- Non-performing assets decreased by $4.3 million to $125.9 million as of December 31, 2023, mainly driven by the commercial and construction loan portfolios, which includes $7.7 million in collections and loans returned to accrual status and $1.5 million in charge-offs, partially offset by a $3.3 million increase in consumer loans, mainly auto loans and finance leases, and a $1.1 million increase in other repossessed automobiles.
- Annualized net charge-offs to average loans ratio increased to 0.69% for the fourth quarter of 2023, compared to 0.48% for the third quarter of 2023, mainly driven by a $4.6 million increase in consumer loans, a $1.4 million recovery recorded on a construction loan in the Puerto Rico region during the third quarter of 2023, and a $1.0 million charge-off recorded on a nonaccrual commercial mortgage loan transferred to other real estate owned (“OREO”) during the fourth quarter of 2023.
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 $79.5 million, or $0.46 per diluted share, for the fourth quarter of 2023, compared to $82.0 million, or $0.46 per diluted share, for the third quarter of 2023, and $73.2 million, or $0.40 per diluted share, for the fourth quarter of 2022.
For the year ended December 31, 2023, the Corporation reported net income of $302.9 million, or $1.71 per diluted share, compared to $305.1 million, or $1.59 per diluted share, for the year ended December 31, 2022.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We closed an unprecedented and challenging year for the banking industry with another quarter of strong financial performance and solid loan growth for our franchise. We delivered a 1.70% return on average assets, grew loans by $233.0 million or 7.8% linked quarter annualized, and decreased non-performing assets to just 0.67% of total assets. Core deposits, other than government and brokered, contracted by 2.0% as we continue to see use of excess liquidity across all market segments. We are very fortunate to have the support of our loyal client base and the commitment from all our service-oriented colleagues during this period and as we continue to capitalize on the stable economic environment of our main operating markets.”
Alemán continued: “Over the course of 2023, we continued to deploy our capital wisely while selectively growing the loan portfolio, proactively managing the acceleration in funding costs, and executing on multiple franchise investments. Total loans grew by $627.7 million, or 5.4%, during the year driven by strong commercial and consumer loan originations, and we expect that a significant portion of unfunded construction loan originations will be disbursed during 2024. Franchise investments continue to enable the achievement of our strategic objectives. We grew digital banking registered users by 14%, deployed multiple enhancements to both our physical and information technology infrastructure, and advanced several process improvement initiatives aimed at supporting business goals and increase efficiency across the organization. For the third consecutive year, we distributed close to 100% of earnings to shareholders in the form of cash dividends and share repurchases, while maintaining robust regulatory capital levels and ample liquidity.
“As we look forward to 2024, additional investments will be geared towards simplifying our commercial lending process and enhancing the resiliency of the franchise, while continuing to expand our digital offerings. Although we are seeing an expected correction in the credit cycle of the consumer lending business driven by lower levels of excess liquidity and inflationary pressures, our ample reserve coverage levels and risk management framework should withstand the impact of any additional credit deterioration over the next year. That said, we remain confident that the economic prospects of our primary market, driven by a strong labor market and an unprecedented level of federal support, should also serve as a mitigant.
Alemán concluded: “Finally, while we don’t manage the organization based on short-term stock price fluctuations, we do believe that our 2023 stock price performance is a clear reflection of the strength of our balance sheet and our growth prospects for the coming years. We thank our shareholders for their support and remain committed to delivering consistent results.”
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, adjusted pre-tax, pre-provision income, adjusted non-interest expenses, and adjusted efficiency ratio, 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 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 third quarter of 2023, fourth quarter of 2022, and the year ended December 31, 2022 did not include any significant Special Items. The financial results for the fourth quarter of 2023 and the year ended December 31, 2023 included the following Special Items:
Quarter ended December 31, 2023
- A one-time FDIC special assessment expense of $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate of 37.5%) recognized as a result of the final rule approved by the FDIC Board of Directors on November 16, 2023 to recover the loss to the Deposit Insurance Fund associated with protecting uninsured deposits following certain financial institution failures during the first half of 2023 by means of a quarterly special assessment rate of 3.36 basis points to be applied to the special assessment base during an eight-quarter collection period. The special assessment base is equal to estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of such deposits. The FDIC deposit special assessment is reflected in the condensed consolidated statements of income as part of “FDIC deposit insurance” expenses.
Year ended December 31, 2023
- A $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate of 37.5%) one-time expense related to the aforementioned FDIC special assessment.
- A $3.6 million ($2.3 million after-tax, calculated based on the statutory tax rate of 37.5%) gain recognized from a legal settlement reflected in the condensed consolidated statements of income as part of “Other non-interest income.”
- 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 recorded during 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 and any gains or losses on sales of investment 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 intangibles. Tangible assets are total assets less goodwill and other intangibles. 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. 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)
Net income was $79.5 million for the fourth quarter of 2023, or $0.46 per diluted share, compared to $82.0 million, or $0.46 per diluted share, for the third quarter of 2023. The following table reconciles, for the fourth quarter of 2023 and year ended December 31, 2023, 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, and shows the net income and earnings per diluted share for the third quarter of 2023, fourth quarter of 2022, and year ended December 31, 2022.
Quarter Ended
Year Ended
December 31,
2023
September 30,
2022
(In thousands, except per share information)
Net income, as reported (GAAP)
$
79,489
82,022
73,174
302,864
305,072
Adjustments:
FDIC special assessment expense
6,311
-
Gain recognized from legal settlement
(3,600
)
Gain on early extinguishment of debt
(1,605
Income tax impact of adjustments (1)
(2,367
(1,017
Adjusted net income attributable to common stockholders (non-GAAP)
83,433
302,953
Weighted-average diluted shares outstanding
171,351
176,962
184,847
177,180
191,968
Earnings Per Share - diluted (GAAP)
0.46
0.40
1.71
1.59
Adjusted Earnings Per Share - diluted (non-GAAP)
0.49
(1) See Special Items discussion above for the individual tax impact related to the above adjustments.
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $84.9 million for the fourth quarter of 2023, compared to $109.0 million for the third quarter of 2023. For the year ended December 31, 2023, income before income taxes was $397.4 million, compared to $447.6 million for the same period in 2022. Adjusted pre-tax, pre-provision income was $110.0 million for the fourth quarter of 2023, compared to pre-tax, pre-provision income of $113.4 million for the third quarter of 2023. For the year ended December 31, 2023, adjusted pre-tax, pre-provision income was $459.5 million, compared to pre-tax, pre-provision income of $475.3 million for the same period in 2022. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters and for the years ended December 31, 2023 and 2022:
June 30,
March 31,
(Dollars in thousands)
Income before income taxes
84,874
108,990
100,939
102,633
106,530
397,436
447,584
Add: Provision for credit losses expense
18,812
4,396
22,230
15,502
15,712
60,940
27,696
Add: FDIC special assessment expense
Less: Gain recognized from legal settlement
Less: Gain on early extinguishment of debt
Adjusted pre-tax, pre-provision income (1)
109,997
113,386
117,964
118,135
122,242
459,482
475,280
Change from most recent prior period (amount)
(3,389
(4,578
(171
(4,107
(172
(15,798
83,768
Change from most recent prior period (percentage)
-3.0
%
-3.9
-0.1
-3.4
-3.3
21.4
(1)
Non-GAAP financial measure. See Non-GAAP Disclosures above for the definition and additional information about this non-GAAP financial measure.
NET INTEREST INCOME
The following table sets forth information concerning net interest income for the last five quarters:
Net Interest Income
Interest income
265,481
263,405
252,204
242,396
233,452
Interest expense
68,799
63,677
52,389
41,511
27,879
Net interest income
196,682
199,728
199,815
200,885
205,573
Average Balances
Loans and leases
12,004,881
11,783,456
11,591,516
11,519,399
11,364,963
Total securities, other short-term investments and interest-bearing cash balances
6,835,407
7,325,226
7,333,989
7,232,347
7,314,293
Average interest-earning assets
18,840,288
19,108,682
18,925,505
18,751,746
18,679,256
Average interest-bearing liabilities
11,665,459
11,671,938
11,176,385
10,957,892
10,683,776
Average Yield/Rate
Average yield on interest-earning assets - GAAP
5.59
5.47
5.35
5.24
4.96
Average rate on interest-bearing liabilities - GAAP
2.34
2.16
1.88
1.54
1.04
Net interest spread - GAAP
3.25
3.31
3.47
3.70
3.92
Net interest margin - GAAP
4.14
4.15
4.23
4.34
4.37
Net interest income amounted to $196.7 million for the fourth quarter of 2023, a decrease of $3.0 million, compared to $199.7 million for the third quarter of 2023. The decrease in net interest income reflects the following:
- A $3.7 million increase in interest expense on brokered CDs, primarily related to a $3.3 million increase associated with a $253.3 million increase in the average balance of this portfolio and approximately $0.4 million driven by an increase in average rates paid in the fourth quarter of 2023.
- A $2.4 million increase in interest expense on time deposits, excluding brokered CDs, mainly due to approximately $1.8 million associated with higher rates paid in the fourth quarter of 2023 on new issuances and renewals, and $0.6 million of additional interest expense associated with an $84.5 million increase in the average balance. The average cost of non-brokered time deposits in the fourth quarter of 2023 increased 26 basis points to 3.17% when compared to the previous quarter.
Partially offset by:
- A $0.7 million net decrease in interest expense on interest-bearing checking and saving accounts, of which $1.7 million is due to a $321.6 million decrease in the average balance, partially offset by approximately $1.0 million driven by an increase in average rates paid in the fourth quarter of 2023 on public sector deposits. The average cost of interest-bearing checking and saving accounts, excluding public sector deposits, remained stable at 0.73% in the fourth quarter of 2023, when compared to 0.74% in the previous quarter.
Net interest margin for the fourth quarter of 2023 remained relatively flat at 4.14% and includes an increase in cost of funds which offsets the change in mix to higher interest-earning assets.
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
9,662
9,552
9,287
9,541
9,174
Mortgage banking activities
2,094
2,821
2,860
2,812
2,572
1,605
Insurance commission income
2,379
2,790
2,747
4,847
2,898
Card and processing income
11,015
10,841
11,135
10,918
10,601
Other non-interest income
8,459
4,292
8,637
4,400
4,355
Non-interest income
33,609
30,296
36,271
32,518
29,600
Non-interest income increased by $3.3 million to $33.6 million for the fourth quarter of 2023, compared to $30.3 million for the third quarter of 2023, 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
55,584
56,535
54,314
56,422
52,241
Occupancy and equipment
21,847
21,781
21,097
21,186
21,843
Business promotion
6,725
4,759
4,167
3,975
5,590
Professional service fees:
Collections, appraisals and other credit-related fees
952
930
1,231
848
1,483
Outsourcing technology services
7,003
7,261
7,278
8,141
7,806
Other professional fees
3,295
2,831
3,087
2,984
3,380
Taxes, other than income taxes
5,535
5,465
5,124
5,112
5,211
FDIC deposit insurance
8,454
2,143
2,133
1,544
Other insurance and supervisory fees
2,308
2,356
2,352
2,368
2,429
Net gain on OREO operations
(1,005
(2,153
(1,984
(1,996
(2,557
Credit and debit card processing expenses
7,360
6,779
6,540
5,318
6,362
Communications
2,134
2,219
1,992
2,216
2,322
Other non-interest expenses
6,413
5,732
5,576
6,561
5,277
Total non-interest expenses
126,605
116,638
112,917
115,268
112,931
Non-interest expenses amounted to $126.6 million in the fourth quarter of 2023, an increase of $10.0 million, from $116.6 million in the third quarter of 2023. Non-interest expenses for the fourth quarter of 2023 include the FDIC special assessment expense of $6.3 million. On a non-GAAP basis, excluding the effect of this Special Item, adjusted non-interest expenses increased by $3.7 million mainly due to:
INCOME TAXES
The Corporation recorded an income tax expense of $5.4 million for the fourth quarter of 2023, compared to $27.0 million for the third quarter of 2023. The income tax expense decreased due to a reduction in the effective tax rate for the year related to higher than previously forecasted business activities during the fourth quarter with preferential tax treatment under the Puerto Rico tax code, coupled with a lower pre-tax income.
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 23.5% for the fourth quarter of 2023, compared to 28.2% estimated during the third quarter of 2023. As of December 31, 2023, the Corporation had a deferred tax asset of $150.1 million, net of a valuation allowance of $139.2 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
32,239
31,946
33,252
36,410
42,772
Construction
1,569
1,640
1,677
1,794
2,208
Commercial mortgage
12,205
21,632
21,536
21,598
22,319
Commercial and Industrial
15,250
18,809
9,194
13,404
7,830
Consumer and finance leases
22,444
19,137
16,362
15,936
14,806
Total nonaccrual loans held for investment
83,707
93,164
82,021
89,142
89,935
OREO
32,669
28,563
31,571
32,862
31,641
Other repossessed property
8,115
7,063
5,404
4,743
5,380
Other assets (1)
1,415
1,448
2,111
2,203
2,202
Total non-performing assets (2)
125,906
130,238
121,107
128,950
129,158
Past due loans 90 days and still accruing (3)
59,452
62,892
63,211
74,380
80,517
Nonaccrual loans held for investment to total loans held for investment
0.69
0.78
0.70
0.77
Nonaccrual loans to total loans
Non-performing assets to total assets
0.67
0.63
0.68
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 $8.3 million as of December 31, 2023 (September 30, 2023 - $8.9 million; June 30, 2023 - $9.5 million; March 31, 2023 - $10.4 million; December 31, 2022 - $12.0 million).
(3)
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $7.9 million as of December 31, 2023 (September 30, 2023 - $8.5 million; June 30, 2023 - $6.5 million; March 31, 2023 - $7.1 million; December 31, 2022 - $10.3 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:
- $7.7 million in collections and loans returned to accrual status, which include a $2.7 million commercial mortgage loan that was cured during the quarter; and
- $1.5 million in charge-offs, of which $1.0 million was related to the aforementioned $1.0 million charge-off recorded on a nonaccrual commercial mortgage loan transferred to OREO during the fourth quarter of 2023.
- A $3.3 million increase in nonaccrual consumer loans, consisting mainly of auto loans and finance leases.
- A $1.1 million increase in other repossessed property, consisting of repossessed automobiles.
- A $0.3 million increase in nonaccrual residential mortgage loans, mainly related to inflows of $5.3 million, partially offset by $3.0 million in collections and $1.6 million of loans restored to accrual status.
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 $150.8 million as of December 31, 2023, an increase of $13.8 million, compared to $137.0 million as of September 30, 2023. The variances by major portfolio categories 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 fourth and third quarters of 2023:
Quarter ended December 31,2023
Loans and Finance Leases
Debt Securities
Residential
Mortgage
Loans
Commercial
and
Consumer
Loans and
Finance
Leases
Total Loans
and Finance
Unfunded
Commitments
Held-to-
Maturity
Available-
for-Sale
Total ACL
Allowance for credit losses, beginning balance
57,200
76,875
129,540
263,615
4,761
2,250
465
271,091
Provision for credit losses - (benefit) expense
(90
(4,905
23,970
18,975
(123
(53
13
Net recoveries (charge-offs)
287
(544
(20,490
(20,747
33
(20,714
Allowance for credit losses, end of period
57,397
71,426
133,020
261,843
4,638
2,197
511
269,189
Amortized cost of loans and finance leases
2,821,726
5,706,092
3,657,665
12,185,483
Allowance for credit losses on loans to amortized cost
2.03
1.25
3.64
2.15
Quarter ended September 30, 2023
60,514
75,245
131,299
267,058
4,889
8,401
433
280,781
(3,349
(55
14,047
10,643
(128
(6,151
32
35
1,685
(15,806
(14,086
2,812,631
5,549,841
3,588,460
11,950,932
1.39
3.61
2.21
The main variances of the total ACL by main categories are discussed below:
Allowance for Credit Losses for Loans and Finance Leases
As of December 31, 2023, the ACL for loans and finance leases was $261.8 million, a decrease of $1.8 million, from $263.6 million as of September 30, 2023. The ratio of the ACL for loans and finance leases to total loans held for investment was 2.15% as of December 31, 2023, compared to 2.21% as of September 30, 2023. The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 312.81% as of December 31, 2023, compared to 282.96% as of September 30, 2023.
The ACL for commercial and construction loans decreased by $5.5 million to $71.4 million as of December 31, 2023, when compared to September 30, 2023, mainly due to an improvement on the economic outlook of certain macroeconomic variables, such as the CRE price index, which was partially offset by increased volume particularly in the commercial and industrial loan portfolio. Meanwhile, the ACL for consumer loans increased by $3.5 million mainly due to increases in portfolio volumes in the auto loan and finance lease portfolios and increases in delinquency and historical charge-off levels. In addition, the ACL for residential mortgage loans increased by $0.2 million, mainly due to the increase in the size of the loan portfolio, partially offset by updated macroeconomic variables, mainly in the projection of unemployment rates across all regions.
The provision for credit losses on loans and finance leases was $19.0 million for the fourth quarter of 2023, compared to $10.6 million in the third quarter of 2023.
- Provision for credit losses for the consumer loan and finance lease portfolios was an expense of $24.0 million for the fourth quarter of 2023, compared to an expense of $14.0 million in the third quarter of 2023. The increase in provision expense recorded during the fourth quarter of 2023 reflects increases in portfolio balances across all major consumer products and higher delinquency and historical charge-off levels.
- Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $0.1 million for the fourth quarter of 2023, compared to a net benefit of $3.3 million in the third quarter of 2023. The net benefit recorded during the fourth quarter of 2023 was mainly due to updated macroeconomic variables, partially offset by the increase in the size of the loan portfolio. Meanwhile, the net benefit recorded during the third quarter of 2023 was mainly due to an update in macroeconomic variables and a reduction in qualitative reserves, partially offset by the increase in the size of the loan portfolio.
- Provision for credit losses for the commercial and construction loan portfolio was a net benefit of $4.9 million for the fourth quarter of 2023, compared to a net benefit of $0.1 million in the third quarter of 2023. The net benefit recorded during the fourth quarter of 2023 was mainly driven by an improvement on the economic outlook of certain macroeconomic variables, such as the CRE price index, which was partially offset by increased volume particularly in the commercial and industrial loan portfolio. Meanwhile, the net benefit recorded during the third quarter of 2023 was mainly driven by a $1.4 million recovery recorded on a construction loan in the Puerto Rico region, partially offset by an incremental provision of $1.7 million associated to the aforementioned inflow to nonaccrual of a $9.5 million commercial and industrial loan in the Puerto Rico region.
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:
-0.04
-0.01
0.06
0.07
0.01
-3.18
-0.99
-0.17
-1.82
0.09
-0.03
0.00
-0.02
0.87
0.19
Consumer loans and finance leases
2.26
1.79
1.51
1.44
Total loans
0.48
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 $20.8 million for the fourth quarter of 2023, or an annualized 0.69% of average loans, compared to $14.0 million, or an annualized 0.48% of average loans, in the third quarter of 2023. The increase of $6.8 million in net charge-offs was mainly driven by increases of $4.6 million in consumer loans net charge-offs and $2.2 million in commercial and construction loans net charge-offs mainly related to the aforementioned $1.4 million recovery recorded on a construction loan in the Puerto Rico region during the third quarter of 2023 and the aforementioned $1.0 million charge-off recorded on a nonaccrual commercial mortgage loan transferred to OREO during the fourth quarter of 2023.
Allowance for Credit Losses for Unfunded Loan Commitments
As of December 31, 2023, the ACL for off-balance sheet credit exposures decreased to $4.6 million, compared to $4.8 million as of September 30, 2023.
Allowance for Credit Losses for Debt Securities
As of December 31, 2023, the ACL for debt securities was $2.7 million, of which $2.2 million related to Puerto Rico municipal bonds classified as held-to-maturity, compared to $2.8 million and $2.3 million, respectively, as of September 30, 2023.
LIQUIDITY
Cash and cash equivalents increased by $78.3 million to $663.2 million as of December 31, 2023. When adding $2.2 billion of free high-quality liquid securities that could be liquidated or pledged within one day, total core liquidity amounted to $2.8 billion as of December 31, 2023, or 14.93% of total assets, compared to $2.7 billion, or 14.58% of total assets as of September 30, 2023. In addition, as of December 31, 2023, the Corporation had $924.2 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 19.82% as of December 31, 2023, compared to 19.67% as of September 30, 2023.
In addition to the aforementioned available credit from the FHLB, the Corporation also maintains borrowing capacity at the FED Discount Window Program. The Corporation does not consider borrowing capacity from the FED Discount Window as a primary source of liquidity but had approximately $1.5 billion available for funding under the FED’s Borrower-In-Custody (“BIC”) Program as of December 31, 2023. Also, the Corporation has access to financing with other counterparties through repurchase agreements and is enrolled in the FED’s Bank Term Funding Program. Combined, as of December 31, 2023, the Corporation had $5.2 billion, or 118% 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 December 31, 2023, which includes government deposits of $3.2 billion that are fully collateralized. Excluding fully collateralized government deposits, as of December 31, 2023, $4.4 billion of these deposits are uninsured, which represent 28.13% of total deposits.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $18.9 billion as of December 31, 2023, up $314.9 million from September 30, 2023.
The following variances within the main components of total assets are noted:
Total liabilities were approximately $17.4 billion as of December 31, 2023, an increase of $120.4 million from September 30, 2023.
The increase in total liabilities was mainly due to:
Total stockholders’ equity amounted to $1.5 billion as of December 31, 2023, an increase of $194.5 million from September 30, 2023, mainly driven by a $212.0 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 earnings generated in the fourth quarter of 2023, partially offset by $75.0 million in stock repurchases under the 2023 capital plan authorization of $225 million and $24.0 million in common stock dividends declared in the fourth quarter of 2023.
As of December 31, 2023, 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 16.10%, 16.10%, 18.57%, and 10.78%, respectively, as of December 31, 2023, compared to CET1 capital, tier 1 capital, total capital, and leverage ratios of 16.35%, 16.35%, 18.84%, and 10.57%, respectively, as of September 30, 2023.
Meanwhile, estimated CET1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank, were 16.33%, 17.11%, 18.36%, and 11.15%, respectively, as of December 31, 2023, compared to CET1 capital, tier 1 capital, total capital and leverage ratios of 16.41%, 17.20%, 18.45%, and 11.12%, respectively, as of September 30, 2023.
Tangible Common Equity (Non-GAAP)
On a non-GAAP basis, the Corporation’s tangible common equity ratio increased to 7.67% as of December 31, 2023, compared to 6.74% as of September 30, 2023, mainly driven by a $212.0 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.
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
1,497,609
1,303,068
1,397,999
1,405,593
1,325,540
Goodwill
(38,611
Purchased credit card relationship intangible
(17
(86
(205
Core deposit intangible
(13,383
(15,229
(17,075
(18,987
(20,900
Insurance customer relationship intangible
(13
Tangible common equity - non-GAAP
1,445,615
1,249,228
1,342,296
1,347,909
1,265,811
Tangible Assets:
Total assets - GAAP
18,909,549
18,594,608
19,152,455
18,977,114
18,634,484
Tangible assets - non-GAAP
18,857,555
18,540,768
19,096,752
18,919,430
18,574,755
Common shares outstanding
169,303
174,386
179,757
179,789
182,709
Tangible common equity ratio - non-GAAP
7.67
6.74
7.03
7.12
6.81
Tangible book value per common share - non-GAAP
8.54
7.16
7.47
7.50
6.93
Exposure to Puerto Rico Government
As of December 31, 2023, the Corporation had $297.9 million of direct exposure to the Puerto Rico government, its municipalities, and public corporations, an increase of $3.0 million when compared to $294.9 million as of September 30, 2023. As of December 31, 2023, approximately $189.0 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 $59.4 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 $8.9 million in a loan extended to an affiliate of the Puerto Rico Electric Power Authority and $37.4 million in loans to agencies of Puerto Rico public corporations. In addition, the total direct exposure included obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $3.2 million (fair value of $1.4 million as of December 31, 2023), 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 $1.7 million as of December 31, 2023, of which $0.4 million is due to credit deterioration.
The aforementioned exposure to municipalities in Puerto Rico included $107.0 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 December 31, 2023, the Corporation had $2.7 billion of public sector deposits in Puerto Rico, compared to $2.8 billion as of September 30, 2023. Approximately 20% of the public sector deposits as of December 31, 2023, were from municipalities and municipal agencies in Puerto Rico, and 80% were 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 Wednesday, January 24, 2024, at 11:00 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 for international callers. The participant access code is 636165. 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 January 24, 2025. A telephone replay will be available one hour after the end of the conference call through February 23, 2024, at (866) 813-9403. The replay access code is 906531.
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, 2022, as amended on October 13, 2023 (the “2022 Annual Report on Form 10-K”), 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 interest rate environment or changes in interest rates and inflation levels or the level or composition of the Corporation’s assets and liabilities on the Corporation’s net interest income, net interest margin, loan originations, results of operations and its liquidity position; 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 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, such as an April 2023 security incident at one of our third-party vendors, 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, increased costs and losses or an adverse effect to our reputation; general competitive factors and other market risks as well as the implementation of strategic growth opportunities, including risks, uncertainties, and other factors or events related to any business acquisitions or dispositions; uncertainty as to the implementation of the debt restructuring plan of Puerto Rico and the fiscal plan for Puerto Rico as certified on April 3, 2023, 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 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; 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 the ongoing conflict in Ukraine, the conflict in Israel and surrounding areas, the possible expansion of such conflicts 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 effect 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; the risk that additional portions of the unrealized losses in the Corporation’s debt securities portfolio are determined to be credit-related, or the need of additional credit losses that could emerge from the downgrade of the U.S.’s Long-Term Foreign-Currency Issuer Rating to ‘AA+’ from ‘AAA’ in August 2023 and subsequent negative ratings outlooks, resulting in additional charges to the provision for credit losses on the Corporation’s debt securities portfolio; the impacts of applicable legislative, tax, or regulatory changes, as well as of the 2024 U.S. presidential 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, 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
December 31, 2023
September 30, 2023
December 31, 2022
(In thousands, except for share information)
ASSETS
Cash and due from banks
661,925
583,913
478,480
Money market investments:
Time deposits with other financial institutions
300
Other short-term investments
939
700
1,725
Total money market investments
1,239
1,000
2,025
Debt securities available for sale, at fair value (ACL of $511 as of December 31, 2023; $465 as of September 30, 2023; and $458 as of December 31, 2022)
5,229,984
5,175,803
5,599,520
Debt securities held to maturity, at amortized cost, net of ACL of $2,197 as of December 31, 2023; $2,250 as of September 30, 2023; and $8,286 as of December 31, 2022 (fair value of $346,132 as of December 31, 2023; $342,851 as of September 30, 2023; and $427,115 as of December 31, 2022)
351,981
356,919
429,251
Total debt securities
5,581,965
5,532,722
6,028,771
Equity securities
49,675
48,683
55,289
Total investment securities
5,631,640
5,581,405
6,084,060
Loans, net of ACL of $261,843 as of December 31, 2023; $263,615 as of September 30, 2023; and $260,464 as of December 31, 2022
11,923,640
11,687,317
11,292,361
Loans held for sale, at lower of cost or market
7,368
8,961
12,306
Total loans, net
11,931,008
11,696,278
11,304,667
Accrued interest receivable on loans and investments
77,716
68,783
69,730
Premises and equipment, net
142,016
144,611
142,935
Deferred tax asset, net
150,127
150,805
155,584
38,611
Other intangible assets
13,383
15,229
21,118
Other assets
229,215
285,410
305,633
Total assets
LIABILITIES
Deposits:
Non-interest-bearing deposits
5,404,121
5,440,247
6,112,884
Interest-bearing deposits
11,151,864
10,994,990
10,030,583
Total deposits
16,555,985
16,435,237
16,143,467
Securities sold under agreements to repurchase
75,133
Advances from the FHLB
500,000
675,000
Other borrowings
161,700
183,762
Accounts payable and other liabilities
194,255
194,603
231,582
Total liabilities
17,411,940
17,291,540
17,308,944
STOCKHOLDERSʼ EQUITY
Common stock, $0.10 par value, 223,663,116 shares issued (December 31, 2023 - 169,302,812 shares outstanding; September 30, 2023 - 174,386,326 shares outstanding; and December 31, 2022 - 182,709,059 shares outstanding)
22,366
Additional paid-in capital
965,707
963,791
970,722
Retained earnings
1,846,112
1,790,652
1,644,209
Treasury stock, at cost (December 31, 2023 - 54,360,304 shares; September 30, 2023 - 49,276,790 shares; December 31, 2022 - 40,954,057 shares)
(697,406
(622,378
(506,979
Accumulated other comprehensive loss
(639,170
(851,363
(804,778
Total stockholdersʼ equity
Total liabilities and stockholdersʼ equity
Table 2 – Condensed Consolidated Statements of Income
Net interest income:
1,023,486
862,614
226,376
67,321
797,110
795,293
Provision for credit losses - expense (benefit):
15,651
66,644
25,679
Unfunded loan commitments
31
365
2,736
Debt securities
(40
(6,119
30
(6,069
(719
Provision for credit losses - expense
Net interest income after provision for credit losses
177,870
195,332
189,861
736,170
767,597
Non-interest income:
38,042
37,823
10,587
15,260
43,909
40,416
10,838
7,082
7,253
38,551
29,593
Total non-interest income
132,694
123,092
Non-interest expenses:
Employees’ compensation and benefits
222,855
206,038
85,911
88,277
19,626
18,231
Professional service fees
11,250
11,022
12,669
45,841
47,848
21,236
20,267
14,873
6,149
(7,138
(5,826
25,997
22,736
10,855
10,307
10,028
42,227
39,385
471,428
443,105
Income tax expense
5,385
26,968
33,356
94,572
142,512
Net income
Net income attributable to common stockholders
Earnings per common share:
Basic
0.47
1.72
1.60
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
0.14
0.12
0.56
Average shares outstanding
170,624
176,358
183,649
176,504
190,805
Average shares outstanding diluted
Book value per common share
8.85
7.25
Tangible book value per common share (1)
Common Stock Price: End of period
16.45
13.46
12.72
Selected Financial Ratios (In Percent):
Profitability:
Return on Average Assets
1.70
1.58
1.62
1.57
Return on Average Common Equity
23.69
20.70
22.37
21.86
18.66
Interest Rate Spread (2)
3.34
3.41
4.08
3.53
4.03
Net Interest Margin (2)
4.24
4.52
4.33
4.29
Efficiency ratio (3)
54.98
50.71
48.02
50.70
48.25
Capital and Other:
Average Total Equity to Average Total Assets
8.32
7.05
7.41
8.44
Total capital
18.57
18.84
19.21
Common equity Tier 1 capital
16.10
16.35
16.53
Tier 1 capital
Leverage
10.78
10.57
10.70
Tangible common equity ratio (1)
Dividend payout ratio
30.05
30.10
30.12
32.64
28.77
Basic liquidity ratio (4)
19.82
19.67
22.48
Core liquidity ratio (5)
14.93
14.58
19.02
Loan to deposit ratio
73.65
72.77
71.64
Asset Quality:
Allowance for credit losses for loans and finance leases to total loans held for investment
2.25
Net charge-offs (annualized) to average loans outstanding
0.58
0.31
Provision for credit losses for loans and finance leases to net charge-offs
91.46
75.56
119.97
98.91
74.99
Allowance for credit losses for loans and finance leases to total nonaccrual loans
held for investment
312.81
282.96
289.61
Allowance for credit losses for loans and finance leases to total nonaccrual loans held for investment, excluding residential estate loans
508.75
430.62
552.26
Non-GAAP financial measures (as defined above). Refer to Statement of Financial Condition above and Table 4 below for additional information about the components and a reconciliation of these measures.
On a tax-equivalent basis and excluding changes in the fair value of derivative instruments (non-GAAP financial measure). Refer to Non-GAAP Disclosures above 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.
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 fourth and third quarters of 2023, the fourth quarter of 2022 and for the years ended December 31, 2023 and 2022, respectively. The table also reconciles netinterest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.
December 31,2023
December 31,2022
Interest income - GAAP
Unrealized loss (gain) on derivative instruments
8
(3
5
(30
Interest income excluding valuations non-GAAP
265,489
263,402
233,457
1,023,494
862,584
Tax-equivalent adjustment
4,262
4,690
7,391
20,839
33,149
Interest income on a tax-equivalent basis and excluding valuations non-GAAP
269,751
268,092
240,848
1,044,333
895,733
Interest expense - GAAP
Net interest income - GAAP
Net interest income excluding valuations - non-GAAP
196,690
199,725
205,578
797,118
795,263
Net interest income on a tax-equivalent basis and excluding valuations - non-GAAP
200,952
204,415
212,969
817,957
828,412
11,726,304
11,199,013
7,181,048
8,112,842
Average Interest-Earning Assets
18,907,352
19,311,855
Average Interest-Bearing Liabilities
11,370,689
11,120,732
Average Assets (1)
18,581,625
18,895,980
18,411,440
18,706,423
19,378,649
Average Non-Interest-Bearing Deposits
5,384,264
5,621,233
6,207,108
5,741,345
6,391,171
5.41
4.47
1.99
0.61
3.42
3.86
4.22
4.12
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
5.68
5.57
5.12
5.52
4.64
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)
December
31,
September
30,
Interest-earning assets:
Money market and other short-term investments
503,293
807,883
394,471
6,933
10,956
3,444
5.38
3.46
Government obligations (2)
2,738,478
2,817,646
2,910,733
9,161
9,415
10,386
1.33
1.42
MBS
3,543,423
3,650,737
3,973,307
15,481
15,677
20,838
1.73
2.08
FHLB stock
34,745
34,666
22,292
830
768
284
9.48
8.79
5.05
Other investments
15,468
14,294
13,490
232
61
48
5.95
1.69
1.41
Total investments (3)
32,637
36,877
35,000
1.89
2.00
1.90
Residential mortgage loans
2,812,428
2,800,675
2,839,268
40,711
39,640
39,225
5.74
5.62
5.48
Construction loans
211,641
183,507
128,845
4,295
4,937
2,227
8.05
10.67
6.86
C&I and commercial mortgage loans
5,355,145
5,261,849
5,127,028
96,299
93,711
81,464
7.13
7.07
6.30
Finance leases
844,780
808,480
691,585
16,584
15,802
12,769
7.79
7.75
7.33
Consumer loans
2,780,887
2,728,945
2,578,237
79,225
77,125
70,163
11.30
11.21
10.80
Total loans (4) (5)
237,114
231,215
205,848
7.84
7.78
7.19
Total interest-earning assets
Interest-bearing liabilities:
Time deposits
2,792,843
2,708,297
2,180,928
22,304
19,852
6,055
3.17
2.91
1.10
Brokered CDs
572,105
318,831
47,304
7,452
3,830
286
5.17
4.77
2.40
Other interest-bearing deposits
7,635,223
7,956,856
7,909,759
29,918
30,616
14,696
1.55
1.53
0.74
925
26,254
139,740
359
1,408
5.58
5.43
4.00
502,446
220,652
5,709
5,675
2,469
4.51
4.50
4.44
161,917
185,393
3,403
3,345
2,965
8.34
8.21
6.35
Total interest-bearing liabilities
Interest rate spread
Net interest margin
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 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 $3.0 million, $2.9 million, and $2.7 million, for the quarters ended December 31, 2023, September 31, 2023, and December 31, 2022, 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)
584,083
1,156,127
30,419
11,791
5.21
1.02
2,843,284
2,870,889
40,314
39,033
1.36
3,702,908
4,052,660
67,641
85,090
1.83
2.10
36,606
20,419
2,799
1,114
7.65
5.46
14,167
12,747
490
126
0.99
141,663
137,154
1.97
2,814,102
2,886,594
160,009
160,359
5.69
5.56
172,952
121,642
14,811
7,350
8.56
6.04
5,244,503
5,092,638
365,185
281,486
6.96
5.53
789,870
636,507
60,909
46,842
7.71
7.36
2,704,877
2,461,632
301,756
262,542
11.16
902,670
758,579
7.70
6.77
2,590,313
2,213,145
68,605
18,102
2.65
0.82
348,829
69,694
16,630
1,500
7,664,793
8,279,320
100,226
26,759
1.31
0.32
54,570
194,948
2,769
7,555
5.07
3.88
541,000
179,452
24,608
5,136
4.55
2.86
171,184
184,173
13,538
8,269
7.91
4.49
Interest income on loans includes $11.9 million and $11.2 million for the years ended December 31, 2023 and 2022, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.
Table 7 – Loan Portfolio by Geography
As of December 31,2023
Puerto Rico
Virgin Islands
United States
Consolidated
2,187,875
168,131
465,720
Commercial loans:
111,664
3,737
99,376
214,777
Commercial mortgage loans
1,725,325
65,312
526,446
2,317,083
Commercial and Industrial loans
2,130,368
119,040
924,824
3,174,232
Commercial loans
3,967,357
188,089
1,550,646
856,815
2,726,457
68,498
5,895
2,800,850
Loans held for investment
9,738,504
424,718
2,022,261
Loans held for sale
9,745,872
12,192,851
As of September 30, 2023
2,182,882
170,797
458,952
98,565
3,762
100,447
202,774
1,714,974
65,034
536,105
2,316,113
1,971,686
116,588
942,680
3,030,954
3,785,225
185,384
1,579,232
831,540
2,683,277
67,184
6,459
2,756,920
9,482,924
423,365
2,044,643
9,491,885
11,959,893
As of December 31, 2022
2,237,983
179,917
429,390
2,847,290
30,529
4,243
98,181
132,953
1,768,890
65,314
524,647
2,358,851
1,791,235
68,874
1,026,154
2,886,263
3,590,654
138,431
1,648,982
5,378,067
718,230
2,537,840
61,419
9,979
2,609,238
9,084,707
379,767
2,088,351
11,552,825
9,097,013
11,565,131
Table 8 – Non-Performing Assets by Geography
Total
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
19,378
5,871
6,697
669
971
13,220
8,412
15,779
1,094
1,936
18,564
475
98
67,610
16,823
8,731
23,547
378
6,799
264
99,404
21,725
9,109
57,834
4,678
380
28,857
6,614
7,301
831
1,377
14,341
7,978
5,859
1,179
792
14,142
469
195
64,030
17,617
8,288
28,135
3,475
5,275
76
29
99,642
21,168
8,348
76,417
4,100
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 $8.3 million as of December 31, 2023 (September 30, 2023 - $8.9 million; December 31, 2022 - $12.0 million).
These include rebooked loans, which were previously pooled into GNMA securities, amounting to $7.9 million as of December 31, 2023 (September 30, 2023 - $8.5 million; December 31, 2022 - $10.3 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
257,859
260,464
269,030
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:
(498
(553
(3,343
(4
1,459
587
1,889
602
(539
74
10
(347
1,287
(1
152
(1,360
(6,095
392
(11,785
(62,275
(33,183
Net charge-offs
(13,046
(67,381
(34,245
Allowance for credit losses on loans and finance leases, end of period
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
0.91x
0.76x
1.20x
0.99x
0.75x
Table 10 – Annualized Net (Recoveries) Charge-Offs to Average Loans
0.02
-1.09
-0.49
-0.06
0.21
1.78
1.07
Table 11 – Deposits
2,833,730
2,754,776
2,250,876
Interest-bearing saving and checking accounts
7,534,800
7,929,875
7,673,881
Total deposits, excluding brokered CDs (1)
15,772,651
16,124,898
16,037,641
783,334
310,339
105,826
Total deposits, excluding brokered CDs and government deposits
12,600,719
12,862,616
13,268,585
As of December 31,2023, September 30, 2023, and December 31, 2022, government deposits amounted to $3.2 billion, $3.3 billion, and $2.8 billion, respectively.
First BanCorp. Ramon Rodriguez Senior Vice President Corporate Strategy and Investor Relations ramon.rodriguez@firstbankpr.com (787) 729-8200 Ext. 82179