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First Bancorp. Announces Earnings for the Quarter and Year Ended December 31, 2022

  • Net income of $73.2 million, or $0.40 per diluted share, for the fourth quarter of 2022, compared to $74.6 million, or $0.40 per diluted share, for the third quarter of 2022. Income before income taxes of $106.5 million for the fourth quarter of 2022, compared to $106.6 million for the third quarter of 2022.
  • Net income of $305.1 million, or $1.59 per diluted share, for the year ended December 31, 2022, compared to $281.0 million, or $1.31 per diluted share, for the year ended December 31, 2021. Income before income taxes of $447.6 million for the year ended December 31, 2022, compared to $427.8 million for the year ended December 31, 2021.
  • On a non-GAAP basis, pre-tax, pre-provision income of $122.2 million for the fourth quarter of 2022, compared to pre-tax, pre-provision income of $122.4 million for the third quarter of 2022. Pre-tax, pre-provision income for the year ended December 31, 2022 was $475.3 million, an increase of $83.8 million, or 21%, compared to adjusted pre-tax, pre-provision income of $391.5 million for the year ended December 31, 2021.
  • Net interest income decreased to $205.6 million for the fourth quarter of 2022, compared to $207.9 million for the third quarter of 2022, primarily due to an increase in interest expense as a result of higher cost of deposits combined with a higher level of borrowings, partially offset by the upward repricing of variable-rate commercial loans and higher average loan balances.
  • Net interest margin increased to 4.37% for the fourth quarter of 2022, compared to 4.31% for the third quarter of 2022, mainly due to the change in asset mix to higher yielding earning assets, partially offset by higher cost of funds.
  • Provision for credit losses of $15.7 million for the fourth quarter of 2022, relatively flat compared to $15.8 million for the third quarter of 2022.
  • Non-interest income of $29.6 million for the fourth quarter of 2022, relatively flat compared to $29.7 million for the third quarter of 2022.
  • Non-interest expenses decreased by $2.3 million to $112.9 million for the fourth quarter of 2022, compared to $115.2 million for the third quarter of 2022, mainly driven by higher net gains on other real estate owned (“OREO”) operations. The efficiency ratio for the fourth quarter of 2022 was 48.02%, compared to 48.48% for the third quarter of 2022.
  • Income tax expense of $33.4 million for the fourth quarter of 2022, an increase of $1.4 million, compared to $32.0 million for the third quarter of 2022.
  • Credit quality variances:
    • Non-performing assets decreased by $14.1 million to $129.2 million as of December 31, 2022, compared to $143.3 million as of September 30, 2022. The decline was mainly driven by the restoration to accrual status of a $5.2 million commercial and industrial loan and a $7.1 million decrease in the OREO portfolio balance, mainly associated with sales of residential properties.
    • An annualized net charge-offs to average loans ratio of 0.46% for the fourth quarter of 2022, compared to 0.31% for the third quarter of 2022, mainly due to a $3.6 million increase in consumer loans net charge-offs and a $1.2 million increase in commercial and construction net charge-offs during the fourth quarter of 2022.
  • Total loans increased $254.3 million from the prior quarter to $11.6 billion as of December 31, 2022. The variance consisted of increases of $130.2 million in commercial and construction loans, $107.7 million in consumer loans, and $16.4 million in residential mortgage loans. Excluding the $11.1 million decrease in the carrying value of the Small Business Administration Paycheck Protection Program (“SBA PPP”) loan portfolio, the growth in the commercial and construction loans portfolio was $141.3 million driven by several large commercial loans in excess of $10 million originated in both the Puerto Rico and Florida regions.
  • Total loan originations, including refinancings, renewals and draws from existing commitments (other than credit card utilization activity), amounted to $1.3 billion in the fourth quarter of 2022, a net increase of $191.4 million compared to the third quarter of 2022. The net increase in total loan originations consisted of: (i) a $186.7 million increase in commercial and construction loan originations; (ii) an $11.8 million increase in residential mortgage loan originations; and (iii) a $7.1 million decrease in consumer loan originations.
  • Total deposits, excluding brokered certificates of deposit (“CDs”) and government deposits, decreased by $314.9 million to $13.3 billion as of December 31, 2022, reflecting reductions in both retail consumer and commercial transactional and savings account balances across all regions, partially offset by an increase in time deposits.
  • Government deposits decreased in the fourth quarter by $171.9 million and totaled $2.8 billion as of December 31, 2022, reflecting decreases of $157.4 million in the Puerto Rico region and $16.0 million in the Virgin Islands region, partially offset by an increase of $1.5 million in the Florida region.
  • Brokered CDs increased by $60.6 million during the fourth quarter to $105.8 million as of December 31, 2022.
  • Borrowings increased by $550.1 million during the fourth quarter to $933.9 million as of December 31, 2022, including a $675.0 million increase in Federal Home Loan Bank (“FHLB”) advances and a $124.9 million reduction in securities sold under agreements to repurchase.
  • The cash and liquid securities to total assets ratio increased to 19.02% as of December 31, 2022, compared to 18.57% as of September 30, 2022.
  • During the fourth quarter of 2022, First BanCorp. has repurchased approximately 3.5 million shares for a total purchase price of $50.0 million. For the year ended December 31, 2022, First BanCorp. repurchased approximately 19.4 million shares for a total purchase price of $275.0 million.
  • Capital ratios remained higher than required regulatory levels for bank holding companies and well-capitalized banks. Estimated total capital, common equity tier 1 capital (“CET1”), tier 1 capital, and leverage ratios were 19.21%, 16.53%, 16.53%, and 10.70%, respectively, as of December 31, 2022. On a non-GAAP basis, the tangible common equity ratio was 6.81% as of December 31, 2022, compared to 6.55% as of September 30, 2022.

First BanCorp. (the “Corporation” or “First BanCorp.”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported net income of $73.2 million, or $0.40 per diluted share, for the fourth quarter of 2022, compared to $74.6 million, or $0.40 per diluted share, for the third quarter of 2022, and $73.6 million, or $0.35 per diluted share, for the fourth quarter of 2021.

For the year ended December 31, 2022, the Corporation reported net income of $305.1 million or $1.59 per diluted share, compared to $281.0 million, or $1.31 per diluted share, for the year ended December 31, 2021.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We closed the year with another strong quarter of organic growth and notable improvement across franchise metrics. We generated $73.2 million in net income, or $0.40 per diluted share, and reached $122.2 million in pre-tax, pre-provision income, highlighting once again our solid earnings generation capacity and expense management discipline. The loan portfolio grew by $254.3 million during the quarter, driven by strong loan origination activity, particularly in the commercial and consumer business segments. Net interest margin expanded by 6 basis points, asset quality improved, and we reached the lowest efficiency ratio among our peers at 48.02%. In line with industry trends, core deposits, net of brokered and government deposits, decreased by $314.9 million during the quarter as households unwind excess liquidity associated with pandemic-related programs. Our main market continues to be supported by a large amount of disaster relief funds flowing into the economy, strong consumer demand, and positive labor market trends.

“Over the course of 2022, the organization performed exceptionally well reflecting one of its best performing years on record. We registered organic loan growth of $762 million or 10% (excluding SBA PPP loans and strategic reduction of residential mortgages), achieved a record pre-tax pre-provision income of $475.3 million, up 21% when compared to 2021, and reached a decade low non-performing asset ratio of 0.69%. Responsible and value driven capital allocation has allowed us to grow the franchise and invest for the future, while supporting our communities and colleagues and returning approximately $363 million, or 119% of 2022 earnings, to our shareholders through repurchases of common stock and the payment of common stock dividends.

“We remain vigilant to changing global economic conditions and the effect that restrictive monetary policies may continue to have on the overall inflationary environment. We believe that our organization has ample experience navigating uncertainty and is well equipped to manage rising market challenges going into the next cycle. We are highly encouraged by the growth prospects in our main market which should continue to benefit from rebuilding activity over the next few years.”

NON-GAAP DISCLOSURES

This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted earnings per diluted share, and adjusted pre-tax, pre-provision income that exclude the effect of items that management believes are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts (the “Special Items”). 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 discussion below in Basis of Presentation – Use of Non-GAAP Financial Measures, the accompanying tables (Exhibit A), which are an integral part of this press release, and the Corporation’s other financial information that is presented in accordance with GAAP. 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.

SPECIAL ITEMS

The financial results for the fourth and third quarters of 2022 and year ended December 31, 2022 did not include any significant Special Item. The financial results for the fourth quarter of 2021 and year ended December 31, 2021 included the significant Special Items discussed below.

Quarter ended December 31, 2021

- Merger and restructuring costs of $1.9 million ($1.2 million after-tax, calculated based on the statutory rate of 37.5%) in connection with the Banco Santander Puerto Rico (“BSPR”) acquisition integration process and related restructuring initiatives.

- Costs of $4 thousand ($3 thousand after-tax, calculated based on the statutory rate of 37.5%) related to the COVID-19 pandemic response efforts, consisting primarily of costs related to additional cleaning, safety materials, and security measures.

Year ended December 31, 2021

- Merger and restructuring costs of $26.4 million ($16.5 million after-tax, calculated based on the statutory rate of 37.5%) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in 2021 included approximately $6.5 million related to previously announced Employee Voluntary Separation Program (the “VSP”) as well as involuntary separation actions implemented in the Puerto Rico region. In addition, these costs included costs related to system conversions, accelerated depreciation charges related to planned closures and consolidation of branches in accordance with the Corporation’s integration and restructuring plan, and other integration related efforts.

- Costs of $3.0 million ($1.9 million after-tax, calculated based on the statutory rate of 37.5%) related to the COVID-19 pandemic response efforts, consisting primarily of costs related to additional cleaning, safety materials, and security measures.

NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)

Net income was $73.2 million for the fourth quarter of 2022, or $0.40 per diluted share, compared to $74.6 million for the third quarter of 2022, or $0.40 per diluted share. For the year ended December 31, 2022, net income was $305.1 million or $ 1.59 per diluted share, compared to adjusted net income of $295.7 million or $1.40 per diluted share for the year ended December 31, 2021. The following table shows the net income and earnings per diluted share for the fourth and third quarters of 2022 and for the year ended December 31, 2022, and reconciles, for the fourth quarter of 2021 and for the year ended December 31, 2021 the net income to adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures that exclude the significant Special Items identified above.

 

Quarter Ended

 

Year Ended

 

December 31, 2022

 

September 30, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

(In thousands, except per share information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, as reported (GAAP)

$

73,174

 

$

74,603

 

$

73,639

 

 

$

305,072

 

$

281,025

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger and restructuring costs

 

-

 

 

-

 

 

1,853

 

 

 

-

 

 

26,435

 

COVID-19 pandemic-related expenses

 

-

 

 

-

 

 

4

 

 

 

-

 

 

2,958

 

Income tax impact of adjustments (1)

 

-

 

 

-

 

 

(696

)

 

 

-

 

 

(11,023

)

Adjusted net income (Non-GAAP)

$

73,174

 

$

74,603

 

$

74,800

 

 

$

305,072

 

$

299,395

 

Preferred stock dividends

 

-

 

 

-

 

 

(446

)

 

 

-

 

 

(2,453

)

Excess of redemption value over carrying value of Series A through E

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock redeemed

 

-

 

 

-

 

 

(1,234

)

 

 

-

 

 

(1,234

)

Adjusted net income attributable to common stockholders (Non-GAAP)

$

73,174

 

$

74,603

 

$

73,120

 

 

$

305,072

 

$

295,708

 

Weighted-average diluted shares outstanding

 

184,847

 

 

188,319

 

 

204,705

 

 

 

191,968

 

 

211,300

 

Earnings Per Share - diluted (GAAP)

$

0.40

 

$

0.40

 

$

0.35

 

 

$

1.59

 

$

1.31

 

Adjusted Earnings Per Share - diluted (Non-GAAP)

$

0.40

 

$

0.40

 

$

0.36

 

 

$

1.59

 

$

1.40

 

(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 $106.5 million for the fourth and third quarters of 2022. For the year ended December 31, 2022, income before income taxes was $447.6 million, compared to $427.8 million for the same period in 2021. Pre-tax, pre-provision income was $122.2 million for the fourth quarter of 2022, compared to $122.4 million for the third quarter of 2022. For the year ended December 31, 2022, pre-tax, pre-provision income was $475.3 million, compared to adjusted pre-tax, pre-provision income of $391.5 million for the same period in 2021. 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, 2022 and 2021:

 

Quarter Ended

 

Year Ended

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

$

106,530

 

 

$

106,631

 

 

$

108,798

 

 

$

125,625

 

 

$

115,260

 

 

$

447,584

 

 

$

427,817

 

Add/Less: Provision for credit losses expense (benefit)

 

15,712

 

 

 

15,783

 

 

 

10,003

 

 

 

(13,802

)

 

 

(12,209

)

 

 

27,696

 

 

 

(65,698

)

Add: COVID-19 pandemic-related expenses

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

-

 

 

 

2,958

 

Add: Merger and restructuring costs

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,853

 

 

 

-

 

 

 

26,435

 

Adjusted pre-tax, pre-provision income (1)

$

122,242

 

 

$

122,414

 

 

$

118,801

 

 

$

111,823

 

 

$

104,908

 

 

$

475,280

 

 

$

391,512

 

Change from most recent prior quarter (amount)

$

(172

)

 

$

3,613

 

 

$

6,978

 

 

$

6,915

 

 

$

1,347

 

 

$

83,768

 

 

$

91,729

 

Change from most recent prior quarter (percentage)

 

-0.1

%

 

 

3.0

%

 

 

6.2

%

 

 

6.6

%

 

 

1.3

%

 

 

21.4

%

 

 

30.6

%

(1) Non-GAAP financial measure. See Basis of Presentation below for definition and additional information about this non-GAAP financial measure.

NET INTEREST INCOME

The following table sets forth information concerning net interest income for the last five quarters:

 

 

Quarter Ended

(Dollars in thousands)

 

December 31, 2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31,2021

Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

233,452

 

 

$

222,683

 

 

$

208,625

 

 

$

197,854

 

 

$

198,435

 

Interest expense

 

 

27,879

 

 

 

14,773

 

 

 

12,439

 

 

 

12,230

 

 

 

14,297

 

Net interest income

 

$

205,573

 

 

$

207,910

 

 

$

196,186

 

 

$

185,624

 

 

$

184,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

11,364,963

 

 

$

11,218,864

 

 

$

11,102,310

 

 

$

11,106,855

 

 

$

11,108,997

 

Total securities, other short-term investments and interest-bearing cash balances

 

 

7,314,293

 

 

 

7,938,530

 

 

 

8,568,022

 

 

 

8,647,087

 

 

 

9,140,313

 

Average interest-earning assets

 

$

18,679,256

 

 

$

19,157,394

 

 

$

19,670,332

 

 

$

19,753,942

 

 

$

20,249,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average interest-bearing liabilities

 

$

10,683,776

 

 

$

11,026,975

 

 

$

11,567,228

 

 

$

11,211,780

 

 

$

11,467,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Yield/Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average yield on interest-earning assets - GAAP

 

 

4.96

%

 

 

4.61

%

 

 

4.25

%

 

 

4.06

%

 

 

3.89

%

Average rate on interest-bearing liabilities - GAAP

 

 

1.04

%

 

 

0.53

%

 

 

0.43

%

 

 

0.44

%

 

 

0.49

%

Net interest spread - GAAP

 

 

3.92

%

 

 

4.08

%

 

 

3.82

%

 

 

3.62

%

 

 

3.40

%

Net interest margin - GAAP

 

 

4.37

%

 

 

4.31

%

 

 

4.00

%

 

 

3.81

%

 

 

3.61

%

Net interest income amounted to $205.6 million for the fourth quarter of 2022, a decrease of $2.3 million, compared to $207.9 million for the third quarter of 2022. The decrease in net interest income was mainly due to:

  • A $13.1 million increase in interest expense, including:

- a net increase of $11.1 million in interest expense on interest-bearing deposits, primarily associated with higher average rates paid in the fourth quarter, partially offset by the effects of a $407.4 million reduction in the average balance of interest-bearing deposits;

- a $2.0 million increase in interest expense on FHLB advances mainly associated with an increased use of short-term advances taken in the fourth quarter, which increased the average balance by $124.5 million, and higher rates paid on FHLB advances in the fourth quarter; and

- interest expense on other borrowings remained relatively flat as compared to the third quarter, including an increase of $0.7 million due to the repricing of junior subordinated debentures that are tied to LIBOR, which was almost entirely offset by a $0.6 million decrease in the interest expense associated with $200.0 million of securities sold under agreements to repurchase called prior to maturity during the fourth quarter, net of an increase of short-term securities sold under agreements to repurchase in the fourth quarter.

  • A $1.2 million decrease in interest income from interest-bearing cash balances, mainly attributable to the effects of the $488.3 million reduction in the average balance of interest-bearing cash, primarily consisting of cash balances held at the FED, partially offset by increased market rates.
  • A $0.5 million decrease in interest income on residential mortgage loans, primarily due to lower interest cash collections on nonaccrual loans and the effect of a $16.7 million reduction in the average balance of this portfolio.

Partially offset by:

  • An $8.2 million increase in interest income on commercial and construction loans, primarily due to the upward repricing of variable-rate commercial and construction loans, which resulted in an increase of approximately $8.2 million in interest income, and an increase of $72.2 million in the average balance of this portfolio (excluding SBA PPP loans), which resulted in an increase of approximately $1.0 million in interest income. These variances were partially offset by a $1.3 million reduction in interest income from SBA PPP loans.

The interest rate on approximately 56% of the Corporation’s commercial and construction loans is variable, 42% is based upon LIBOR, SOFR and other indexes and 14% is based upon the Prime rate index. For the fourth quarter of 2022, the average one-month LIBOR increased 143 basis points, the average three-month LIBOR increased 151 basis points, the average Prime rate increased 146 basis points, and the average three-month SOFR increased 140 basis points, compared to the average rates for such indexes during the third quarter of 2022.

  • A $3.7 million increase in interest income on consumer loans and finance leases, primarily due to an increase of approximately $110.9 million in the average balance of this portfolio, which increased interest income by approximately $2.6 million and, to a lesser extent, the effects of higher yields in the consumer credit card portfolio.
  • A $0.7 million increase in interest income from government obligations debt securities, mainly associated with the upward repricing of variable-rate Puerto Rico municipal bonds held as part of the held-to-maturity debt securities portfolio.

Net interest margin for the fourth quarter of 2022 increased to 4.37%, when compared to 4.31% for the third quarter of 2022, mainly due to a change in asset mix to higher yielding earning assets, partially offset by higher cost of funds.

NON-INTEREST INCOME

The following table sets forth information concerning non-interest income for the last five quarters:

 

Quarter Ended

 

December 31,2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31,2021

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fees on deposit accounts

$

9,174

 

$

9,820

 

$

9,466

 

$

9,363

 

$

9,502

Mortgage banking activities

 

2,572

 

 

3,400

 

 

4,082

 

 

5,206

 

 

5,223

Other operating income

 

17,854

 

 

16,473

 

 

17,393

 

 

18,289

 

 

15,653

Non-interest income

$

29,600

 

$

29,693

 

$

30,941

 

$

32,858

 

$

30,378

Non-interest income amounted to $29.6 million for the fourth quarter of 2022, relatively flat compared to $29.7 million for the third quarter of 2022. The $0.1 million decrease in non-interest income was mainly due to:

  • A $0.8 million decrease in revenues from mortgage banking activities, mainly driven by a $1.2 million increase in mark-to-market losses from to-be-announced (“TBA”) mortgage-backed securities (“MBS”) forward contracts, partially offset by a $0.4 million increase related to the net change in mark-to-market gains on interest rate lock commitments.
  • A $0.6 million decrease in service charges and fees on deposit accounts, mainly associated with a $0.7 million adjustment to reverse previously recognized fees on non-sufficient funds as part of changes in the fees structure.

Partially offset by:

  • A $0.8 million increase related to seasonally higher transactional fee income from point-of-sale (“POS”) terminals, credit and debit cards, and merchant-related transactions and, to a lesser extent, the effect in the third quarter of disruptions in digital transactions experienced in connection with Hurricane Fiona.
  • A $0.3 million increase in insurance commission income.

NON-INTEREST EXPENSES

The following table sets forth information concerning non-interest expenses for the last five quarters:

 

Quarter Ended

 

December 31,2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31,2021

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees' compensation and benefits

$

52,241

 

 

$

52,939

 

 

$

51,304

 

 

$

49,554

 

 

$

49,681

 

Occupancy and equipment

 

21,843

 

 

 

22,543

 

 

 

21,505

 

 

 

22,386

 

 

 

21,589

 

Deposit insurance premium

 

1,544

 

 

 

1,466

 

 

 

1,466

 

 

 

1,673

 

 

 

1,253

 

Other insurance and supervisory fees

 

2,429

 

 

 

2,387

 

 

 

2,303

 

 

 

2,235

 

 

 

2,127

 

Taxes, other than income taxes

 

5,211

 

 

 

5,349

 

 

 

4,689

 

 

 

5,018

 

 

 

5,138

 

Professional service fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collections, appraisals and other credit-related fees

 

1,483

 

 

 

1,261

 

 

 

1,075

 

 

 

909

 

 

 

874

 

Outsourcing technology services

 

7,806

 

 

 

7,564

 

 

 

7,636

 

 

 

6,905

 

 

 

7,909

 

Other professional fees

 

3,380

 

 

 

3,724

 

 

 

3,325

 

 

 

2,780

 

 

 

3,154

 

Credit and debit card processing expenses

 

6,362

 

 

 

6,410

 

 

 

5,843

 

 

 

4,121

 

 

 

5,523

 

Business promotion

 

5,590

 

 

 

5,136

 

 

 

4,042

 

 

 

3,463

 

 

 

5,794

 

Communications

 

2,322

 

 

 

2,272

 

 

 

1,978

 

 

 

2,151

 

 

 

2,268

 

Net gain on OREO operations

 

(2,557

)

 

 

(1,064

)

 

 

(1,485

)

 

 

(720

)

 

 

(1,631

)

Merger and restructuring costs

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,853

 

Other

 

5,277

 

 

 

5,202

 

 

 

4,645

 

 

 

6,184

 

 

 

5,933

 

Total

$

112,931

 

 

$

115,189

 

 

$

108,326

 

 

$

106,659

 

 

$

111,465

 

Non-interest expenses amounted to $112.9 million in the fourth quarter of 2022, a decrease of $2.3 million from $115.2 million in the third quarter of 2022. The $2.3 million decrease reflects, among other things, the following significant variances:

  • A $1.5 million increase in net gains on OREO operations, mainly due to a $2.4 million increase in net realized gains on sales of OREO properties, primarily residential properties in the Puerto Rico region, partially offset by a $0.6 million write-down to the value of a commercial OREO property in the Puerto Rico region recorded during the fourth quarter of 2022.
  • A $0.7 million decrease in occupancy and equipment costs, mainly related to lower energy costs and repairs and maintenance charges, including automatic teller machine (“ATM”) maintenance charges as a result of a recent contract renewal.
  • A $0.7 million decrease in employees’ compensation and benefits expense, driven by a $1.0 million decrease in bonuses and a $0.5 million increase in deferred loan origination costs associated with a higher volume of commercial loan originations, partially offset by a $0.5 million increase in compensation expense due to the full quarter effect of merit increases in the third quarter, net of the effect of one less business day in the fourth quarter of 2022.

Partially offset by:

  • A $0.5 million increase in business promotion expenses, mainly related to a $0.7 million increase in sponsorship and public relations activities, partially offset by the effect during the third quarter of $0.3 million in donations to non-profit organizations in the municipalities most affected by Hurricane Fiona.

INCOME TAXES

The Corporation recorded an income tax expense of $33.4 million for the fourth quarter of 2022, compared to $32.0 million for the third quarter of 2022. The increase was mainly related to the effect during the third quarter of a benefit recognized on discrete items.

The Corporation’s effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, was 31.2%, compared to an estimated effective tax rate of 31.8% for the third quarter of 2022. As of December 31, 2022, the Corporation had a deferred tax asset of $155.6 million, net of a valuation allowance of $185.5 million against the deferred tax assets. The Corporation’s banking subsidiary, FirstBank, had a deferred tax asset of $155.6 million, net of a valuation allowance of $149.5 million.

CREDIT QUALITY

Non-Performing Assets

The following table sets forth information concerning non-performing assets for the last five quarters:

(Dollars in thousands)

December 31,2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31,2021

Nonaccrual loans held for investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

$

42,772

 

$

43,036

 

$

44,588

 

$

48,818

 

$

55,127

Commercial mortgage

 

22,319

 

 

23,741

 

 

24,753

 

 

26,576

 

 

25,337

Commercial and Industrial

 

7,830

 

 

15,715

 

 

17,079

 

 

18,129

 

 

17,135

Construction

 

2,208

 

 

2,237

 

 

2,375

 

 

2,543

 

 

2,664

Consumer and finance leases

 

14,806

 

 

12,787

 

 

10,315

 

 

10,964

 

 

10,454

Total nonaccrual loans held for investment

$

89,935

 

$

97,516

 

$

99,110

 

$

107,030

 

$

110,717

OREO

 

31,641

 

 

38,682

 

 

41,706

 

 

42,894

 

 

40,848

Other repossessed property

 

5,380

 

 

4,936

 

 

3,840

 

 

3,823

 

 

3,687

Other assets (1)

 

2,202

 

 

2,193

 

 

2,809

 

 

2,727

 

 

2,850

Total non-performing assets (2)

$

129,158

 

$

143,327

 

$

147,465

 

$

156,474

 

$

158,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Past due loans 90 days and still accruing (3)

$

80,517

 

$

81,790

 

$

94,485

 

$

118,798

 

$

115,448

Nonaccrual loans held for investment to total loans held for investment

 

0.78%

 

 

0.86%

 

 

0.88%

 

 

0.96%

 

 

1.00%

Nonaccrual loans to total loans

 

0.78%

 

 

0.86%

 

 

0.88%

 

 

0.96%

 

 

1.00%

Non-performing assets to total assets

 

0.69%

 

 

0.78%

 

 

0.76%

 

 

0.79%

 

 

0.76%

(1)

Residential pass-through 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 $12.0 million as of December 31, 2022 (September 30, 2022 - $12.8 million; June 30, 2022 - $15.3 million; March 31, 2022 - $18.0 million; December 31, 2021 - $20.6 million).

(3)

These include rebooked loans, which were previously pooled into Government National Mortgage Association ("GNMA") securities, amounting to $10.3 million as of December 31, 2022 (September 30, 2022 - $8.0 million; June 30, 2022 - $10.8 million; March 31, 2022 - $9.5 million; December 31, 2021 - $7.2 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA’s specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.

Variances in credit quality metrics:

  • Total non-performing assets decreased by $14.1 million to $129.2 million as of December 31, 2022, compared to $143.3 million as of September 30, 2022. Total nonaccrual loans held for investment decreased by $7.6 million to $89.9 million as of December 31, 2022, compared to $97.5 million as of September 30, 2022.

The decrease in non-performing assets was mainly driven by:

- A $9.3 million decrease in nonaccrual commercial and construction loans, mainly related to the restoration to accrual status of a $5.2 million commercial and industrial loan and a $1.2 million collection of a commercial and industrial loan during the fourth quarter.

- A $7.1 million decrease in the OREO portfolio balance, mainly related to sales of residential properties in the Puerto Rico region.

- A $0.2 million decrease in nonaccrual residential mortgage loans, mainly related to $3.0 million of loans restored to accrual status, $1.6 million in collections, and $1.3 million in loans transferred to OREO, partially offset by inflows of $5.8 million, including the inflow of a $1.4 million loan in the Florida region.

Partially offset by:

- A $1.9 million increase in nonaccrual consumer loans, associated with the overall portfolio growth, mainly auto loans.

- A $0.5 million increase in other repossessed property, mainly due to auto repossessions.

  • Inflows to nonaccrual loans held for investment were $24.1 million, a $3.8 million increase compared to inflows of $20.3 million in the third quarter of 2022. Inflows to nonaccrual consumer loans were $17.9 million, an increase of $2.6 million compared to inflows of $15.3 million in the third quarter of 2022. Inflows to nonaccrual residential mortgage loans were $5.8 million in the fourth quarter of 2022, an increase of $1.0 million compared to inflows of $4.8 million in the third quarter of 2022. Inflows to nonaccrual commercial and construction loans were $0.4 million in the fourth quarter of 2022, an increase of $0.2 million compared to inflows of $0.2 million in the third quarter of 2022. See Early Delinquency below for additional information.
  • Adversely classified commercial and construction loans decreased by $59.8 million to $93.6 million as of December 31, 2022. The decrease was mostly driven by the aforementioned sale of a $23.9 million commercial and industrial loan participation in the Florida region; the payoff of a $16.2 million commercial and industrial loan in the Puerto Rico region; two commercial and industrial loan upgrades amounting to $10.1 million, of which $5.2 million was related to the aforementioned loan restored to accrual status; and the aforementioned $1.2 million repayment of a commercial and industrial loan.
  • Total Troubled Debt Restructured (“TDR”) loans held for investment were $366.7 million as of December 31, 2022, down $21.0 million from September 30, 2022. Approximately $328.1 million of total TDR loans held for investment were in accrual status as of December 31, 2022. These figures exclude $53.9 million of government-guaranteed TDR residential mortgage loans (i.e., Federal Housing Administration and Veterans Administration 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 $104.9 million as of December 31, 2022, a decrease of $9.0 million, compared to $113.9 million as of September 30, 2022. The variances by major portfolio categories are as follows:

- Residential mortgage loans in early delinquency decreased by $3.6 million to $28.2 million.

- Commercial and construction loans in early delinquency decreased by $2.4 million to $5.8 million, mainly due to the payoff of a $2.0 million commercial and industrial line of credit.

- Consumer loans in early delinquency decreased in the fourth quarter by $3.0 million to $70.9 million, mainly in auto loans.

Allowance for Credit Losses

The following table summarizes the activity of the allowance for credit losses (“ACL”) for on-balance sheet and off-balance sheet exposures during the fourth and third quarters of 2022:

 

 

Quarter ended December 31,2022

 

 

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

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses, beginning balance

 

$

65,079

 

 

$

67,572

 

 

$

125,208

 

 

$

257,859

 

 

$

4,242

 

$

8,257

 

 

$

664

 

 

$

271,022

 

Provision for credit losses - (benefit) expense

 

 

(1,821

)

 

 

3,469

 

 

 

14,003

 

 

 

15,651

 

 

 

31

 

 

29

 

 

 

1

 

 

 

15,712

 

Net charge-offs

 

 

(498

)

 

 

(763

)

 

 

(11,785

)

 

 

(13,046

)

 

 

-

 

 

-

 

 

 

(207

)

 

 

(13,253

)

Allowance for credit losses, end of period

 

$

62,760

 

 

$

70,278

 

 

$

127,426

 

 

$

260,464

 

 

$

4,273

 

$

8,286

 

 

$

458

 

 

$

273,481

 

Amortized cost of loans and finance leases

 

$

2,847,290

 

 

$

5,378,067

 

 

$

3,327,468

 

 

$

11,552,825

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses on loans to amortized cost

 

 

2.20

%

 

 

1.31

%

 

 

3.83

%

 

 

2.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended September 30, 2022

 

 

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

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses, beginning balance

 

$

65,231

 

 

$

70,842

 

 

$

116,079

 

 

$

252,152

 

 

$

2,171

 

$

8,885

 

 

$

676

 

 

$

263,884

 

Provision for credit losses - expense (benefit)

 

 

755

 

 

 

(3,790

)

 

 

17,387

 

 

 

14,352

 

 

 

2,071

 

 

(628

)

 

 

(12

)

 

 

15,783

 

Net (charge-offs) recoveries

 

 

(907

)

 

 

520

 

 

 

(8,258

)

 

 

(8,645

)

 

 

-

 

 

-

 

 

 

-

 

 

 

(8,645

)

Allowance for credit losses, end of period

 

$

65,079

 

 

$

67,572

 

 

$

125,208

 

 

$

257,859

 

 

$

4,242

 

$

8,257

 

 

$

664

 

 

$

271,022

 

Amortized cost of loans and finance leases

 

$

2,830,974

 

 

$

5,247,894

 

 

$

3,219,750

 

 

$

11,298,618

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses on loans to amortized cost

 

 

2.30

%

 

 

1.29

%

 

 

3.89

%

 

 

2.28

%

 

 

 

 

 

 

 

 

 

 

 

 

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, 2022, the ACL for loans and finance leases was $260.5 million, an increase of $2.6 million, from $257.9 million as of September 30, 2022. The ACL for commercial and construction loans increased by $2.7 million, mostly due to an increase in the size of the loan portfolio and a less favorable economic outlook in the projection of certain forecasted macroeconomic variables, such as the commercial real estate (“CRE”) price index, partially offset by reserve releases totaling $4.8 million associated with the aforementioned large adversely classified loans that were paid off or sold during the fourth quarter of 2022. The ACL for consumer loans increased by $2.2 million, primarily reflecting the effect of the increase in the size of the consumer loan portfolios and the increase in historical charge-off levels associated to the overall portfolio growth. On the other hand, the ACL for residential mortgage loans decreased by $2.3 million, mainly due to a decrease in qualitative adjustments due to improvements in underlying portfolio metrics.

  • The provision for credit losses on loans and finance leases was $15.6 million for the fourth quarter of 2022, compared to $14.4 million in the third quarter of 2022.

- Provision for credit losses for the commercial and construction loan portfolio was an expense of $3.4 million for the fourth quarter of 2022, compared to a net benefit of $3.8 million in the third quarter of 2022. The expense recognized during the fourth quarter of 2022 was related mostly to the increase in the size of the loan portfolio and a less favorable economic outlook in the projection of certain forecasted macroeconomic variables, such as the CRE price index, partially offset by the aforementioned reserve reductions. Meanwhile, the net benefit recognized during the third quarter of 2022 was related mostly to a reduction in reserves due to improvements in financial information of certain borrowers.

- Provision for credit losses for the consumer loans and finance leases portfolio was $14.0 million for the fourth quarter of 2022, compared to $17.4 million in the third quarter of 2022, primarily reflecting a reduction in qualitative reserves, partially offset by the effect of the increase in the size of the consumer loan portfolios and the increase in historical charge-off levels associated to the overall portfolio growth.

- Provision for credit losses for the residential mortgage loan portfolio was a net benefit of $1.8 million for the fourth quarter of 2022, compared to an expense of $0.8 million in the third quarter of 2022. The net benefit recorded in the fourth quarter of 2022 was primarily related to the decrease in qualitative adjustments due to the aforementioned improvements in underlying portfolio metrics.

  • The ratio of the ACL for loans and finance leases to total loans held for investment was 2.25% as of December 31, 2022, compared to 2.28% as of September 30, 2022. The ratio of the total ACL for loans and finance leases to nonaccrual loans held for investment was 290% as of December 31, 2022, compared to 264% as of September 30, 2022.

Net Charge-Offs

The following table presents ratios of annualized net charge-offs (recoveries) to average loans held-in-portfolio for the last five quarters:

 

Quarter Ended

 

 

December 31,2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31,2021

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

0.07%

 

0.13%

 

0.11%

 

0.15%

 

0.13%

 

Commercial mortgage

0.00%

 

-0.01%

 

-0.22%

 

0.00%

 

0.01%

 

Commercial and industrial

0.19%

 

-0.07%

 

-0.07%

 

-0.10%

 

0.10%

 

Construction

-1.82%

 

0.07%

 

-0.09%

 

-0.03%

 

-0.03%

 

Consumer loans and finance leases

1.44%

 

1.05%

 

0.91%

 

0.85%

 

0.75%

 

Total loans

0.46%

 

0.31%

 

0.21%

 

0.24%

 

0.26%

 

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 $13.0 million for the fourth quarter of 2022, or an annualized 0.46% of average loans, compared to $8.6 million, or an annualized 0.31% of average loans, in the third quarter of 2022. The increase of $4.4 million in net charge-offs included the following:

  • A $3.6 million increase in consumer loan net charge-offs, reflected across all major portfolio classes.
  • A $1.2 million increase in commercial and construction loan net charge-offs mainly related to a $1.7 million charge-off recorded in connection with the aforementioned sale of an adversely classified commercial and industrial loan participation in the Florida region.

Partially offset by:

  • A $0.4 million decrease in residential mortgage loan net charge-offs.

Allowance for Credit Losses for Unfunded Loan Commitments

The Corporation estimates expected credit losses over the contractual period during which the Corporation is exposed to credit risk as a result of a contractual obligation to extend credit, such as pursuant to unfunded loan commitments and standby letters of credit for commercial and construction loans, unless the obligation is unconditionally cancellable by the Corporation. The ACL for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. As of December 31, 2022, the ACL for off-balance sheet credit exposures was $4.3 million, compared to $4.2 million as of September 30, 2022.

Allowance for Credit Losses for Held-to-Maturity Debt Securities

As of December 31, 2022, the ACL for held-to-maturity debt securities was $8.3 million, relatively flat when compared to September 30, 2022. The ACL for held-to-maturity debt securities related only to Puerto Rico municipal bonds.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $18.6 billion as of December 31, 2022, up $192.5 million from September 30, 2022.

The following variances within the main components of total assets are noted:

  • A $74.5 million decrease in cash and cash equivalents mainly related to the overall decline in total deposits, the funding of new loan originations, and the repurchase of approximately 3.5 million shares of common stock for a total purchase price of approximately $50.0 million, partially offset by an increase in borrowings. The cash and liquid securities to total assets ratio improved to 19.02% as of December 31, 2022, compared to 18.57% as of September 30, 2022.
  • A $47.0 million decrease in investment securities, mainly driven by repayments of approximately $137.0 million primarily related to U.S. agencies MBS, partially offset by a $60.1 million increase in the fair value of available-for-sale debt securities attributable to changes in market interest rates, and a $30.6 million increase in investment of FHLB stock.
  • A $254.3 million increase in total loans. The loan growth consisted of increases of $210.5 million in the Puerto Rico region, $37.7 million in the Florida region, and $6.1 million in the Virgin Islands region. On a portfolio basis, the loan growth consisted of increases of $130.2 million in commercial and construction loans (net of an $11.1 million decrease in the carrying value of the SBA PPP loan portfolio), $107.7 million in consumer loans, and $16.4 million in residential mortgage loans. Excluding the $11.1 million decrease in the carrying value of the SBA PPP loan portfolio, commercial and construction loans increased by $141.3 million, mainly reflecting the origination of loans related to ten commercial and construction relationships, each in excess of $10 million, that increased the portfolio balance by $257.2 million. This variance was partially offset by payoffs and paydowns, of which $51.6 million related to payoffs and paydowns of four commercial and construction relationships each in excess of $10 million, and the sale of a $23.9 million adversely classified commercial and industrial loan participation in the Florida region.



    Total loan originations, including refinancings, renewals and draws from existing commitments (excluding credit card utilization activity), amounted to $1.3 billion in the fourth quarter of 2022, a net increase of $191.4 million compared to the third quarter of 2022. The net increase in total loan originations consisted of: (i) a $186.7 million increase in commercial and construction loan originations, primarily related to commercial mortgage loans; (ii) an $11.8 million increase in residential mortgage loan originations; and (iii) a $7.1 million decrease in consumer loan originations, primarily related to personal loans.



    Total loan originations in the Puerto Rico region amounted to $1.0 billion in the fourth quarter of 2022, a net increase of $213.1 million when compared to $835.8 million in the third quarter of 2022. The $213.1 million net increase in total loan originations consisted of: (i) a $217.6 million increase in commercial and construction loan originations and (ii) a $1.8 million increase in residential mortgage loan originations, partially offset by a (iii) a $6.3 million decrease in consumer loan originations.



    Total loan originations in the Virgin Islands region amounted to $21.1 million in the fourth quarter of 2022, compared to $17.8 million in the third quarter of 2022. The $3.3 million net increase in total loan originations consisted of a $7.3 million increase in residential mortgage loan originations, partially offset by (i) a $3.2 million decrease in commercial and construction loan originations, and (ii) a $0.8 million decrease in consumer loan originations.



    Total loan originations in the Florida region amounted to $242.1 million in the fourth quarter of 2022, compared to $267.1 million in the third quarter of 2022. The $25.0 million decrease in total loan originations consisted of a $27.7 million decrease in commercial and construction loan originations, partially offset by a $2.7 million increase in residential mortgage loan originations.

Total liabilities were approximately $17.3 billion as of December 31, 2022, an increase of $132.3 million from September 30, 2022.

The increase in total liabilities was mainly due to:

  • A $550.1 million net increase in borrowings, including $475.0 million in short-term FHLB advances (average cost of 4.56%) and $75.1 million in securities sold under agreements to repurchase (average cost of 4.55%) reflecting actions taken as part of management’s liquidity and funding needs. In addition, the Corporation added $200.0 million of long-term FHLB advances in the fourth quarter of 2022 at an average cost of 4.25%, and repaid prior to maturity $200.0 million of long-term securities sold under agreements to repurchase carried at a cost of 3.90% upon the exercise of the counterparty’s call option in the fourth quarter of 2022.
  • A $60.6 million increase in brokered CDs.

Partially offset by:

  • A $314.9 million decrease in total deposits, excluding brokered CDs and government deposits, reflecting reductions of $169.9 million in the Florida region, $137.8 million in the Puerto Rico region, and $7.2 million in the Virgin Islands region.
  • A $171.9 million decrease in government deposits, consisting of decreases of $157.4 million in the Puerto Rico region and $16.0 million in the Virgin Islands region, partially offset by an increase of $1.5 million in the Florida region.

Total stockholders’ equity amounted to $1.3 billion as of December 31, 2022, an increase of $60.2 million from September 30, 2022. The increase was driven by earnings generated in the fourth quarter and the $60.1 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, partially offset by the repurchase of approximately 3.5 million shares of common stock for a total purchase price of approximately $50.0 million and $22.2 million in quarterly dividends declared to common stock shareholders.

As of December 31, 2022, 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 16.53%, 16.53%, 19.21%, and 10.70%, respectively, as of December 31, 2022, compared to CET1 capital, tier 1 capital, total capital and leverage ratios of 16.66%, 16.66%, 19.38%, and 10.36%, respectively, as of September 30, 2022.

Meanwhile, estimated CET1 capital, tier 1 capital, total capital and leverage ratios of our banking subsidiary, FirstBank Puerto Rico, were 16.84%, 17.65%, 18.90%, and 11.43%, respectively, as of December 31, 2022, compared to common equity tier 1 capital, tier 1 capital, total capital and leverage ratios of 17.00%, 17.82%, 19.07%, and 11.08%, respectively, as of September 30, 2022.

Tangible Common Equity

The Corporation’s tangible common equity ratio increased to 6.81% as of December 31, 2022, compared to 6.55% as of September 30, 2022. The increase in tangible common equity includes the effect of a $60.1 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, partially offset by $50.0 million in repurchases of common stock and $22.2 million in quarterly dividends declared during the fourth quarter.

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:

 

December 31,2022

 

September 30, 2022

 

June 30, 2022

 

March 31, 2022

 

December 31,2021

(In thousands, except ratios and per share information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity - GAAP

$

1,325,540

 

 

$

1,265,333

 

 

$

1,557,916

 

 

$

1,781,102

 

 

$

2,101,767

 

Goodwill

 

(38,611

)

 

 

(38,611

)

 

 

(38,611

)

 

 

(38,611

)

 

 

(38,611

)

Purchased credit card relationship intangible

 

(205

)

 

 

(376

)

 

 

(599

)

 

 

(873

)

 

 

(1,198

)

Core deposit intangible

 

(20,900

)

 

 

(22,818

)

 

 

(24,736

)

 

 

(26,648

)

 

 

(28,571

)

Insurance customer relationship intangible

 

(13

)

 

 

(51

)

 

 

(89

)

 

 

(127

)

 

 

(165

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity

$

1,265,811

 

 

$

1,203,477

 

 

$

1,493,881

 

 

$

1,714,843

 

 

$

2,033,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets - GAAP

$

18,634,484

 

 

$

18,442,034

 

 

$

19,531,635

 

 

$

19,929,037

 

 

$

20,785,275

 

Goodwill

 

(38,611

)

 

 

(38,611

)

 

 

(38,611

)

 

 

(38,611

)

 

 

(38,611

)

Purchased credit card relationship intangible

 

(205

)

 

 

(376

)

 

 

(599

)

 

 

(873

)

 

 

(1,198

)

Core deposit intangible

 

(20,900

)

 

 

(22,818

)

 

 

(24,736

)

 

 

(26,648

)

 

 

(28,571

)

Insurance customer relationship intangible

 

(13

)

 

 

(51

)

 

 

(89

)

 

 

(127

)

 

 

(165

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible assets

$

18,574,755

 

 

$

18,380,178

 

 

$

19,467,600

 

 

$

19,862,778

 

 

$

20,716,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

182,709

 

 

 

186,258

 

 

 

191,626

 

 

 

198,701

 

 

 

201,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity ratio

 

6.81

%

 

 

6.55

%

 

 

7.67

%

 

 

8.63

%

 

 

9.81

%

Tangible book value per common share

$

6.93

 

 

$

6.46

 

 

$

7.80

 

 

$

8.63

 

 

$

10.07

 

Exposure to Puerto Rico Government

As of December 31, 2022, the Corporation had $338.9 million of direct exposure to the Puerto Rico government, its municipalities and public corporations, an increase of $11.7 million when compared to $327.2 million as of September 30, 2022, mainly due to a $12.8 million loan granted to a municipality in Puerto Rico that is supported by assigned property tax revenues. As of December 31, 2022, approximately $183.4 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 $114.0 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 $10.8 million in loans extended to an affiliate of a public corporation, $27.4 million in loans to an agency of the Puerto Rico central government, and obligations of the Puerto Rico government, specifically a residential pass-through MBS issued by the PRHFA, at an amortized cost of $3.3 million (fair value of $2.2 million as of December 31, 2022), 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 $1.1 million as of December 31, 2022, of which $0.4 million is due to credit deterioration.

The aforementioned exposure to municipalities in Puerto Rico included $165.7 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, 2022, the ACL for these securities was $8.3 million, relatively flat when compared to September 30, 2022.

As of December 31, 2022, the Corporation had $2.3 billion of public sector deposits in Puerto Rico, compared to $2.5 billion as of September 30, 2022. Approximately 24% of the public sector deposits as of December 31, 2022, were from municipalities and municipal agencies in Puerto Rico and 76% 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 Friday, January 27, 2023, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast through the investor relations section of the Corporation’s web site: fbpinvestor.com or through a dial-in telephone number at (844) 200-6205 or (929) 526–1599 for international callers. The participant access code is 291448. The Corporation recommends that listeners go to the web site at least 15 minutes prior to the call to download and install any necessary software. Following the webcast presentation, a question and answer session will be made available to research analysts and institutional investors. A replay of the webcast will be archived in the investor relations section of First BanCorp.’s website, fbpinvestor.com, until January 27, 2024. A telephone replay will be available one hour after the end of the conference call through February 26, 2023 at (866) 813-9403. The replay access code is 044230.

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, 2021 and the following, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements: the impacts of rising interest rates and inflation on the Corporation, including a decrease in demand for new loan originations and refinancings, increased competition for borrowers, attrition in deposits and an increase in non-interest expenses which would impact the Corporation’s margins and may adversely impact origination volumes and financial performance; the long-term effects of the COVID-19 pandemic and their impact on the Corporation’s business, operations and financial condition, including the impact of any residual risks related to the Corporation’s participation in the SBA PPP; 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 and credit quality of the Corporation’s assets; the Corporation’s ability 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 any, which may result in misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs and losses or an adverse effect to our reputation; general competitive factors, industry consolidation 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 ultimate outcome of the debt restructuring plan of Puerto Rico (“Plan of Adjustment” or “PoA”) and the 2022 Fiscal Plan for Puerto Rico as certified by the Financial Oversight and Management Board for Puerto Rico, or any revisions to it, on our clients and loan portfolios, and any potential impact from future economic or political developments in Puerto Rico; the impact of government financial assistance for hurricane recovery and other disaster relief on economic activity in Puerto Rico; uncertainty as to the availability of wholesale funding sources, such as securities sold under agreements to repurchase, FHLB advances, and brokered CDs; the impact of changes in accounting standards or assumptions in applying those standards, on 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 make dividend payments to the Corporation; the impacts of natural or man-made disasters, widespread health emergencies, geopolitical conflicts (including the ongoing conflict in Ukraine), 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 uncertainty about the effect of the cessation of the LIBOR; 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, resulting in additional charges to the provision for credit losses on the Corporation’s available-for-sale debt securities portfolio; the impacts of applicable legislative, tax or regulatory changes on the Corporation’s financial condition or performance; the effect of changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments, including those determined by the Federal Reserve Board, the Federal Reserve Bank of New York, the Federal Deposit Insurance Corporation (the “FDIC”), government-sponsored housing agencies and regulators in Puerto Rico and the U.S. and British Virgin Islands; the risk of possible failure or circumvention of the Corporation’s internal controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; the risk that the FDIC may further increase the deposit insurance premium and/or require 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.

Basis of Presentation

Use of Non-GAAP Financial Measures

This press release contains GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are used when management believes them to be helpful to an investor’s understanding of the Corporation’s results of operations or financial position. Where non-GAAP financial measures are used, the most comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure, can be found in the text or in the tables in or attached to this press release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

Tangible Common Equity Ratio and Tangible Book Value per Common Share

The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity, goodwill, 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.

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, finance leases and debt securities and any gains or losses on sales of investment securities. In addition, from time to time, earnings are also adjusted for certain items regarded as Special Items, such as merger and restructuring costs in connection with the acquisition of BSPR and related integration and restructuring efforts, and costs incurred in connection with the COVID-19 pandemic response efforts, because management believes these items are not reflective of core operating performance, are not expected to reoccur with any regularity or may reoccur at uncertain times and in uncertain amounts.

Net Interest Income, Excluding Valuations, and on a Tax-Equivalent Basis

Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that management believes facilitates comparison of results to the results of peers.

The following table reconciles net interest income in accordance with GAAP to net interest income excluding valuations, and net interest income on a tax-equivalent basis for the fourth and third quarters of 2022, the fourth quarter of 2021 and the year ended December 31, 2022 and 2021, respectively. The table also reconciles net interest spread and net interest margin to these items excluding valuations, and on a tax-equivalent basis.

 

Quarter Ended

 

Year Ended

(Dollars in thousands)

December 31,2022

 

September 30, 2022

 

December 31,2021

 

December 31,2022

 

December 31,2021

Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income - GAAP

$

233,452

 

 

$

222,683

 

 

$

198,435

 

 

$

862,614

 

 

$

794,708

 

Unrealized loss (gain) on derivative instruments

 

5

 

 

 

(11

)

 

 

(2

)

 

 

(30

)

 

 

(24

)

Interest income excluding valuations

 

233,457

 

 

 

222,672

 

 

 

198,433

 

 

 

862,584

 

 

 

794,684

 

Tax-equivalent adjustment

 

7,391

 

 

 

9,150

 

 

 

6,208

 

 

 

33,149

 

 

 

23,753

 

Interest income on a tax-equivalent basis and excluding valuations

$

240,848

 

 

$

231,822

 

 

$

204,641

 

 

$

895,733

 

 

$

818,437

 

Interest expense - GAAP

$

27,879

 

 

$

14,773

 

 

$

14,297

 

 

$

67,321

 

 

$

64,779

 

Net interest income - GAAP

$

205,573

 

 

$

207,910

 

 

$

184,138

 

 

$

795,293

 

 

$

729,929

 

Net interest income excluding valuations

$

205,578

 

 

$

207,899

 

 

$

184,136

 

 

$

795,263

 

 

$

729,905

 

Net interest income on a tax-equivalent basis and excluding valuations

$

212,969

 

 

$

217,049

 

 

$

190,344

 

 

$

828,412

 

 

$

753,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and leases

$

11,364,963

 

 

$

11,218,864

 

 

$

11,108,997

 

 

$

11,199,013

 

 

$

11,413,149

 

Total securities, other short-term investments and interest-bearing cash balances

 

7,314,293

 

 

 

7,938,530

 

 

 

9,140,313

 

 

 

8,112,842

 

 

 

8,180,944

 

Average Interest-Earning Assets

$

18,679,256

 

 

$

19,157,394

 

 

$

20,249,310

 

 

$

19,311,855

 

 

$

19,594,093

 

Average Interest-Bearing Liabilities

$

10,683,776

 

 

$

11,026,975

 

 

$

11,467,480

 

 

$

11,120,732

 

 

$

11,778,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Yield/Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average yield on interest-earning assets - GAAP

 

4.96

%

 

 

4.61

%

 

 

3.89

%

 

 

4.47

%

 

 

4.06

%

Average rate on interest-bearing liabilities - GAAP

 

1.04

%

 

 

0.53

%

 

 

0.49

%

 

 

0.61

%

 

 

0.55

%

Net interest spread - GAAP

 

3.92

%

 

 

4.08

%

 

 

3.40

%

 

 

3.86

%

 

 

3.51

%

Net interest margin - GAAP

 

4.37

%

 

 

4.31

%

 

 

3.61

%

 

 

4.12

%

 

 

3.73

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average yield on interest-earning assets excluding valuations

 

4.96

%

 

 

4.61

%

 

 

3.89

%

 

 

4.47

%

 

 

4.06

%

Average rate on interest-bearing liabilities excluding valuations

 

1.04

%

 

 

0.53

%

 

 

0.49

%

 

 

0.61

%

 

 

0.55

%

Net interest spread excluding valuations

 

3.92

%

 

 

4.08

%

 

 

3.40

%

 

 

3.86

%

 

 

3.51

%

Net interest margin excluding valuations

 

4.37

%

 

 

4.31

%

 

 

3.61

%

 

 

4.12

%

 

 

3.73

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations

 

5.12

%

 

 

4.80

%

 

 

4.01

%

 

 

4.64

%

 

 

4.18

%

Average rate on interest-bearing liabilities

 

1.04

%

 

 

0.53

%

 

 

0.49

%

 

 

0.61

%

 

 

0.55

%

Net interest spread on a tax-equivalent basis and excluding valuations

 

4.08

%

 

 

4.27

%

 

 

3.52

%

 

 

4.03

%

 

 

3.63

%

Net interest margin on a tax-equivalent basis and excluding valuations

 

4.52

%

 

 

4.49

%

 

 

3.73

%

 

 

4.29

%

 

 

3.85

%

FIRST BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

 

 

 

 

 

 

 

As of

 

December 31, 2022

 

September 30, 2022

 

December 31, 2021

(In thousands, except for share information)

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

$

478,480

 

 

$

552,933

 

 

$

2,540,376

 

Money market investments:

 

 

 

 

 

 

 

 

Time deposits with other financial institutions

 

300

 

 

 

300

 

 

 

300

 

Other short-term investments

 

1,725

 

 

 

1,757

 

 

 

2,382

 

Total money market investments

 

2,025

 

 

 

2,057

 

 

 

2,682

 

Debt securities available for sale, at fair value (ACL of $458 as of December 31, 2022; $664 as of September 30, 2022; and $1,105 as of December 31, 2021)

 

5,599,520

 

 

 

5,668,689

 

 

 

6,453,761

 

Debt securities held to maturity, at amortized cost, net of ACL of $8,286 as of December 31, 2022, $8,257 as of September 30, 2022, and $8,571 as of December 31, 2021

 

429,251

 

 

 

437,605

 

 

 

169,562

 

Equity securities

 

55,289

 

 

 

24,727

 

 

 

32,169

 

Total investment securities

 

6,084,060

 

 

 

6,131,021

 

 

 

6,655,492

 

Loans, net of ACL (December 31, 2022 - $260,464; September 30, 2022 - $257,859;

 

 

 

 

 

 

 

 

December 31, 2021 - $269,030)

 

11,292,361

 

 

 

11,040,759

 

 

 

10,791,628

 

Loans held for sale, at lower of cost or market

 

12,306

 

 

 

12,169

 

 

 

35,155

 

Total loans, net

 

11,304,667

 

 

 

11,052,928

 

 

 

10,826,783

 

Accrued interest receivable on loans and investments

 

69,730

 

 

 

61,108

 

 

 

61,507

 

Premises and equipment, net

 

142,935

 

 

 

143,429

 

 

 

146,417

 

OREO

 

31,641

 

 

 

38,682

 

 

 

40,848

 

Deferred tax asset, net

 

155,584

 

 

 

166,100

 

 

 

208,482

 

Goodwill

 

38,611

 

 

 

38,611

 

 

 

38,611

 

Intangible assets

 

21,118

 

 

 

23,245

 

 

 

29,934

 

Other assets

 

305,633

 

 

 

231,920

 

 

 

234,143

 

Total assets

$

18,634,484

 

 

$

18,442,034

 

 

$

20,785,275

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Non-interest-bearing deposits

$

6,112,884

 

 

$

6,235,782

 

 

$

7,027,513

 

Interest-bearing deposits

 

10,030,583

 

 

 

10,333,799

 

 

 

10,757,381

 

Total deposits

 

16,143,467

 

 

 

16,569,581

 

 

 

17,784,894

 

Securities sold under agreements to repurchase

 

75,133

 

 

 

200,000

 

 

 

300,000

 

Advances from the FHLB

 

675,000

 

 

 

-

 

 

 

200,000

 

Other borrowings

 

183,762

 

 

 

183,762

 

 

 

183,762

 

Accounts payable and other liabilities

 

231,582

 

 

 

223,358

 

 

 

214,852

 

Total liabilities

 

17,308,944

 

 

 

17,176,701

 

 

 

18,683,508

 

STOCKHOLDERSʼ EQUITY

 

 

 

 

 

 

 

 

Common stock outstanding and additional paid-in capital, net of treasury stock

 

 

 

 

 

 

 

 

(December 31, 2022 - 182,709,059; September 30, 2022 - 186,257,659;

 

 

 

 

 

 

 

 

December 31, 2021 - 201,826,505)

 

486,109

 

 

 

534,742

 

 

 

758,471

 

Retained earnings

 

1,644,209

 

 

 

1,593,284

 

 

 

1,427,295

 

Accumulated other comprehensive loss

 

(804,778

)

 

 

(862,693

)

 

 

(83,999

)

Total stockholdersʼ equity

 

1,325,540

 

 

 

1,265,333

 

 

 

2,101,767

 

Total liabilities and stockholdersʼ equity

$

18,634,484

 

 

$

18,442,034

 

 

$

20,785,275

 

FIRST BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

December 31, 2022

 

September 30, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

(In thousands, except per share information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

233,452

 

 

$

222,683

 

 

$

198,435

 

 

$

862,614

 

 

$

794,708

 

Interest expense

 

27,879

 

 

 

14,773

 

 

 

14,297

 

 

 

67,321

 

 

 

64,779

 

Net interest income

 

205,573

 

 

 

207,910

 

 

 

184,138

 

 

 

795,293

 

 

 

729,929

 

Provision for credit losses - expense (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

15,651

 

 

 

14,352

 

 

 

(12,241

)

 

 

25,679

 

 

 

(61,720

)

Unfunded loan commitments

 

31

 

 

 

2,071

 

 

 

(222

)

 

 

2,736

 

 

 

(3,568

)

Debt securities

 

30

 

 

 

(640

)

 

 

254

 

 

 

(719

)

 

 

(410

)

Provision for credit losses - expense (benefit)

15,712

 

 

15,783

 

 

(12,209

)

 

27,696

 

 

(65,698

)

Net interest income after provision for credit losses

189,861

 

 

192,127

 

 

196,347

 

 

767,597

 

 

795,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fees on deposit accounts

 

9,174

 

 

 

9,820

 

 

 

9,502

 

 

 

37,823

 

 

 

35,284

 

Mortgage banking activities

 

2,572

 

 

 

3,400

 

 

 

5,223

 

 

 

15,260

 

 

 

24,998

 

Other non-interest income

 

17,854

 

 

 

16,473

 

 

 

15,653

 

 

 

70,009

 

 

 

60,882

 

Total non-interest income

29,600

 

 

29,693

 

 

30,378

 

 

123,092

 

 

121,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees’ compensation and benefits

 

52,241

 

 

 

52,939

 

 

 

49,681

 

 

 

206,038

 

 

 

200,457

 

Occupancy and equipment

 

21,843

 

 

 

22,543

 

 

 

21,589

 

 

 

88,277

 

 

 

93,253

 

Business promotion

 

5,590

 

 

 

5,136

 

 

 

5,794

 

 

 

18,231

 

 

 

15,359

 

Professional service fees

 

12,669

 

 

 

12,549

 

 

 

11,937

 

 

 

47,848

 

 

 

59,956

 

Taxes, other than income taxes

 

5,211

 

 

 

5,349

 

 

 

5,138

 

 

 

20,267

 

 

 

22,151

 

Insurance and supervisory fees

 

3,973

 

 

 

3,853

 

 

 

3,380

 

 

 

15,503

 

 

 

15,642

 

Net gain on OREO operations

 

(2,557

)

 

 

(1,064

)

 

 

(1,631

)

 

 

(5,826

)

 

 

(2,160

)

Merger and restructuring costs

 

-

 

 

 

-

 

 

 

1,853

 

 

 

-

 

 

 

26,435

 

Other non-interest expenses

 

13,961

 

 

 

13,884

 

 

 

13,724

 

 

 

52,767

 

 

 

57,881

 

Total non-interest expenses

112,931

 

 

115,189

 

 

111,465

 

 

443,105

 

 

488,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

106,530

 

 

 

106,631

 

 

 

115,260

 

 

 

447,584

 

 

 

427,817

 

Income tax expense

 

(33,356

)

 

 

(32,028

)

 

 

(41,621

)

 

 

(142,512

)

 

 

(146,792

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

73,174

 

 

$

74,603

 

 

$

73,639

 

 

$

305,072

 

 

$

281,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

73,174

 

 

$

74,603

 

 

$

71,959

 

 

$

305,072

 

 

$

277,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.40

 

 

$

0.40

 

 

$

0.35

 

 

$

1.60

 

 

$

1.32

 

Diluted

$

0.40

 

 

$

0.40

 

 

$

0.35

 

 

$

1.59

 

 

$

1.31

 

About First BanCorp.

First BanCorp. is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the U.S. and the British Virgin Islands and Florida, and of FirstBank Insurance Agency. Among the subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp. and First Express, both small loan companies. First BanCorp.’s shares of common stock trade on the New York Stock Exchange under the symbol FBP. Additional information about First BanCorp. may be found at www.1firstbank.com.

EXHIBIT A

Table 1 – Selected Financial Data

 

 

 

Quarter ended

 

Year Ended

 

 

 

December 31, 2022

 

September 30, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

(Shares in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Common Share Results:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share - basic

$

0.40

 

$

0.40

 

$

0.35

 

 

$

1.60

 

$

1.32

 

Net earnings per share - diluted

$

0.40

 

$

0.40

 

$

0.35

 

 

$

1.59

 

$

1.31

 

Cash dividends declared

$

0.12

 

$

0.12

 

$

0.10

 

 

$

0.46

 

$

0.31

 

Average shares outstanding

 

183,649

 

 

187,236

 

 

203,344

 

 

 

190,805

 

 

210,122

 

Average shares outstanding diluted

 

184,847

 

 

188,319

 

 

204,705

 

 

 

191,968

 

 

211,300

 

Book value per common share

$

7.25

 

$

6.79

 

$

10.41

 

 

$

7.25

 

$

10.41

 

Tangible book value per common share (1)

$

6.93

 

$

6.46

 

$

10.07

 

 

$

6.93

 

$

10.07

 

Selected Financial Ratios (In Percent):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profitability:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Average Assets

 

1.58

 

 

1.55

 

 

1.40

 

 

 

1.57

 

 

1.38

 

Interest Rate Spread (2)

 

4.08

 

 

4.27

 

 

3.52

 

 

 

4.03

 

 

3.63

 

Net Interest Margin (2)

 

4.52

 

 

4.49

 

 

3.73

 

 

 

4.29

 

 

3.85

 

Return on Average Total Equity

 

22.37

 

 

19.00

 

 

13.40

 

 

 

18.66

 

 

12.56

 

Return on Average Common Equity

 

22.37

 

 

19.00

 

 

13.24

 

 

 

18.66

 

 

12.58

 

Average Total Equity to Average Total Assets

 

7.05

 

 

8.14

 

 

10.46

 

 

 

8.44

 

 

11.02

 

Total capital

 

19.21

 

 

19.38

 

 

20.50

 

 

 

19.21

 

 

20.50

 

Common equity Tier 1 capital

 

16.53

 

 

16.66

 

 

17.80

 

 

 

16.53

 

 

17.80

 

Tier 1 capital

 

16.53

 

 

16.66

 

 

17.80

 

 

 

16.53

 

 

17.80

 

Leverage

 

10.70

 

 

10.36

 

 

10.14

 

 

 

10.70

 

 

10.14

 

Tangible common equity ratio (1)

 

6.81

 

 

6.55

 

 

9.81

 

 

 

6.81

 

 

9.81

 

Dividend payout ratio

 

30.12

 

 

30.12

 

 

28.26

 

 

 

28.77

 

 

23.49

 

Efficiency ratio (3)

 

48.02

 

 

48.48

 

 

51.96

 

 

 

48.25

 

 

57.45

 

Asset Quality:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses for loans and finance leases to total loans held for investment

 

2.25

 

 

2.28

 

 

2.43

 

 

 

2.25

 

 

2.43

 

Net charge-offs (annualized) to average loans

 

0.46

 

 

0.31

 

 

0.26

 

 

 

0.31

 

 

0.48

 

Provision for credit losses for loans and finance leases - expense (benefit) to net charge-offs

 

119.97

 

 

166.02

 

 

(172.67

)

 

 

74.99

 

 

(111.94

)

Non-performing assets to total assets

 

0.69

 

 

0.78

 

 

0.76

 

 

 

0.69

 

 

0.76

 

Nonaccrual loans held for investment to total loans held for investment

 

0.78

 

 

0.86

 

 

1.00

 

 

 

0.78

 

 

1.00

 

Allowance for credit losses for loans and finance leases to total nonaccrual loans held for investment

 

289.61

 

 

264.43

 

 

242.99

 

 

 

289.61

 

 

242.99

 

Allowance for credit losses for loans and finance leases to total nonaccrual loans held for investment, excluding residential estate loans

 

552.26

 

 

473.31

 

 

483.95

 

 

 

552.26

 

 

483.95

 

Other Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock Price: End of period

$

12.72

 

$

13.68

 

$

13.78

 

 

$

12.72

 

$

13.78

 

(1)

Non-GAAP financial measures (as defined above). Refer to Statement of Financial Condition above for additional information about the components and a reconciliation of these measures.

(2)

On a tax-equivalent basis and excluding changes in the fair value of derivative instruments (Non-GAAP financial measure). Refer to Basis of Presentation above for additional information and a reconciliation of these measures.

(3)

Non-interest expenses to the sum of net interest income and non-interest income.

Table 2 – 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)

Quarter ended

December 31,

 

September 30,

 

December 31,

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

September 30,

 

December 31,

 

2022

 

2022

 

2021

 

2022

 

2022

 

2021

 

2022

 

 

2022

 

 

2021

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market and other short-term investments

$

394,471

 

$

882,759

 

$

2,350,719

 

$

3,444

 

$

4,654

 

$

912

 

3.46

%

 

2.09

%

 

0.15

%

Government obligations (2)

 

2,910,733

 

 

2,912,130

 

 

2,585,069

 

 

10,386

 

 

10,325

 

 

7,431

 

1.42

%

 

1.41

%

 

1.14

%

Mortgage-backed securities

 

3,973,307

 

 

4,113,870

 

 

4,166,861

 

 

20,838

 

 

22,028

 

 

15,986

 

2.08

%

 

2.12

%

 

1.52

%

FHLB stock

 

22,292

 

 

16,677

 

 

26,103

 

 

284

 

 

292

 

 

300

 

5.05

%

 

6.95

%

 

4.56

%

Other investments

 

13,490

 

 

13,094

 

 

11,561

 

 

48

 

 

45

 

 

16

 

1.41

%

 

1.36

%

 

0.53

%

Total investments (3)

 

7,314,293

 

 

7,938,530

 

 

9,140,313

 

 

35,000

 

 

37,344

 

 

24,645

 

1.90

%

 

1.87

%

 

1.07

%

Residential mortgage loans

 

2,839,268

 

 

2,855,927

 

 

3,069,075

 

 

39,225

 

 

39,874

 

 

42,633

 

5.48

%

 

5.54

%

 

5.51

%

Construction loans

 

128,845

 

 

118,794

 

 

165,067

 

 

2,227

 

 

1,831

 

 

2,236

 

6.86

%

 

6.12

%

 

5.37

%

C&I and commercial mortgage loans

 

5,127,028

 

 

5,085,257

 

 

5,028,753

 

 

81,464

 

 

73,518

 

 

63,202

 

6.30

%

 

5.74

%

 

4.99

%

Finance leases

 

691,585

 

 

647,586

 

 

561,423

 

 

12,769

 

 

11,751

 

 

10,395

 

7.33

%

 

7.20

%

 

7.35

%

Consumer loans

 

2,578,237

 

 

2,511,300

 

 

2,284,679

 

 

70,163

 

 

67,504

 

 

61,530

 

10.80

%

 

10.66

%

 

10.68

%

Total loans (4) (5)

 

11,364,963

 

 

11,218,864

 

 

11,108,997

 

 

205,848

 

 

194,478

 

 

179,996

 

7.19

%

 

6.88

%

 

6.43

%

Total interest-earning assets

$

18,679,256

 

$

19,157,394

 

$

20,249,310

 

$

240,848

 

$

231,822

 

$

204,641

 

5.12

%

 

4.80

%

 

4.01

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brokered CDs

$

47,304

 

$

63,524

 

$

106,275

 

$

286

 

$

333

 

$

561

 

2.40

%

 

2.08

%

 

2.09

%

Other interest-bearing deposits

 

10,090,687

 

 

10,481,863

 

 

10,573,790

 

 

20,751

 

 

9,645

 

 

8,115

 

0.82

%

 

0.37

%

 

0.30

%

FHLB advances

 

220,652

 

 

97,826

 

 

301,739

 

 

2,469

 

 

529

 

 

1,771

 

4.44

%

 

2.15

%

 

2.33

%

Other borrowed funds

 

325,133

 

 

383,762

 

 

485,676

 

 

4,373

 

 

4,266

 

 

3,850

 

5.34

%

 

4.41

%

 

3.15

%

Total interest-bearing liabilities

$

10,683,776

 

$

11,026,975

 

$

11,467,480

 

$

27,879

 

$

14,773

 

$

14,297

 

1.04

%

 

0.53

%

 

0.49

%

Net interest income

 

 

 

 

 

 

 

 

 

$

212,969

 

$

217,049

 

$

190,344

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.08

%

 

4.27

%

 

3.52

%

Net interest margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.52

%

 

4.49

%

 

3.73

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. Refer to Basis of Presentation above for additional information and a reconciliation of these measures.

(2)

Government obligations include debt issued by government-sponsored agencies.

(3)

Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.

(4)

Average loan balances include the average of non-performing loans.

(5)

Interest income on loans includes $2.7 million, $2.9 million and $2.7 million for the quarters ended December 31, 2022, September 30, 2022, and December 31, 2021, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.

Table 3 – Year-to-Date Statement of Average Interest-Earning Assets and Average Interest-Bearing Liabilities (On a Tax-Equivalent Basis)

 

Average Volume

 

Interest income (1) / expense

 

Average Rate (1)

Year Ended

December 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

 

December 31, 2022

 

December 31, 2021

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market and other short-term investments

$

1,156,127

 

$

2,012,617

 

$

11,791

 

$

2,662

 

1.02

%

 

0.13

%

Government obligations (2)

 

2,870,889

 

 

2,065,522

 

 

39,033

 

 

27,058

 

1.36

%

 

1.31

%

Mortgage-backed securities

 

4,052,660

 

 

4,064,343

 

 

85,090

 

 

57,159

 

2.10

%

 

1.41

%

FHLB stock

 

20,419

 

 

28,208

 

 

1,114

 

 

1,394

 

5.46

%

 

4.94

%

Other investments

 

12,747

 

 

10,254

 

 

126

 

 

61

 

0.99

%

 

0.59

%

Total investments (3)

 

8,112,842

 

 

8,180,944

 

 

137,154

 

 

88,334

 

1.69

%

 

1.08

%

Residential mortgage loans

 

2,886,594

 

 

3,277,087

 

 

160,359

 

 

177,747

 

5.56

%

 

5.42

%

Construction loans

 

121,642

 

 

181,470

 

 

7,350

 

 

12,766

 

6.04

%

 

7.03

%

C&I and commercial mortgage loans

 

5,092,638

 

 

5,228,150

 

 

281,486

 

 

261,333

 

5.53

%

 

5.00

%

Finance leases

 

636,507

 

 

518,757

 

 

46,842

 

 

38,532

 

7.36

%

 

7.43

%

Consumer loans

 

2,461,632

 

 

2,207,685

 

 

262,542

 

 

239,725

 

10.67

%

 

10.86

%

Total loans (4) (5)

 

11,199,013

 

 

11,413,149

 

 

758,579

 

 

730,103

 

6.77

%

 

6.40

%

Total interest-earning assets

$

19,311,855

 

$

19,594,093

 

$

895,733

 

$

818,437

 

4.64

%

 

4.18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brokered CDs

$

69,694

 

$

141,959

 

$

1,500

 

$

2,982

 

2.15

%

 

2.10

%

Other interest-bearing deposits

 

10,492,465

 

 

10,798,583

 

 

44,861

 

 

38,500

 

0.43

%

 

0.36

%

FHLB advances

 

179,452

 

 

354,055

 

 

5,136

 

 

8,199

 

2.86

%

 

2.32

%

Other borrowed funds

 

379,121

 

 

484,244

 

 

15,824

 

 

15,098

 

4.17

%

 

3.12

%

Total interest-bearing liabilities

$

11,120,732

 

$

11,778,841

 

$

67,321

 

$

64,779

 

0.61

%

 

0.55

%

Net interest income

 

 

 

 

 

 

$

828,412

 

$

753,658

 

 

 

 

Interest rate spread

 

 

 

 

 

 

 

 

 

 

 

 

4.03

%

 

3.63

%

Net interest margin

 

 

 

 

 

 

 

 

 

 

 

 

4.29

%

 

3.85

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

On a tax-equivalent basis. The tax-equivalent yield was estimated by dividing the interest rate spread on exempt assets by 1 less the Puerto Rico statutory tax rate of 37.5% and adding to it the cost of interest-bearing liabilities. When adjusted to a tax-equivalent basis, yields on taxable and exempt assets are comparable. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received. Refer to Basis of Presentation above for additional information and a reconciliation of these measures.

(2)

Government obligations include debt issued by government-sponsored agencies.

(3)

Unrealized gains and losses on available-for-sale debt securities are excluded from the average volumes.

(4)

Average loan balances include the average of non-performing loans.

(5)

Interest income on loans includes $11.2 million and $10.5 million for years ended December 31, 2022 and 2021, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.

Table 4 – Loan Portfolio by Geography

 

As of December 31,2022

 

Puerto Rico

 

Virgin Islands

 

United States

 

Consolidated

(In thousands)

 

 

Residential mortgage loans

$

2,237,983

 

$

179,917

 

$

429,390

 

$

2,847,290

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans:

 

 

 

 

 

 

 

 

 

 

 

Construction loans

 

30,529

 

 

4,243

 

 

98,181

 

 

132,953

Commercial mortgage loans

 

1,768,890

 

 

65,314

 

 

524,647

 

 

2,358,851

Commercial and Industrial loans (1)

 

1,791,235

 

 

68,874

 

 

1,026,154

 

 

2,886,263

Commercial loans

 

3,590,654

 

 

138,431

 

 

1,648,982

 

 

5,378,067

 

 

 

 

 

 

 

 

 

 

 

 

Finance leases

 

718,230

 

 

-

 

 

-

 

 

718,230

 

 

 

 

 

 

 

 

 

 

 

 

Consumer loans

 

2,537,840

 

 

61,419

 

 

9,979

 

 

2,609,238

Loans held for investment

 

9,084,707

 

 

379,767

 

 

2,088,351

 

 

11,552,825

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

12,306

 

 

-

 

 

-

 

 

12,306

Total loans

$

9,097,013

 

$

379,767

 

$

2,088,351

 

$

11,565,131

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2022

 

Puerto Rico

 

Virgin Islands

 

United States

 

Consolidated

(In thousands)

 

 

Residential mortgage loans

$

2,240,466

 

$

174,766

 

$

415,742

 

$

2,830,974

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans:

 

 

 

 

 

 

 

 

 

 

 

Construction loans

 

23,595

 

 

4,121

 

 

96,278

 

 

123,994

Commercial mortgage loans

 

1,688,345

 

 

66,102

 

 

511,167

 

 

2,265,614

Commercial and Industrial loans (1)

 

1,772,418

 

 

69,748

 

 

1,016,120

 

 

2,858,286

Commercial loans

 

3,484,358

 

 

139,971

 

 

1,623,565

 

 

5,247,894

 

 

 

 

 

 

 

 

 

 

 

 

Finance leases

 

669,114

 

 

-

 

 

-

 

 

669,114

 

 

 

 

 

 

 

 

 

 

 

 

Consumer loans

 

2,480,412

 

 

58,911

 

 

11,313

 

 

2,550,636

Loans held for investment

 

8,874,350

 

 

373,648

 

 

2,050,620

 

 

11,298,618

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

12,169

 

 

-

 

 

-

 

 

12,169

Total loans

$

8,886,519

 

$

373,648

 

$

2,050,620

 

$

11,310,787

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

Puerto Rico

 

Virgin Islands

 

United States

 

Consolidated

(In thousands)

 

 

Residential mortgage loans

$

2,361,322

 

$

188,251

 

$

429,322

 

$

2,978,895

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loans:

 

 

 

 

 

 

 

 

 

 

 

Construction loans

 

38,789

 

 

4,344

 

 

95,866

 

 

138,999

Commercial mortgage loans

 

1,635,137

 

 

67,094

 

 

465,238

 

 

2,167,469

Commercial and Industrial loans (1)

 

1,867,082

 

 

79,515

 

 

940,654

 

 

2,887,251

Commercial loans

 

3,541,008

 

 

150,953

 

 

1,501,758

 

 

5,193,719

 

 

 

 

 

 

 

 

 

 

 

 

Finance leases

 

575,005

 

 

-

 

 

-

 

 

575,005

 

 

 

 

 

 

 

 

 

 

 

 

Consumer loans

 

2,245,097

 

 

52,282

 

 

15,660

 

 

2,313,039

Loans held for investment

 

8,722,432

 

 

391,486

 

 

1,946,740

 

 

11,060,658

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

33,002

 

 

177

 

 

1,976

 

 

35,155

Total loans

$

8,755,434

 

$

391,663

 

$

1,948,716

 

$

11,095,813

(1)

Includes $6.8 million of SBA PPP loans, net of unearned fees of $0.5 million, as of December 31, 2022 (September 30, 2022 - $17.9 million; December 31, 2021 - $145.0 million).

Table 5 – Non-Performing Assets by Geography

 

As of December 31,2022

(In thousands)

Puerto Rico

 

Virgin Islands

 

United States

 

Total

Nonaccrual loans held for investment:

 

 

Residential mortgage

$

28,857

 

$

6,614

 

$

7,301

 

$

42,772

Commercial mortgage

 

14,341

 

 

7,978

 

 

-

 

 

22,319

Commercial and Industrial

 

5,859

 

 

1,179

 

 

792

 

 

7,830

Construction

 

831

 

 

1,377

 

 

-

 

 

2,208

Consumer and finance leases

 

14,142

 

 

469

 

 

195

 

 

14,806

Total nonaccrual loans held for investment

 

64,030

 

 

17,617

 

 

8,288

 

 

89,935

OREO

 

28,135

 

 

3,475

 

 

31

 

 

31,641

Other repossessed property

 

5,275

 

 

76

 

 

29

 

 

5,380

Other assets (1)

 

2,202

 

 

-

 

 

-

 

 

2,202

Total non-performing assets (2)

$

99,642

 

$

21,168

 

$

8,348

 

$

129,158

Past due loans 90 days and still accruing (3)

$

76,417

 

$

4,100

 

$

-

 

$

80,517

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2022

(In thousands)

Puerto Rico

 

Virgin Islands

 

United States

 

Total

Nonaccrual loans held for investment:

 

 

Residential mortgage

$

30,988

 

$

6,530

 

$

5,518

 

$

43,036

Commercial mortgage

 

15,269

 

 

8,472

 

 

-

 

 

23,741

Commercial and Industrial

 

13,564

 

 

1,313

 

 

838

 

 

15,715

Construction

 

854

 

 

1,383

 

 

-

 

 

2,237

Consumer and finance leases

 

12,510

 

 

143

 

 

134

 

 

12,787

Total nonaccrual loans held for investment

 

73,185

 

 

17,841

 

 

6,490

 

 

97,516

OREO

 

34,626

 

 

4,025

 

 

31

 

 

38,682

Other repossessed property

 

4,789

 

 

98

 

 

49

 

 

4,936

Other assets (1)

 

2,193

 

 

-

 

 

-

 

 

2,193

Total non-performing assets (2)

$

114,793

 

$

21,964

 

$

6,570

 

$

143,327

Past due loans 90 days and still accruing (3)

$

80,249

 

$

1,541

 

$

-

 

$

81,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

(In thousands)

Puerto Rico

 

Virgin Islands

 

United States

 

Total

Nonaccrual loans held for investment:

 

 

Residential mortgage

$

39,256

 

$

8,719

 

$

7,152

 

$

55,127

Commercial mortgage

 

15,503

 

 

9,834

 

 

-

 

 

25,337

Commercial and Industrial

 

14,708

 

 

1,476

 

 

951

 

 

17,135

Construction

 

1,198

 

 

1,466

 

 

-

 

 

2,664

Consumer and finance leases

 

10,177

 

 

144

 

 

133

 

 

10,454

Total nonaccrual loans held for investment

 

80,842

 

 

21,639

 

 

8,236

 

 

110,717

OREO

 

36,750

 

 

3,450

 

 

648

 

 

40,848

Other repossessed property

 

3,456

 

 

187

 

 

44

 

 

3,687

Other assets (1)

 

2,850

 

 

-

 

 

-

 

 

2,850

Total non-performing assets (2)

$

123,898

 

$

25,276

 

$

8,928

 

$

158,102

Past due loans 90 days and still accruing (3)

$

114,001

 

$

1,265

 

$

182

 

$

115,448

(1)

Residential pass-through MBS issued by the PRHFA held as part of the available-for-sale debt securities portfolio.

(2)

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 $12.0 million as of December 31, 2022 (September 30, 2022 - $12.8 million; December 31, 2021 - $20.6 million).

(3)

These include rebooked loans, which were previously pooled into GNMA securities, amounting to $10.3 million as of December 31, 2022 (September 30, 2022 - $8.0 million; December 31, 2021 - $7.2 million). Under the GNMA program, the Corporation has the option but not the obligation to repurchase loans that meet GNMA's specified delinquency criteria. For accounting purposes, the loans subject to the repurchase option are required to be reflected on the financial statements with an offsetting liability.

Table 6 – Allowance for Credit Losses on Loans and Finance Leases

 

 

Quarter Ended

 

 

Year Ended

 

 

December 31,

 

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

 

2022

 

2022

 

2021

 

2022

 

2021

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses on loans and finance leases, beginning of period

$

257,859

 

 

$

252,152

 

 

$

288,360

 

 

$

269,030

 

 

$

385,887

 

 

Provision for credit losses on loans and finance leases expense (benefit)

 

15,651

 

 

 

14,352

 

 

 

(12,241

)

 

 

25,679

 

 

 

(61,720

)

 

Net (charge-offs) recoveries of loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

 

(498

)

 

 

(907

)

 

 

(988

)

 

 

(3,343

)

 

 

(28,517

)

(1)

Commercial mortgage

 

10

 

 

 

54

 

 

 

(56

)

 

 

1,287

 

 

 

(1,213

)

 

Commercial and industrial

 

(1,360

)

 

 

486

 

 

 

(702

)

 

 

392

 

 

 

4,889

 

 

Construction

 

587

 

 

 

(20

)

 

 

12

 

 

 

602

 

 

 

76

 

 

Consumer loans and finance leases

 

(11,785

)

 

 

(8,258

)

 

 

(5,355

)

 

 

(33,183

)

 

 

(30,372

)

 

Net charge-offs

 

(13,046

)

 

 

(8,645

)

 

 

(7,089

)

 

 

(34,245

)

 

 

(55,137

)

 

Allowance for credit losses on loans and finance leases, end of period

$

260,464

 

 

$

257,859

 

 

$

269,030

 

 

$

260,464

 

 

$

269,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses on loans and finance leases to period end total loans held for investment

 

2.25

%

 

 

2.28

%

 

 

2.43

%

 

 

2.25

%

 

 

2.43

%

 

Net charge-offs (annualized) to average loans outstanding during the period

 

0.46

%

 

 

0.31

%

 

 

0.26

%

 

 

0.31

%

 

 

0.48

%

(2)

Provision for credit losses on loans and finance leases to net charge-offs during the period

 

1.20x

 

 

1.66x

 

 

-1.73x

 

 

0.75x

 

 

-1.12x

 

(1)

Includes net charge-offs totaling $23.1 million associated with a bulk sale of residential mortgage nonaccrual loans and related servicing advance receivables.

(2)

Excluding net charge-offs associated with the bulk sale, total net charge-offs to average loans for the year ended December 31, 2021 was 0.28%.

Table 7 – Annualized Net Charge-Offs (Recoveries) to Average Loans

 

Quarter Ended

 

Year Ended

 

December 31,2022

 

September 30, 2022

 

December 31,2021

 

December 31,2022

 

December 31,2021

Residential mortgage

0.07

%

 

0.13

%

 

0.13

%

 

0.12

%

 

0.87

%

(1)

Commercial mortgage

0.00

%

 

-0.01

%

 

0.01

%

 

-0.06

%

 

0.06

%

 

Commercial and industrial

0.19

%

 

-0.07

%

 

0.10

%

 

-0.01

%

 

-0.16

%

 

Construction

-1.82

%

 

0.07

%

 

-0.03

%

 

-0.49

%

 

-0.04

%

 

Consumer loans and finance leases

1.44

%

 

1.05

%

 

0.75

%

 

1.07

%

 

1.11

%

 

Total loans

0.46

%

 

0.31

%

 

0.26

%

 

0.31

%

 

0.48

%

(1)

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes net charge-offs totaling $23.1 million associated with the bulk sale of residential mortgage nonaccrual loans and related servicing advance receivables. Excluding net charge-offs associated with the bulk sale, residential mortgage and total net charge offs to related average loans for the year ended December 31, 2021 was 0.17% and 0.28%, respectively.

 

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