mainly due to a higher volume of loans and an increase of approximately $1.2 million associated with the effect of an additional day in the third quarter of 2024. Net interest margin increased to 4.25%, compared to 4.22%.
Provision for credit losses – $15.2 million compared to $11.6 million. The increase in provision reflects the impact of higher charge-off levels in the consumer loan and finance lease portfolios, partially offset by reductions associated with the improved financial condition from certain commercial borrowers and improvements in the long-term projections of the unemployment rate primarily in the Puerto Rico region and the commercial real estate (“CRE”) price index.
Non-interest income – $32.5 million compared to $32.0 million. The increase was driven by insurance proceeds of $0.8 million received in the third quarter of 2024.
Non-interest expenses – $122.9 million compared to $118.7 million. The increase was mainly due to a $2.3 million realized gain on the sale of a commercial other real estate owned (“OREO”) property in the Puerto Rico region in the second quarter of 2024 and a $1.6 million increase in employees’ compensation and benefits expense, driven by annual salary merit increases and an additional working day in the third quarter of 2024. The efficiency ratio was 52.41%, compared to 51.23%.
Balance Sheet
Total loans – grew by $62.8 million to $12.5 billion, primarily reflecting growth in the consumer and commercial loan portfolios. Total loan originations, other than credit card utilization activity, of $1.2 billion, up $43.1 million, mainly in commercial and construction loans.
Core deposits (other than brokered and government deposits) – decreased by $36.8 million to $12.7 billion, reflecting a decline of $51.0 million in the Virgin Islands region and $31.5 million in the Puerto Rico region, partially offset by a $45.7 million increase in the Florida region. This decline includes a $96.9 million decrease in non-interest-bearing deposits, partially offset by a $35.9 million increase in time deposits.
Government deposits (fully collateralized) – decreased by $40.1 million to $3.2 billion, mainly in the Virgin Islands region.
Brokered certificates of deposits (“CDs”) – decreased by $104.7 million to $520.0 million, mainly in the Puerto Rico region.
Asset Quality
Allowance for credit losses (“ACL”) coverage ratio – amounted to 1.98%, compared to 2.06%.
Annualized net charge-offs to average loans ratio increased to 0.78%, compared to 0.69%; the increase includes a $1.2 million fully reserved charge-off taken in connection with the sale of an $8.2 million nonaccrual commercial and industrial (“C&I”) loan in the Puerto Rico region.
Non-performing assets – decreased by $7.8 million, driven by the sale and charge-off of the aforementioned nonaccrual C&I loan.
Liquidity and Capital
Liquidity – Cash and cash equivalents amounted to $685.4 million, compared to $586.3 million. When adding $1.8 billion of free high-quality liquid securities that could be liquidated or pledged within one day and $964.7 million in available lending capacity at the Federal Home Loan Bank (“FHLB”), available liquidity amounted to 18.43% of total assets, compared to 18.50%.
Capital – Repurchased $50.0 million of junior subordinated debentures and paid $26.1 million in common stock dividends. Capital ratios exceeded required regulatory levels. The Corporation’s estimated total capital, common equity tier 1 (“CET1”) capital, tier 1 capital, and leverage ratios were 18.25%, 16.18%, 16.18%, and 10.96%, respectively, as of September 30, 2024. On a non-GAAP basis, the tangible common equity ratio (2) increased to 8.79% when compared to 7.66%, driven by the $160.1 million increase in the fair value of available-for-sale debt securities due to changes in market interest rates which is recognized as part of accumulated other comprehensive loss.
(1) In thousands, except per share information and financial ratios.
(2) Represents a non-GAAP financial measure. Refer to Non-GAAP Disclosures - Non-GAAP Financial Measures for the definition of and additional information about this non-GAAP financial measure
NET INTEREST INCOME
The following table sets forth information concerning net interest income for the last five quarters:
Quarter Ended
(Dollars in thousands)
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Net Interest Income
Interest income
274,675
272,245
268,505
265,481
263,405
Interest expense
72,611
72,617
71,985
68,799
63,677
196,520
196,682
Average Balances
Loans and leases
12,354,679
12,272,816
12,207,840
12,004,881
11,783,456
Total securities, other short-term investments and interest-bearing cash balances
6,509,789
6,698,609
6,720,395
6,835,407
7,325,226
Average interest-earning assets
18,864,468
18,971,425
18,928,235
18,840,288
19,108,682
Average interest-bearing liabilities
11,743,122
11,868,658
11,838,159
11,665,459
11,671,938
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.78
5.76
5.69
5.59
5.47
Average rate on interest-bearing liabilities - GAAP
2.45
2.44
2.34
2.16
Net interest spread - GAAP
3.33
3.31
3.25
Net interest margin - GAAP
4.16
4.14
Net interest income amounted to $202.1 million for the third quarter of 2024, an increase of $2.5 million, compared to $199.6 million for the second quarter of 2024, including a net increase of approximately $1.2 million associated with the effect of an additional day in the third quarter of 2024. The increase in net interest income reflects the following:
- A $1.6 million increase in interest income on commercial and construction loans, driven by increases of $1.1 million associated with the effect of an additional day in the third quarter of 2024, and a $0.4 million increase associated with a $37.8 million increase in the average balance.
- A $1.4 million increase in interest income on consumer loans and finance leases, of which $0.7 million was associated with a $35.3 million increase in the average balance, mainly in the auto loans and finance leases portfolios, and $0.7 million was associated with the effect of an additional day in the third quarter of 2024.
- An $0.8 million increase in interest income in residential mortgage loans driven by higher interest income recognized on nonaccrual loans that returned to accrual status.
Partially offset by:
Interest expense on interest-bearing liabilities remained relatively flat during the third and second quarters of 2024, as further explained below.
Net interest margin for the third quarter of 2024 was 4.25%, a 3 basis points increase when compared to the second quarter of 2024, mostly reflecting a change in asset mix resulting from the deployment of cash flows from lower-yielding investment securities to fund loan growth while simultaneously repaying higher rate brokered CDs.
NON-INTEREST INCOME
The following table sets forth information concerning non-interest income for the last five quarters:
(In thousands)
Service charges and fees on deposit accounts
9,684
9,725
9,662
9,552
Mortgage banking activities
3,199
3,419
2,882
2,094
2,821
Insurance commission income
3,003
2,786
5,507
2,379
2,790
Card and processing income
11,768
11,523
11,312
11,015
10,841
Other non-interest income
4,848
4,585
4,620
8,459
4,292
33,983
33,609
Non-interest income increased by $0.5 million to $32.5 million for the third quarter of 2024, compared to $32.0 million for the second quarter of 2024, mainly due to:
NON-INTEREST EXPENSES
The following table sets forth information concerning non-interest expenses for the last five quarters:
Employees' compensation and benefits
59,081
57,456
59,506
55,584
56,535
Occupancy and equipment
22,424
21,851
21,381
21,847
21,781
Business promotion
4,116
4,359
3,842
6,725
4,759
Professional service fees:
Collections, appraisals and other credit-related fees
688
1,149
1,366
952
930
Outsourcing technology services
7,771
7,698
7,469
7,003
7,261
Other professional fees
4,079
3,584
3,841
3,295
2,831
Taxes, other than income taxes
5,665
5,408
5,129
5,535
5,465
FDIC deposit insurance
2,164
2,316
3,102
8,454
2,143
Other insurance and supervisory fees
2,092
2,287
2,293
2,308
2,356
Net gain on OREO operations
(1,339)
(3,609)
(1,452)
(1,005)
(2,153)
Credit and debit card processing expenses
7,095
7,607
5,751
7,360
6,779
Communications
2,170
2,261
2,097
2,134
2,219
Other non-interest expenses
6,929
6,315
6,598
6,413
5,732
Total non-interest expenses
120,923
126,605
Non-interest expenses amounted to $122.9 million in the third quarter of 2024, an increase of $4.2 million, from $118.7 million in the second quarter of 2024. Non-interest expenses for the second quarter of 2024 include a $0.2 million charge related to an adjustment to the Federal Deposit Insurance Corporation (“FDIC”) special assessment expense. Refer to Non-GAAP Disclosures - Special Items for additional information. On a non-GAAP basis, excluding the effect of this Special Item (as defined below in Non-GAAP Disclosures - Special Items ), adjusted non-interest expenses increased by $4.4 million mainly due to:
INCOME TAXES
The Corporation recorded an income tax expense of $22.7 million for the third quarter of 2024, compared to $25.5 million for the second quarter of 2024, mainly due to lower pre-tax income and a $0.4 million tax contingency accrual release in connection with the expiration of the statute of limitation on some uncertain tax positions.
The Corporation’s estimated annual effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, was 23.7% for the third quarter of 2024, compared to 24.1% for the second quarter of 2024. As of September 30, 2024, the Corporation had a deferred tax asset of $137.5 million, net of a valuation allowance of $121.6 million against the deferred tax assets.
CREDIT QUALITY
Non-Performing Assets
The following table sets forth information concerning non-performing assets for the last five quarters:
Nonaccrual loans held for investment:
Residential mortgage
31,729
31,396
32,685
32,239
31,946
Construction
4,651
4,742
1,498
1,569
1,640
Commercial mortgage
11,496
11,736
11,976
12,205
21,632
C&I
18,362
27,661
25,067
15,250
18,809
Consumer and finance leases
23,106
20,638
21,739
22,444
19,137
Total nonaccrual loans held for investment
89,344
96,173
92,965
83,707
93,164
OREO
19,330
21,682
28,864
32,669
28,563
Other repossessed property
8,844
7,513
6,226
8,115
7,063
Other assets (1)
1,567
1,532
1,551
1,415
1,448
Total non-performing assets (2)
119,085
126,900
129,606
125,906
130,238
Past due loans 90 days and still accruing (3)
43,610
47,173
57,515
59,452
62,892
Nonaccrual loans held for investment to total loans held for investment
0.72
0.78
0.76
0.69
Nonaccrual loans to total loans
0.75
Non-performing assets to total assets
0.63
0.67
0.70
(1)
Residential pass-through mortgage-backed securities (“MBS”) issued by the Puerto Rico Housing Finance Authority (“PRHFA”) held as part of the available-for-sale debt securities portfolio.
(2)
Excludes purchased-credit deteriorated (“PCD”) loans previously accounted for under Accounting Standards Codification (“ASC”) Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of account” both at the time of adoption of current expected credit losses (“CECL”) on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more amounted to $6.5 million as of September 30, 2024 (June 30, 2024- $7.4 million; March 31, 2024 - $8.6 million; December 31, 2023 - $8.3 million; September 30, 2023 - $8.9 million).
(3)
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $6.6 million as of September 30, 2024 (June 30, 2024- $6.8 million; March 31, 2024 - $8.8 million; December 31, 2023 - $7.9 million; September 30, 2023 - $8.5 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
Variances in credit quality metrics:
The decrease in non-performing assets was driven by:
- A $9.6 million decrease in nonaccrual commercial and construction loans, mainly associated with the sale of an $8.2 million nonaccrual C&I loan in the Puerto Rico region. The sale resulted in a $1.2 million charge-off that had been previously reserved.
- A $2.3 million decrease in the OREO portfolio balance, mainly attributable to the sale of residential properties in the Puerto Rico region.
- A $2.5 million increase in nonaccrual consumer loans, consisting mainly of auto loans.
- A $1.3 million increase in other repossessed property, consisting of repossessed automobiles.
- A $0.3 million increase in nonaccrual residential mortgage loans.
Early Delinquency
Total loans held for investment in early delinquency (i.e., 30-89 days past due accruing loans, as defined in regulatory reporting instructions) amounted to $143.4 million as of September 30, 2024, a decrease of $4.0 million, compared to $147.4 million as of June 30, 2024. The variances by major portfolio are as follows:
Allowance for Credit Losses
The following table summarizes the activity of the ACL for on-balance sheet and off-balance sheet exposures during the third and second quarters of 2024:
Quarter Ended September 30, 2024
Loans and Finance Leases
Debt Securities
Residential Mortgage Loans
Commercial and Construction Loans
Consumer Loans and Finance Leases
Total Loans and Finance Leases
Unfunded Loans Commitments
Held-to Maturity
Available- for-Sale
Total ACL
Allowance for credit losses, beginning balance
46,051
70,172
138,309
254,532
4,502
1,267
549
260,850
Provision for credit losses - (benefit) expense
(5,476
)
(6,435
28,381
16,470
(1,041
(148
(36
Net recoveries (charge-offs)
76
(1,088
(22,994
(24,006
-
13
(23,993
Allowance for credit losses, end of period
40,651
62,649
143,696
246,996
3,461
1,119
526
252,102
Amortized cost of loans and finance leases
2,820,147
5,884,535
3,741,342
12,446,024
Allowance for credit losses on loans to amortized cost
1.44
1.06
3.84
1.98
Quarter Ended June 30, 2024
Held-to- Maturity
56,689
73,337
133,566
263,592
4,919
1,235
442
270,188
(10,593
(4,198
26,721
11,930
(417
32
60
Net (charge-offs) recoveries
(45
1,033
(21,978
(20,990
47
(20,943
2,809,666
5,863,843
3,711,999
12,385,508
1.64
1.20
3.73
2.06
Allowance for Credit Losses for Loans and Finance Leases
As of September 30, 2024, the ACL for loans and finance leases was $247.0 million, a decrease of $7.5 million, from $254.5 million as of June 30, 2024. The decrease was mainly related to the ACL for commercial and construction loans, which decreased by $7.5 million, mainly due to releases associated with the improved financial condition of certain commercial borrowers and the improvement in the forecasted CRE price index, as well as the effect of the aforementioned $1.2 million charge-off recorded on the sale of a nonaccrual C&I loan that had been previously reserved. The ACL for residential mortgage loans decreased by $5.4 million, driven by updated macroeconomic variables, mainly in the long-term projection of the unemployment rate in the Puerto Rico region. Meanwhile, the ACL for consumer loans increased by $5.4 million, driven by higher charge-off levels and loan portfolio growth.
The provision for credit losses on loans and finance leases was $16.5 million for the third quarter of 2024, compared to $11.9 million in the second quarter of 2024, as detailed below:
The ratio of the ACL for loans and finance leases to total loans held for investment was 1.98% as of September 30, 2024, compared to 2.06% as of June 30, 2024. The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 276.46% as of September 30, 2024, compared to 264.66% as of June 30, 2024.
Net Charge-Offs
The following table presents ratios of annualized net (recoveries) charge-offs to average loans held-in-portfolio for the last five quarters:
-0.01%
0.01%
0.03%
-0.04%
-0.02%
-3.18%
-0.07%
0.09%
Commercial and Industrial
0.14%
-0.08%
-0.59%
0.00%
Consumer loans and finance leases
2.47%
2.38%
1.70%
2.26%
1.79%
Total loans
0.78%
0.69%
0.37%
0.48%
The $9.5 million recovery associated with the bulk sale of fully charged-off consumer loans during the first quarter of 2024 reduced the consumer loans and finance leases and total net charge-offs to related average loans ratio for the quarter ended March 31, 2024 by 104 basis points and 31 basis points, respectively.
The ratios above are based on annualized net charge-offs and are not necessarily indicative of the results expected in subsequent periods.
Net charge-offs were $24.0 million for the third quarter of 2024, or an annualized 0.78% of average loans, compared to $21.0 million, or an annualized 0.69% of average loans, in the second quarter of 2024. The $3.0 million increase in net charge-offs was driven by the aforementioned $1.2 million charge-off recorded on the sale of a nonaccrual C&I loan in the third quarter of 2024; $1.2 million in recoveries recorded on two commercial loans in the Florida region during the second quarter of 2024; and a $1.0 million increase in net charge-offs in consumer loans and finance leases.
Allowance for Credit Losses for Unfunded Loan Commitments
As of September 30, 2024, the ACL for off-balance sheet credit exposures decreased to $3.5 million, compared to $4.5 million as of June 30, 2024, driven by an improvement on the economic outlook of certain macroeconomic variables, particularly in variables associated with the CRE price index.
Allowance for Credit Losses for Debt Securities
As of September 30, 2024, the ACL for debt securities was $1.6 million, of which $1.1 million related to Puerto Rico municipal bonds classified as held-to-maturity, compared to $1.8 million and $1.3 million, respectively, as of June 30, 2024.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $18.9 billion as of September 30, 2024, down $22.2 million from June 30, 2024.
The following variances within the main components of total assets are noted:
Total loan originations, including refinancings, renewals, and draws from existing commitments (excluding credit card utilization activity), amounted to $1.2 billion in the third quarter of 2024, an increase of $43.1 million compared to the second quarter of 2024.
Total loan originations in the Puerto Rico region amounted to $902.2 million in the third quarter of 2024, compared to $840.5 million in the second quarter of 2024. The $61.7 million increase in total loan originations was mainly in commercial and construction loans, driven by five C&I originations totaling $107.1 million, each in excess of $10 million, partially offset by decreases in commercial mortgage and construction loan originations.
Total loan originations in the Virgin Islands region amounted to $34.7 million in the third quarter of 2024, compared to $20.8 million in the second quarter of 2024. The $13.9 million increase in total loan originations was mainly in commercial and construction loans.
Total loan originations in the Florida region amounted to $248.4 million in the third quarter of 2024, compared to $280.9 million in the second quarter of 2024. The $32.5 million decline in total loan originations consisted of decreases of $23.0 million in commercial and construction loans, mainly in C&I loans; $7.0 million in residential mortgage loans; and $2.5 million in consumer loans.
Total liabilities were approximately $17.2 billion as of September 30, 2024, a decrease of $231.6 million from June 30, 2024.
Total stockholders’ equity amounted to $1.7 billion as of September 30, 2024, an increase of $209.4 million from June 30, 2024, driven by a $160.1 million increase in the fair value of available-for-sale debt securities due to changes in market interest rates recognized as part of accumulated other comprehensive loss and the net income generated in the third quarter of 2024, partially offset by $26.3 million in common stock dividends declared in the third quarter of 2024.
As of September 30, 2024, capital ratios exceeded the required regulatory levels for bank holding companies and well-capitalized banks. The Corporation’s estimated CET1 capital, tier 1 capital, total capital and leverage ratios under the Basel III rules were 16.18%, 16.18%, 18.25%, and 10.96%, respectively, as of September 30, 2024, compared to CET1 capital, tier 1 capital, total capital, and leverage ratios of 15.77%, 15.77%, 18.21%, and 10.63%, respectively, as of June 30, 2024.
Meanwhile, estimated CET1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank, were 16.00%, 16.76%, 18.01%, and 11.36%, respectively, as of September 30, 2024, compared to CET1 capital, tier 1 capital, total capital and leverage ratios of 15.97%, 16.73%, 17.98%, and 11.29%, respectively, as of June 30, 2024.
LIQUIDITY
Cash and cash equivalents increased by $99.1 million to $685.4 million as of September 30, 2024. When adding $1.8 billion of free high-quality liquid securities that could be liquidated or pledged within one day, total core liquidity amounted to $2.5 billion as of September 30, 2024, or 13.32% of total assets, compared to $2.5 billion, or 13.37% of total assets as of June 30, 2024. In addition, as of September 30, 2024, the Corporation had $964.7 million available for credit with the FHLB based on the value of collateral pledged with the FHLB. As such, the basic liquidity ratio (which includes cash, free high-quality liquid assets such as U.S. government and government-sponsored enterprises’ obligations that could be liquidated or pledged within one day, and available secured lines of credit with the FHLB to total assets) was approximately 18.43% as of September 30, 2024, compared to 18.50% as of June 30, 2024.
In addition to the aforementioned available credit from the FHLB, the Corporation also maintains borrowing capacity at the FED Discount Window Program. The Corporation had approximately $2.6 billion available for funding under the FED’s Borrower-In-Custody Program as of September 30, 2024. In the aggregate, as of September 30, 2024, the Corporation had $6.1 billion, or 131% of estimated uninsured deposits (excluding fully collateralized government deposits), available to meet liquidity needs.
The Corporation’s total deposits, excluding brokered CDs, amounted to $15.8 billion as of September 30, 2024, compared to $15.9 billion as of June 30, 2024, which includes $3.2 billion in government deposits that are fully collateralized as of each of September 30, 2024 and June 30, 2024. Excluding fully collateralized government deposits and FDIC-insured deposits, as of September 30, 2024, the estimated amount of uninsured deposits was $4.6 billion, which represents 29.25% of total deposits, compared to $4.5 billion, or 28.46% of total deposits, as of June 30, 2024. Refer to Table 11 in the accompanying tables (Exhibit A) for additional information about the deposits composition.
Tangible Common Equity (Non-GAAP)
On a non-GAAP basis, the Corporation’s tangible common equity ratio increased to 8.79% as of September 30, 2024, compared to 7.66% as of June 30, 2024, driven by the $160.1 million increase in the fair value of available-for-sale debt securities. Refer to Non-GAAP Disclosures- Non-GAAP Financial Measures for the definition of and additional information about this non-GAAP financial measure.
The following table presents a reconciliation of the Corporation’s tangible common equity and tangible assets to the most comparable GAAP items as of the indicated dates:
(In thousands, except ratios and per share information)
Tangible Equity:
Total common equity - GAAP
1,700,885
1,491,460
1,479,717
1,497,609
1,303,068
Goodwill
(38,611
Other intangible assets
(8,260
(9,700
(11,542
(13,383
(15,229
Tangible common equity - non-GAAP
1,654,014
1,443,149
1,429,564
1,445,615
1,249,228
Tangible Assets:
Total assets - GAAP
18,859,170
18,881,374
18,890,961
18,909,549
18,594,608
Tangible assets - non-GAAP
18,812,299
18,833,063
18,840,808
18,857,555
18,540,768
Common shares outstanding
163,876
163,865
166,707
169,303
174,386
Tangible common equity ratio - non-GAAP
8.79
7.66
7.59
7.67
6.74
Tangible book value per common share - non-GAAP
8.58
8.54
Exposure to Puerto Rico Government
As of September 30, 2024, the Corporation had $309.0 million of direct exposure to the Puerto Rico government, its municipalities, and public corporations, a decrease of $7.7 million when compared to $316.7 million as of June 30, 2024, mainly due to multiple repayments. As of September 30, 2024, approximately $195.6 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 $50.9 million consisted of loans and obligations which are supported by one or more specific sources of municipal revenues. The Corporation’s total direct exposure to the Puerto Rico government also included $8.8 million in a loan extended to an affiliate of the Puerto Rico Electric Power Authority and $50.7 million in loans to agencies of Puerto Rico public corporations. In addition, the total direct exposure included an obligation of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $3.0 million (fair value of $1.6 million as of September 30, 2024), included as part of the Corporation’s available-for-sale debt securities portfolio. This residential pass-through MBS issued by the PRHFA is collateralized by certain second mortgages and had an unrealized loss of $1.4 million as of September 30, 2024, of which $0.3 million is due to credit deterioration.
The aforementioned exposure to municipalities in Puerto Rico included $92.1 million of financing arrangements with Puerto Rico municipalities that were issued in bond form but underwritten as loans with features that are typically found in commercial loans. These bonds are accounted for as held-to-maturity debt securities.
As of each of September 30, 2024 and June 30, 2024, the Corporation had $2.7 billion of public sector deposits in Puerto Rico. Approximately 22% of the public sector deposits as of September 30, 2024 were from municipalities and municipal agencies in Puerto Rico, and 78% were from public corporations, the Puerto Rico central government and agencies, and U.S. federal government agencies in Puerto Rico.
NON-GAAP DISCLOSURES
This press release contains GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are used when management believes that the presentation of these non-GAAP financial measures enhances the ability of analysts and investors to analyze trends in the Corporation’s business and understand the performance of the Corporation. The Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process. Where non-GAAP financial measures are used, the most comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure, can be found in the text or in the tables in or attached to this press release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.
Certain non-GAAP financial measures, such as adjusted net income and adjusted earnings per share, adjusted pre-tax, pre-provision income, and adjusted non-interest expenses exclude the effect of items that management believes are not reflective of core operating performance (the “Special Items”). Other non-GAAP financial measures include adjusted net interest income and adjusted net interest income margin, tangible common equity, tangible book value per common share, and certain capital ratios. These measures should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release, and the Corporation’s other financial information that is presented in accordance with GAAP.
Special Items
The financial results for the nine-month periods ended September 30, 2024 and 2023 included the following Special Items:
Quarter Ended June 30, 2024 and Nine-Month Period Ended September 30, 2024
FDIC Special Assessment Expense
Charges of $0.2 million ($0.1 million after-tax, calculated based on the statutory tax rate of 37.5%) and $1.1 million ($0.7 million after-tax, calculated based on the statutory tax rate of 37.5%) were recorded in the second quarter of 2024 and nine-month period ended September 30, 2024, respectively, to increase the initial estimated FDIC special assessment resulting from the FDIC’s updates related to the loss estimate in connection with losses to the Deposit Insurance Fund associated with protecting uninsured deposits following the failures of certain financial institutions during the first half of 2023. The aforementioned charges increased the estimated FDIC special assessment to a total of $7.4 million, which was the revised estimated loss reflected in the FDIC invoice for the first quarterly collection period with a payment date of June 28, 2024. The FDIC deposit special assessment is reflected in the condensed consolidated statements of income as part of “FDIC deposit insurance” expenses.
Nine-Month Period Ended September 30, 2023
Gain Recognized from Legal Settlement
During the second quarter of 2023, the Corporation recognized a $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain from a legal settlement reflected in the condensed consolidated statements of income as part of other non-interest income.
Gain on Early Extinguishment of Debt
During the second quarter of 2023, the Corporation recognized a $1.6 million gain on the repurchase of $21.4 million in junior subordinated debentures reflected in the condensed consolidated statements of income as “Gain on early extinguishment of debt.” The junior subordinated debentures are reflected in the condensed consolidated statements of financial condition as “Other borrowings.” The purchase price equated to 92.5% of the $21.4 million par value. The 7.5% discount resulted in the gain of $1.6 million. The gain, realized at the holding company level, had no effect on the income tax expense in the second quarter of 2023.
Non-GAAP Financial Measures
Adjusted Pre-Tax, Pre-Provision Income
Adjusted pre-tax, pre-provision income is a non-GAAP performance metric that management uses and believes that investors may find useful in analyzing underlying performance trends, particularly in times of economic stress, including as a result of natural catastrophes or health epidemics. Adjusted pre-tax, pre-provision income, as defined by management, represents income before income taxes adjusted to exclude the provisions for credit losses on loans, unfunded loan commitments and debt securities. In addition, from time to time, earnings are also adjusted for certain items that management believes are not reflective of core operating performance, which are regarded as Special Items.
Tangible Common Equity Ratio and Tangible Book Value per Common Share
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other intangible assets. Tangible assets are total assets less goodwill and other intangible assets. Tangible common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible assets divided by common shares outstanding. Refer to Statement of Financial Condition - Tangible Common Equity (Non-GAAP) for a reconciliation of the Corporation’s total stockholders’ equity and total assets in accordance with GAAP to the non-GAAP financial measures of tangible common equity and tangible assets, respectively. Management uses and believes that many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation believes that disclosure of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets, or the related measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets, and any other related measures may differ from that of other companies reporting measures with similar names.
Net Interest Income Excluding Valuations, and on a Tax-Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Refer to Table 4 in the accompanying tables (Exhibit A) for a reconciliation of the Corporation’s net interest income to adjusted net interest income excluding valuations, and on a tax-equivalent basis. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that management believes facilitates comparison of results to the results of peers.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)
The following table shows, for the third quarters of 2024 and 2023, net income and earnings per diluted share, and reconciles, for the second quarter of 2024 and nine-month periods ended September 30, 2024 and 2023, net income to adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures that exclude the significant Special Items discussed in the Non-GAAP Disclosures - Special Items section.
Nine-Month Period Ended
(In thousands, except per share information)
Net income, as reported (GAAP)
Adjustments:
FDIC special assessment expense
152
1,099
Gain recognized from legal settlement
(3,600
Gain on early extinguishment of debt
(1,605
Income tax impact of adjustments (1)
(57
(412
1,350
Adjusted net income attributable to common stockholders (non-GAAP)
75,933
223,710
219,520
Weighted-average diluted shares outstanding
163,872
165,543
176,962
165,730
179,144
Earnings Per Share - diluted (GAAP)
Adjusted Earnings Per Share - diluted (non-GAAP)
1.23
(1) See Non-GAAP Disclosures - Special Items above for discussion of the individual tax impact related to the above adjustments.
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters and for the nine-month periods ended September 30, 2024 and 2023:
97,413
84,874
Add: Provision for credit losses expense
12,167
18,812
Add: FDIC special assessment expense
947
6,311
Less: Gain recognized from legal settlement
Less: Gain on early extinguishment of debt
Adjusted pre-tax, pre-provision income (1)
111,631
113,136
110,527
109,997
113,386
335,294
349,485
Change from most recent prior period (amount)
(1,505
2,609
530
(3,389
(4,578
(14,191
(3,553
Change from most recent prior period (percentage)
-1.3
2.4
0.5
-3.0
-3.9
-4.1
-1.0
Non-GAAP financial measure. See Non-GAAP Disclosures above for the definition and additional information about this non-GAAP financial measure.
Conference Call / Webcast Information
First BanCorp.’s senior management will host an earnings conference call and live webcast on Wednesday, October 23, 2024, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast through the Corporation’s investor relations website, fbpinvestor.com, or through a dial-in telephone number at (833) 470-1428 or (404) 975-4839. The participant access code is 104808. 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 Corporation’s investor relations website, fbpinvestor.com, until October 23, 2025. A telephone replay will be available one hour after the end of the conference call through November 22, 2024, at (866) 813-9403. The replay access code is 131916.
Safe Harbor
This press release may contain “forward-looking statements” concerning the Corporation’s future economic, operational, and financial performance. The words or phrases “expect,” “anticipate,” “intend,” “should,” “would,” “will,” “plans,” “forecast,” “believe,” and similar expressions are meant to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. The Corporation cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date hereof, and advises readers that any such forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by us that are difficult to predict. Various factors, some of which are beyond our control, including, but not limited to, the uncertainties more fully discussed in Part I, Item 1A, “Risk Factors” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, as updated in the Corporation’s subsequent Quarterly Reports on Form 10-Q, and the following, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements: the effect of the current global interest rate environment (including the potential for ongoing reductions in interest rates) and inflation levels on the level, composition and performance of the Corporation’s assets and liabilities, and corresponding effects on the Corporation’s net interest income, net interest margin, loan originations, deposit attrition, overall results of operations, and liquidity position; the effects of changes in the interest rate environment, including any adverse change in the Corporation’s ability to attract and retain clients and gain acceptance from current and prospective customers for new products and services, including those related to the offering of digital banking and financial services; volatility in the financial services industry, including failures or rumored failures of other depository institutions, and actions taken by governmental agencies to stabilize the financial system, which could result in, among other things, bank deposit runoffs, liquidity constraints, and increased regulatory requirements and costs; the effect of continued changes in the fiscal and monetary policies and regulations of the U.S. federal government, the Puerto Rico government and other governments, including those determined by the Federal Reserve Board, the Federal Reserve Bank of New York, the FDIC, government-sponsored housing agencies and regulators in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, that may affect the future results of the Corporation; uncertainty as to the ability of FirstBank to retain its core deposits and generate sufficient cash flow through its wholesale funding sources, such as securities sold under agreements to repurchase, FHLB advances, and brokered CDs, which may require us to sell investment securities at a loss; adverse changes in general political and economic conditions in Puerto Rico, the U.S., and the U.S. and British Virgin Islands, including in the interest rate environment, unemployment rates, market liquidity, housing absorption rates, real estate markets, and U.S. capital markets, which may affect funding sources, loan portfolio performance and credit quality, market prices of investment securities, and demand for the Corporation’s products and services, and which may reduce the Corporation’s revenues and earnings and the value of the Corporation’s assets; the impact of government financial assistance for hurricane recovery and other disaster relief on economic activity in Puerto Rico, and the timing and pace of disbursements of funds earmarked for disaster relief; the ability of the Corporation, FirstBank, and third-party service providers to identify and prevent cyber-security incidents, such as data security breaches, ransomware, malware, “denial of service” attacks, “hacking,” identity theft, and state-sponsored cyberthreats, and the occurrence of and response to any incidents that occur, which may result in misuse or misappropriation of confidential or proprietary information, disruption, or damage to our systems or those of third-party service providers on which we rely, increased costs and losses and/or adverse effects to our reputation; general competitive factors and other market risks as well as the implementation of existent or planned strategic growth opportunities, including risks, uncertainties, and other factors or events related to any business acquisitions, dispositions, strategic partnerships, strategic operational investments, including systems conversions, and any anticipated efficiencies or other expected results related thereto; uncertainty as to the implementation of the debt restructuring plan of Puerto Rico and the fiscal plan for Puerto Rico as certified on June 5, 2024, by the oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act, or any revisions to it, on our clients and loan portfolios, and any potential impact from future economic or political developments and tax regulations in Puerto Rico; the impact of changes in accounting standards, or determinations and assumptions in applying those standards, and of forecasts of economic variables considered for the determination of the ACL; the ability of FirstBank to realize the benefits of its net deferred tax assets; the ability of FirstBank to generate sufficient cash flow to pay dividends to the Corporation; environmental, social, and governance matters, including our climate-related initiatives and commitments; the impacts of natural or man-made disasters, the emergence or continuation of widespread health emergencies, geopolitical conflicts (including sanctions, war or armed conflict, such as the ongoing conflict in Ukraine, the conflict in the Middle East, and the possible expansion of such conflicts in surrounding areas and potential geopolitical consequences), terrorist attacks, or other catastrophic external events, including impacts of such events on general economic conditions and on the Corporation’s assumptions regarding forecasts of economic variables; the risk that additional portions of the unrealized losses in the Corporation’s debt securities portfolio are determined to be credit-related, resulting in additional charges to the provision for credit losses on the Corporation’s debt securities portfolio, and the potential for additional credit losses that could emerge from the downgrade of the U.S.’s Long-Term Foreign-Currency Issuer Default Rating to ‘AA+’ from ‘AAA’ in August 2023 and subsequent negative ratings outlooks; the impacts of applicable legislative, tax, or regulatory changes or changes in legislative, tax, or regulatory priorities, potential government shutdowns, and political impasses, including uncertainties regarding the U.S. debt ceiling and federal budget, as well as of the 2024 U.S. and Puerto Rico general election, on the Corporation’s financial condition or performance; the risk of possible failure or circumvention of the Corporation’s internal controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; the risk that the FDIC may further increase the deposit insurance premium and/or require further special assessments, causing an additional increase in the Corporation’s non-interest expenses; any need to recognize impairments on the Corporation’s financial instruments, goodwill, and other intangible assets; the risk that the impact of the occurrence of any of these uncertainties on the Corporation’s capital would preclude further growth of FirstBank and preclude the Corporation’s Board of Directors from declaring dividends; and uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding, among other things, its asset quality, liquidity plans, maintenance of capital levels, and compliance with applicable laws, regulations and related requirements. The Corporation does not undertake to, and specifically disclaims any obligation to update any “forward-looking statements” to reflect occurrences or unanticipated events or circumstances after the date of such statements, except as required by the federal securities laws.
About First BanCorp.
First BanCorp. is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the U.S., and the British Virgin Islands and Florida, and of FirstBank Insurance Agency. First BanCorp.’s shares of common stock trade on the New York Stock Exchange under the symbol FBP. Additional information about First BanCorp. may be found at www.1firstbank.com.
EXHIBIT A
Table 1 – Condensed Consolidated Statements of Financial Condition
As of
(In thousands, except for share information)
ASSETS
Cash and due from banks
684,028
581,843
661,925
Money market investments:
Time deposits with other financial institutions
500
300
Other short-term investments
843
3,939
939
Total money market investments
1,343
4,439
1,239
Debt securities available for sale, at fair value (ACL of $526 as of September 30, 2024; $549 as of June 30, 2024; and $511 as of December 31, 2023)
4,894,781
4,957,311
5,229,984
Debt securities held to maturity, at amortized cost, net of ACL of $1,119 as of September 30, 2024; $1,267 as of June 30, 2024; and $2,197 as of December 31, 2023 (fair value of $316,854 as of September 30, 2024; $333,690 as of June 30, 2024; and $346,132 as of December 31, 2023)
322,023
343,168
351,981
Total debt securities
5,216,804
5,300,479
5,581,965
Equity securities
52,432
51,037
49,675
Total investment securities
5,269,236
5,351,516
5,631,640
Loans, net of ACL of $246,996 as of September 30, 2024; $254,532 as of June 30, 2024; and $261,843 as of December 31, 2023
12,199,028
12,130,976
11,923,640
Loans held for sale, at lower of cost or market
12,641
10,392
7,368
Total loans, net
12,211,669
12,141,368
11,931,008
Accrued interest receivable on loans and investments
67,112
77,895
77,716
Premises and equipment, net
136,401
138,554
142,016
Deferred tax asset, net
137,484
142,725
150,127
38,611
8,260
9,700
13,383
Other assets
285,696
373,041
229,215
Total assets
LIABILITIES
Deposits:
Non-interest-bearing deposits
5,275,733
5,406,054
5,404,121
Interest-bearing deposits
11,071,657
11,122,902
11,151,864
Total deposits
16,347,390
16,528,956
16,555,985
Advances from the FHLB
500,000
Other borrowings
111,700
161,700
Accounts payable and other liabilities
199,195
199,258
194,255
Total liabilities
17,158,285
17,389,914
17,411,940
STOCKHOLDERSʼ EQUITY
Common stock, $0.10 par value, 223,663,116 shares issued (September 30, 2024 - 163,875,810 shares outstanding; June 30, 2024 - 163,865,453 shares outstanding; and December 31, 2023 - 169,302,812 shares outstanding)
22,366
Additional paid-in capital
962,973
961,254
965,707
Retained earnings
1,989,419
1,941,980
1,846,112
Treasury stock, at cost (September 30, 2024 - 59,787,306 shares; June 30, 2024 - 59,797,663 shares; and December 31, 2023 - 54,360,304 shares)
(790,252
(790,465
(697,406
Accumulated other comprehensive loss
(483,621
(643,675
(639,170
Total stockholdersʼ equity
Total liabilities and stockholdersʼ equity
Table 2 – Condensed Consolidated Statements of Income
Net interest income:
815,425
758,005
217,213
157,577
Provision for credit losses - expense (benefit):
Loans
10,643
41,317
47,669
Unfunded loan commitments
(128
(1,177
488
Debt securities
(184
92
(6,119
(1,123
(6,029
Provision for credit losses - expense
Net interest income after provision for credit losses
186,819
188,023
195,332
559,195
558,300
Non-interest income:
29,071
28,380
9,500
8,493
1,605
34,603
32,894
7,851
7,371
7,082
25,349
27,713
Total non-interest income
Non-interest expenses:
Employees’ compensation and benefits
176,043
167,271
65,656
64,064
12,317
12,901
Professional service fees
12,538
12,431
11,022
37,645
34,591
16,202
15,701
7,582
6,419
(1,339
(3,609
(2,153
(6,400
(6,133
20,453
18,637
11,191
10,863
10,307
33,042
31,372
Net income attributable to common stockholders
Earnings per common share:
Basic
0.47
Diluted
Table 3 – Selected Financial Data
(Shares in thousands)
Per Common Share Results:
Net earnings per share - basic
Net earnings per share - diluted
Cash dividends declared
0.16
0.14
0.48
0.42
Average shares outstanding
163,059
164,945
176,358
165,041
178,486
Average shares outstanding diluted
Book value per common share
Tangible book value per common share (1)
Common stock price: end of period
21.17
18.29
13.46
Selected Financial Ratios (In Percent):
Profitability:
Interest rate spread (2)
3.42
3.41
3.39
3.60
Net interest margin (2)
4.34
4.32
4.31
4.36
Efficiency ratio (3)
Capital and Other:
Average total equity to average total assets
8.46
7.74
8.32
8.06
8.39
Total capital
18.25
18.21
18.84
Common equity Tier 1 capital
16.18
15.77
16.35
Tier 1 capital
Leverage
10.96
10.63
10.57
Tangible common equity ratio (1)
Dividend payout ratio
35.39
34.80
30.10
35.52
33.56
Basic liquidity ratio (4)
18.43
18.50
19.67
Core liquidity ratio (5)
13.32
13.37
14.58
Loan to deposit ratio
76.21
75.00
72.77
Uninsured deposits, excluding fully collateralized deposits, to total deposits (6)
29.25
28.46
27.74
Asset Quality:
Allowance for credit losses for loans and finance leases to total loans
held for investment
2.21
Net charge-offs (annualized) to average loans outstanding
0.61
0.54
Provision for credit losses for loans and finance leases
to net charge-offs
68.61
56.84
75.56
73.56
102.22
Allowance for credit losses for loans and finance leases to total nonaccrual loans
276.46
264.66
282.96
held for investment, excluding residential estate loans
428.70
392.94
430.62
Non-GAAP financial measures. Refer to Non-GAAP Disclosures and Statement of Financial Condition - Tangible Common Equity (Non-GAAP) above for additional information about the components and a reconciliation of these measures.
Non-GAAP financial measures reported on a tax-equivalent basis and excluding changes in the fair value of derivative instruments. Refer to Non-GAAP Disclosures and Table 4 below for additional information and a reconciliation of these measures.
Non-interest expenses to the sum of net interest income and non-interest income.
(4)
Defined as the sum of cash and cash equivalents, free high quality liquid assets that could be liquidated within one day, and available secured lines of credit with the FHLB to total assets.
(5)
Defined as the sum of cash and cash equivalents and free high quality liquid assets that could be liquidated within one day to total assets.
(6)
Exclude insured deposits not covered by federal deposit insurance.
Table 4 – Reconciliation of Net Interest Income to Net Interest Income Excluding Valuations and on a Tax-Equivalent Basis
The following table reconciles net interest income in accordance with GAAP to net interest income excluding valuations, and net interest income on a tax-equivalent basis for the third and second quarters of 2024, the third quarter of 2023, and the nine-month periods ended September 30, 2024 and 2023, respectively. The table also reconciles net interest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.
September 30,
June 30,
Interest income - GAAP
Unrealized loss (gain) on derivative instruments
5
(3
3
Interest income excluding valuations - non-GAAP
274,680
263,402
815,428
Tax-equivalent adjustment
4,528
4,866
4,690
14,207
16,577
Interest income on a tax-equivalent basis and excluding valuations - non-GAAP
279,208
277,111
268,092
829,635
774,582
Interest expense - GAAP
Net interest income - GAAP
Net interest income excluding valuations - non-GAAP
202,069
199,725
598,215
Net interest income on a tax-equivalent basis and excluding valuations - non-GAAP
206,597
204,494
204,415
612,422
617,005
12,278,724
11,632,424
6,642,446
7,297,528
Average Interest-Earning Assets
18,921,170
18,929,952
Average Interest-Bearing Liabilities
11,816,378
11,271,354
Average Assets (1)
18,883,374
18,884,431
18,895,980
18,875,397
18,748,479
Average Non-Interest-Bearing Deposits
5,341,589
5,351,308
5,621,233
5,333,838
5,861,680
5.74
5.35
1.87
3.29
3.48
Average yield on interest-earning assets excluding valuations - non-GAAP
Average rate on interest-bearing liabilities
Net interest spread excluding valuations - non-GAAP
Net interest margin excluding valuations - non-GAAP
Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations - non-GAAP
5.87
5.86
5.57
5.84
Net interest spread on a tax-equivalent basis and excluding valuations - non-GAAP
Net interest margin on a tax-equivalent basis and excluding valuations - non-GAAP
(1) Includes, among other things, the ACL on loans and finance leases and debt securities, as well as unrealized gains and losses on available-for-sale debt securities.
Table 5 – Quarterly Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis)
Average Volume
Interest Income (1) / Expense
Average Rate (1)
Interest-earning assets:
Money market and other short-term investments
645,398
667,564
807,883
8,782
9,060
10,956
5.40
5.44
5.38
Government obligations (2)
2,520,133
2,619,778
2,817,646
8,458
8,947
9,415
1.33
1.37
MBS
3,290,547
3,359,598
3,650,737
13,830
14,339
15,677
1.67
1.71
1.70
FHLB stock
33,985
34,032
34,666
804
818
768
9.39
9.64
Other investments
19,726
17,637
14,294
73
244
61
1.47
5.55
1.69
Total investments (3)
31,947
33,408
36,877
1.95
2.00
Residential mortgage loans
2,816,343
2,807,639
2,800,675
41,505
40,686
39,640
5.85
5.81
5.62
Construction loans
195,001
245,219
183,507
4,417
4,955
4,937
8.99
8.10
10.67
C&I and commercial mortgage loans
5,616,658
5,528,607
5,261,849
102,768
100,919
93,711
7.26
7.32
7.07
Finance leases
885,807
873,908
808,480
17,290
17,255
15,802
7.92
7.75
Consumer loans
2,840,870
2,817,443
2,728,945
81,281
79,888
77,125
11.35
11.37
11.21
Total loans (4)(5)
247,261
243,703
231,215
7.94
7.96
7.78
Total interest-earning assets
Interest-bearing liabilities:
Time deposits
3,057,918
3,002,159
2,708,297
27,768
26,588
19,852
3.55
2.91
Brokered CDs
600,319
676,421
318,831
7,656
8,590
3,830
5.06
5.09
4.77
Other interest-bearing deposits
7,429,163
7,528,378
7,956,856
28,280
28,493
30,616
1.51
1.52
1.53
Securities sold under agreements to repurchase
26,254
359
0.00
5.43
5,672
5,610
5,675
4.50
155,722
3,235
3,336
3,345
8.24
8.27
8.21
Total interest-bearing liabilities
Interest rate spread
Non-GAAP financial measures reported on a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. Refer to Non-GAAP Disclosures - Non-GAAP Financial Measures and Table 4 above for additional information and a reconciliation of these measures.
Government obligations include debt issued by government-sponsored agencies.
Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.
Average loan balances include the average of non-performing loans.
Interest income on loans includes $3.2 million, $3.1 million, and $2.9 million, for the quarters ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively, of income from prepayment penalties and late fees related to the Corporation’s loan portfolio.
Table 6 – Year-to-Date Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis)
615,679
611,308
25,096
23,486
5.14
2,607,706
2,878,603
26,458
31,153
1.45
3,366,866
3,756,654
43,407
52,160
1.86
34,217
37,234
2,476
1,969
17,978
13,729
383
258
2.84
2.51
97,820
109,026
1.96
2,811,447
2,814,667
122,664
119,298
5.67
219,601
159,914
13,909
10,516
8.44
5,550,259
5,207,216
302,761
268,886
7.27
6.90
874,508
771,366
51,672
44,325
7.87
7.68
2,822,909
2,679,261
240,809
222,531
11.36
11.10
Total loans (4) (5)
731,815
665,556
7.65
2,984,413
2,522,061
78,766
46,301
3.52
675,226
273,586
25,926
9,178
5.11
4.49
7,497,046
7,674,759
85,708
70,308
1.22
72,648
2,756
5.07
553,993
16,892
18,899
4.56
159,693
174,307
9,921
10,135
8.28
7.77
Interest income on loans includes $9.5 million and $8.9 million for the nine-month periods ended September 30, 2024 and 2023, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.
Table 7 – Loan Portfolio by Geography
As of September 30, 2024
Puerto Rico
Virgin Islands
United States
Consolidated
2,168,590
159,088
492,469
Commercial loans:
173,352
2,001
31,989
207,342
Commercial mortgage loans
1,728,552
68,781
674,547
2,471,880
Commercial and Industrial loans
2,161,688
81,942
961,683
3,205,313
Commercial loans
4,063,592
152,724
1,668,219
893,374
2,770,616
69,751
7,601
2,847,968
Loans held for investment
9,896,172
381,563
2,168,289
Loans held for sale
9,908,813
12,458,665
As of June 30, 2024
2,163,245
161,057
485,364
160,093
3,681
22,183
185,957
1,697,939
62,821
662,549
2,423,309
2,176,489
135,456
942,632
3,254,577
4,034,521
201,958
1,627,364
880,312
2,755,077
68,540
8,070
2,831,687
9,833,155
431,555
2,120,798
9,843,547
12,395,900
As of December 31, 2023
2,187,875
168,131
465,720
2,821,726
111,664
3,737
99,376
214,777
1,725,325
65,312
526,446
2,317,083
2,130,368
119,040
924,824
3,174,232
3,967,357
188,089
1,550,646
5,706,092
856,815
2,726,457
68,498
5,895
2,800,850
9,738,504
424,718
2,022,261
12,185,483
9,745,872
12,192,851
Table 8 – Non-Performing Assets by Geography
Total
16,047
6,434
9,248
3,687
964
2,734
8,762
17,131
1,231
22,763
307
36
62,362
17,698
9,284
15,715
3,615
8,655
186
88,299
21,499
9,287
40,458
3,152
16,895
6,446
8,055
3,776
966
2,865
8,871
26,387
1,274
20,276
326
70,199
17,883
8,091
17,413
4,202
67
7,330
183
96,474
22,268
8,158
44,028
3,145
18,324
6,688
7,227
595
974
3,106
9,099
13,414
1,169
667
21,954
419
71
57,393
18,349
7,965
28,382
4,287
7,857
252
6
95,047
22,888
7,971
53,308
6,005
139
Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.
Excludes PCD loans previously accounted for under ASC Subtopic 310-30 for which the Corporation made the accounting policy election of maintaining pools of loans as “units of account” both at the time of adoption of CECL on January 1, 2020 and on an ongoing basis for credit loss measurement. These loans will continue to be excluded from nonaccrual loan statistics as long as the Corporation can reasonably estimate the timing and amount of cash flows expected to be collected on the loan pools. The portion of such loans contractually past due 90 days or more amounted to $6.5 million as of September 30, 2024 (June 30, 2024 - $7.4 million; December 31, 2023 - $8.3 million).
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $6.6 million as of September 30, 2024 (June 30, 2024 - $6.8 million; December 31, 2023 - $7.9 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.
Table 9 – Allowance for Credit Losses on Loans and Finance Leases
Allowance for credit losses on loans and finance leases, beginning of period
267,058
261,843
260,464
Impact of adoption of ASU 2022-02
2,116
Provision for credit losses on loans and finance leases expense
Net recoveries (charge-offs) of loans and finance leases:
35
(213
(840
11
14
1,459
1,893
41
393
74
474
192
(1,140
626
4,146
(6,094
(15,806
(60,606
(41,785
Net charge-offs
(14,086
(56,164
(46,634
Allowance for credit losses on loans and finance leases, end of period
263,615
Allowance for credit losses on loans and finance leases to period end total loans held for investment
Net charge-offs (annualized) to average loans outstanding during the period
Provision for credit losses on loans and finance leases to net charge-offs during the period
0.69x
0.57x
0.76x
0.74x
1.02x
For the nine-month period ended September 30 2024, includes a recovery totaling $10.0 million associated with the aforementioned bulk sale of fully charged-off consumer loans and finance leases.
Table 10 – Annualized Net (Recoveries) Charge-Offs to Average Loans
0.04%
-1.58%
-0.03%
-0.17%
0.28%
2.19%
1.61%
0.61%
0.54%
The $10.0 million recovery associated with the aforementioned bulk sale reduced the consumer loans and finance leases and total net charge-offs to related average loans ratio for the for the nine-month period ended September 30, 2024 by 36 basis points and 11 basis points, respectively.
Table 11 – Deposits
3,067,261
3,037,120
2,833,730
Interest-bearing saving and checking accounts
7,484,348
7,461,003
7,534,800
Total deposits, excluding brokered CDs (1)
15,827,342
15,904,177
15,772,651
520,048
624,779
783,334
Total deposits, excluding brokered CDs and government deposits
12,669,900
12,706,646
12,600,719
As of each of September 30, 2024, June 30, 2024 and December 31, 2023, government deposits amounted to $3.2 billion.
First BanCorp. Ramon Rodriguez Senior Vice President Corporate Strategy and Investor Relations ramon.rodriguez@firstbankpr.com (787) 729-8200 Ext. 82179