SAN JUAN, Puerto Rico–(BUSINESS WIRE)–First BanCorp. (the “Corporation” or “First BanCorp.”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported a net income of $73.5 million, or $0.44 per diluted share, for the first quarter of 2024, compared to $79.5 million, or $0.46 per diluted share, for the fourth quarter of 2023, and $70.7 million, or $0.39 per diluted share, for the first quarter of 2023.
|
Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We continue to successfully navigate the challenging interest rate cycle delivering another quarter of strong operating results. Consistent with our guidance, we grew the loan portfolio for the ninth consecutive quarter, prudently managed our expense base, sustained our profitability profile, and returned over 100% of earnings in the form of buybacks and dividends during the first quarter.
Core deposit balances stabilized during the quarter although we continue to see internal migration of customers seeking higher yields in time deposits, as expected. That said, we remain well positioned to redeploy investment portfolio cash flows into higher-yielding assets under a higher-for-longer interest rate environment which should be margin accretive for the year. Early delinquency metrics improved and we took advantage of market opportunities to sell a portfolio of previously charged-off consumer loans which positively impacted the provision expense for the quarter.
Multiple technological investments are planned throughout the year to continue strengthening our competitive position in the markets we serve, including the recently announced strategic partnership with nCino which we believe will simplify our commercial lending operations and allow for a more seamless and agile interaction with our clients. We have ample balance sheet flexibility to execute on our business plans while navigating the current operating environment and look forward to sharing our progress with all stakeholders over the course of the year.»
|
Q1 |
Q4 |
Q1 |
||||
|
|
2024 |
2023 |
2023 |
||||
|
(in thousands, except per share and financial ratios) |
Financial Highlights |
||||||
|
Net interest income |
$196,520 |
$196,682 |
$200,885 |
||||
|
Provision for credit losses |
$12,167 |
$18,812 |
$15,502 |
||||
|
Non-interest income |
$33,983 |
$33,609 |
$32,518 |
||||
|
Non-interest expenses |
$120,923 |
$126,605 |
$115,268 |
||||
|
Income before income taxes |
$97,413 |
$84,874 |
$102,633 |
||||
|
Income tax expense |
$23,955 |
$5,385 |
$31,935 |
||||
|
Net Income |
$73,458 |
$79,489 |
$70,698 |
||||
|
|
Selected Financial Data |
||||||
|
Net Interest Margin |
4.16% |
4.14% |
4.34% |
||||
|
Efficiency Ratio |
52.46% |
54.98% |
49.39% |
||||
|
Earnings per share – diluted |
$0.44 |
$0.46 |
$0.39 |
||||
|
Book Value per Share |
$8.88 |
$8.85 |
$7.82 |
||||
|
Tangible Book Value per Share (1) |
$8.58 |
$8.54 |
$7.50 |
||||
|
Return on Average Common Equity |
19.56% |
23.69% |
21.00% |
||||
|
Return on Average Assets |
1.56% |
1.70% |
1.55% |
||||
|
(1) Represents a non-GAAP financial measure. Refer to “Non-GAAP Financial Measures” for the definition of and additional information about this non-GAAP financial measure. |
|||||||
Results for First Quarter of 2024 compared to Fourth Quarter 2023
|
Profitability |
Net Income – $73.5 million, or $0.44 per diluted share compared to $79.5 million, or $0.46 per diluted share. Net income for the respective periods included $0.9 million ($0.6 million after-tax) and $6.3 million ($3.9 million after-tax, or a decrease of $0.03 per diluted share), respectively, related to the estimated Federal Deposit Insurance Corporation (“FDIC”) special assessment expense. Income before income taxes – $97.4 million compared to $84.9 million. Adjusted pre-tax, pre-provision income (Non-GAAP)(1) – $110.5 million, compared to $110.0 million. Net interest income – $196.5 million compared to $196.7 million. The decrease includes a net reduction of $1.1 million associated with the effect of one less day in the first quarter of 2024. Net interest margin increased to 4.16%, compared to 4.14%. Provision for credit losses – $12.2 million compared to $18.8 million. First quarter of 2024 includes a $9.5 million recovery associated with a bulk sale of fully charged-off consumer loans, a $5.0 million recovery of a commercial and industrial loan and higher volume of loans. Non-interest expenses – $120.9 million compared to $126.6 million, mainly driven by the aforementioned $6.3 million FDIC special assessment recognized in the fourth quarter of 2023. The efficiency ratio was 52.46%, compared to 54.98%. On a non-GAAP basis, excluding the FDIC special assessment, the adjusted efficiency ratio(1) was 52.05% and 52.24%, respectively. |
|
|
Balance Sheet |
Total loans – grew by $130.7 million, primarily attributed to growth in the commercial and construction loan portfolios in the Puerto Rico and Florida regions. Total loan originations, other than credit card utilization activity, of $1.1 billion, down $214.9 million. Core deposits (other than brokered and government deposits) – $12.6 billion, decreased by $25.8 million, reflecting a decline of $28.3 million in the Florida region, partially offset by increases of $1.3 million in the Virgin Islands region and $1.2 million in the Puerto Rico region. This decrease is net of a $93.9 million increase in time deposits. Government deposits (fully collateralized) – increased by $73.0 million and totaled $3.2 billion. Variance reflects growth of $56.8 million in the Puerto Rico region, $14.2 million in the Virgin Islands region, and $2.0 million in the Florida region. |
|
|
Asset Quality |
Allowance for credit losses (“ACL”) coverage ratio – 2.14%, compared to 2.15%. Annualized net charge-offs to average loans ratio decreased to 0.37% (31 basis points decrease due to aforementioned bulk sale), compared to 0.69%. Non-performing assets – Increased by $3.7 million to $129.6 million, mainly driven by inflow of a $10.5 million commercial and industrial loan in the Florida region, partially offset by lower other real estate owned (“OREO”). |
|
|
Liquidity and Capital |
Liquidity – Cash and cash equivalents increased to $684.5 million, compared to $663.2 million. When adding $2.0 billion of free high-quality liquid securities that could be liquidated or pledged within one day, total core liquidity amounted to $2.7 billion, or 14.45% of total assets, compared to 14.93%. Including the $972.5 million in available lending capacity at the Federal Home Loan Bank (“FHLB”), available liquidity amounted to 19.60% of total assets, compared to 19.82%. Capital – Repurchased $50.0 million of common stock and paid $26.6 million in common stock dividends. Capital ratios exceeded required regulatory levels. The Corporation’s estimated total capital, common equity tier 1 (“CET1”) capital, tier 1 capital, and leverage ratios were 18.36%, 15.90%, 15.90%, and 10.65%, respectively, as of March 31, 2024. On a non-GAAP basis, the tangible common equity ratio(1) amounted to 7.59% compared to 7.67%. |
NON-GAAP DISCLOSURES
This press release contains GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are used when management believes that the presentation of these non-GAAP financial measures enhances the ability of analysts and investors to analyze trends in the Corporation’s business and understand the performance of the Corporation. The Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process. Where non-GAAP financial measures are used, the most comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure, can be found in the text or in the tables in or attached to this press release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.
Certain non-GAAP financial measures, such as adjusted net income and adjusted earnings per diluted share, adjusted pre-tax, pre-provision income, adjusted non-interest expenses, and adjusted efficiency ratio exclude the effect of items that management believes are not reflective of core operating performance (the “Special Items”). Other non-GAAP financial measures include adjusted net interest income and adjusted net interest income margin, tangible common equity, tangible book value per common share, and certain capital ratios. These measures should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release, and the Corporation’s other financial information that is presented in accordance with GAAP.
Special Items
The financial results for the first quarter of 2024 and fourth quarter of 2023 included the following Special Item:
FDIC Special Assessment Expense
On November 16, 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the Deposit Insurance Fund associated with protecting uninsured deposits following certain financial institution failures during the first half of 2023. Under the final rule, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points to be applied to the special assessment base during an eight-quarter collection period. The base for the special assessment is equal to the estimated uninsured deposits reported for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion of such amount. As such, during the fourth quarter of 2023, the Corporation recorded a charge of $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate of 37.5%).
Under the final rule, the FDIC retains the ability to cease collection early, extend the special assessment collection period, or impose an additional shortfall special assessment on a one-time basis after the receiverships of the two failed institutions are terminated. During the first quarter of 2024, the FDIC informed that the estimated loss attributable to the protection of uninsured depositors of the financial institution failures increased, when compared with the estimate described in the final rule. As such, the Corporation recorded a $0.9 million ($0.6 million after-tax, calculated based on the statutory tax rate of 37.5%) additional expense to increase the estimated FDIC special assessment to $7.3 million.
The FDIC special assessment is reflected in the condensed consolidated statements of income as part of “FDIC deposit insurance” expenses.
Non-GAAP Financial Measures
Adjusted Pre-Tax, Pre-Provision Income
Adjusted pre-tax, pre-provision income is a non-GAAP performance metric that management uses and believes that investors may find useful in analyzing underlying performance trends, particularly in times of economic stress, including as a result of natural catastrophes or health epidemics. Adjusted pre-tax, pre-provision income, as defined by management, represents income before income taxes adjusted to exclude the provisions for credit losses on loans, unfunded loan commitments and debt securities and any gains or losses on sales of investment securities. In addition, from time to time, earnings are also adjusted for certain items that management believes are not reflective of core operating performance, which are regarded as Special Items.
Tangible Common Equity Ratio and Tangible Book Value per Common Share
The tangible common equity ratio and tangible book value per common share are non-GAAP financial measures that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other intangible assets. Tangible assets are total assets less goodwill and other intangible assets. Tangible common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible assets divided by common shares outstanding. Refer to the Tangible Common Equity section for a reconciliation of the Corporation’s tangible common equity and tangible assets to the most comparable GAAP items. Management uses and believes that many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with other more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of accounting for mergers and acquisitions. Accordingly, the Corporation believes that disclosure of these financial measures may be useful to investors. Neither tangible common equity nor tangible assets, or the related measures, should be considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets, and any other related measures may differ from that of other companies reporting measures with similar names.
Net Interest Income Excluding Valuations, and on a Tax-Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation’s net interest income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Refer to Exhibit A hereto for a reconciliation of the Corporation’s net interest income to adjusted net interest income excluding valuations, and on a tax-equivalent basis. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that management believes facilitates comparison of results to the results of peers.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)
Net income was $73.5 million for the first quarter of 2024, or $0.44 per diluted share, compared to $79.5 million, or $0.46 per diluted share, for the fourth quarter of 2023. The following table reconciles, for the first quarter of 2024 and fourth quarter of 2023, net income to adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures that exclude the significant Special Item identified above, and shows, for the first quarter of 2023, net income and earnings per diluted share.
|
|
Quarter Ended |
||||||||||
|
|
March 31, 2024 |
|
December 31, 2023 |
|
March 31, 2023 |
||||||
|
(In thousands, except per share information) |
|
|
|
|
|
||||||
|
Net income, as reported (GAAP) |
$ |
73,458 |
|
|
$ |
79,489 |
|
|
$ |
70,698 |
|
|
Adjustments: |
|
|
|
|
|
||||||
|
FDIC special assessment expense |
|
947 |
|
|
|
6,311 |
|
|
|
– |
|
|
Income tax impact of adjustments (1) |
|
(355 |
) |
|
|
(2,367 |
) |
|
|
– |
|
|
Adjusted net income attributable to common stockholders (non-GAAP) |
$ |
74,050 |
|
|
$ |
83,433 |
|
|
$ |
70,698 |
|
|
Weighted-average diluted shares outstanding |
|
167,798 |
|
|
|
171,351 |
|
|
|
181,236 |
|
|
Earnings Per Share – diluted (GAAP) |
$ |
0.44 |
|
|
$ |
0.46 |
|
|
$ |
0.39 |
|
|
Adjusted Earnings Per Share – diluted (non-GAAP) |
$ |
0.44 |
|
|
$ |
0.49 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
||||||
|
(1) See Non-GAAP Disclosures – Special Items – FDIC Special Assessment Expense above for discussion of the individual tax impact related to the above adjustments. |
|||||||||||
INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $97.4 million for the first quarter of 2024, compared to $84.9 million for the fourth quarter of 2023. Adjusted pre-tax, pre-provision income was $110.5 million for the first quarter of 2024, compared to $110.0 million for the fourth quarter of 2023. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:
|
|
Quarter Ended |
||||||||||||||||||
|
|
March 31, 2024 |
|
December 31, 2023 |
|
September 30, 2023 |
|
June 30, 2023 |
|
March 31, 2023 |
||||||||||
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
||||||||||
|
Income before income taxes |
$ |
97,413 |
|
|
$ |
84,874 |
|
|
$ |
108,990 |
|
|
$ |
100,939 |
|
|
$ |
102,633 |
|
|
Add: Provision for credit losses expense |
|
12,167 |
|
|
|
18,812 |
|
|
|
4,396 |
|
|
|
22,230 |
|
|
|
15,502 |
|
|
Add: FDIC special assessment expense |
|
947 |
|
|
|
6,311 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Less: Gain recognized from legal settlement |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(3,600 |
) |
|
|
– |
|
|
Less: Gain on early extinguishment of debt |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(1,605 |
) |
|
|
– |
|
|
Adjusted pre-tax, pre-provision income (1) |
$ |
110,527 |
|
|
$ |
109,997 |
|
|
$ |
113,386 |
|
|
$ |
117,964 |
|
|
$ |
118,135 |
|
|
Change from most recent prior period (amount) |
$ |
530 |
|
|
$ |
(3,389 |
) |
|
$ |
(4,578 |
) |
|
$ |
(171 |
) |
|
$ |
(4,107 |
) |
|
Change from most recent prior period (percentage) |
|
0.5 |
% |
|
|
-3.0 |
% |
|
|
-3.9 |
% |
|
|
-0.1 |
% |
|
|
-3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(1) Non-GAAP financial measure. See Non-GAAP Disclosures above for the definition and additional information about this non-GAAP financial measure. |
|||||||||||||||||||
NET INTEREST INCOME
The following table sets forth information concerning net interest income for the last five quarters:
|
|
Quarter Ended |
||||||||||||||||||
|
(Dollars in thousands) |
March 31, 2024 |
|
December 31, 2023 |
|
September 30, 2023 |
|
June 30, 2023 |
|
March 31, 2023 |
||||||||||
|
Net Interest Income |
|
|
|
|
|
|
|
|
|
||||||||||
|
Interest income |
$ |
268,505 |
|
|
$ |
265,481 |
|
|
$ |
263,405 |
|
|
$ |
252,204 |
|
|
$ |
242,396 |
|
|
Interest expense |
|
71,985 |
|
|
|
68,799 |
|
|
|
63,677 |
|
|
|
52,389 |
|
|
|
41,511 |
|
|
Net interest income |
$ |
196,520 |
|
|
$ |
196,682 |
|
|
$ |
199,728 |
|
|
$ |
199,815 |
|
|
$ |
200,885 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Average Balances |
|
|
|
|
|
|
|
|
|
||||||||||
|
Loans and leases |
$ |
12,207,840 |
|
|
$ |
12,004,881 |
|
|
$ |
11,783,456 |
|
|
$ |
11,591,516 |
|
|
$ |
11,519,399 |
|
|
Total securities, other short-term investments and interest-bearing cash balances |
|
6,720,395 |
|
|
|
6,835,407 |
|
|
|
7,325,226 |
|
|
|
7,333,989 |
|
|
|
7,232,347 |
|
|
Average interest-earning assets |
$ |
18,928,235 |
|
|
$ |
18,840,288 |
|
|
$ |
19,108,682 |
|
|
$ |
18,925,505 |
|
|
$ |
18,751,746 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Average interest-bearing liabilities |
$ |
11,838,159 |
|
|
$ |
11,665,459 |
|
|
$ |
11,671,938 |
|
|
$ |
11,176,385 |
|
|
$ |
10,957,892 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Average Yield/Rate |
|
|
|
|
|
|
|
|
|
||||||||||
|
Average yield on interest-earning assets – GAAP |
|
5.69 |
% |
|
|
5.59 |
% |
|
|
5.47 |
% |
|
|
5.35 |
% |
|
|
5.24 |
% |
|
Average rate on interest-bearing liabilities – GAAP |
|
2.44 |
% |
|
|
2.34 |
% |
|
|
2.16 |
% |
|
|
1.88 |
% |
|
|
1.54 |
% |
|
Net interest spread – GAAP |
|
3.25 |
% |
|
|
3.25 |
% |
|
|
3.31 |
% |
|
|
3.47 |
% |
|
|
3.70 |
% |
|
Net interest margin – GAAP |
|
4.16 |
% |
|
|
4.14 |
% |
|
|
4.15 |
% |
|
|
4.23 |
% |
|
|
4.34 |
% |
Net interest income amounted to $196.5 million for the first quarter of 2024, a decrease of $0.2 million, compared to $196.7 million for the fourth quarter of 2023, which includes a net reduction of approximately $1.1 million associated with the effect of one less day in the first quarter of 2024. The decrease in net interest income reflects the following:
|
||
|
– |
A $2.2 million increase in interest expense on brokered CDs, primarily related to a $177.7 million increase in the average balance of this portfolio. |
|
|
|
|
|
|
– |
A $2.1 million increase in interest expense on time deposits, excluding brokered CDs, mainly due to approximately $1.6 million associated with higher rates paid in the first quarter of 2024 on new issuances and renewals, and $0.8 million of additional interest expense associated with a $99.5 million increase in the average balance, partially offset by $0.3 million associated with the effect of one less day in the first quarter of 2024. The average cost of non-brokered time deposits in the first quarter of 2024 increased 22 basis points to 3.39% when compared to the previous quarter. |
|
|
|
|
|
|
Partially offset by: |
||
|
|
|
|
|
– |
A $1.0 million decrease in interest expense on interest-bearing checking and saving accounts, of which approximately $0.4 million was driven by a decrease in average rates paid in the first quarter of 2024, primarily on public sector deposits; $0.3 million was due to a $100.9 million decrease in the average balance; and $0.3 million was associated with the effect of one less day in the first quarter of 2024. The average cost of interest-bearing checking and saving accounts, excluding public sector deposits, remained stable at 0.75% in the first quarter of 2024, when compared to the previous quarter. |
|
|
|
|
|
|
||
| Partially offset by: | ||
|
|
|
|
|
||
|
– |
A $2.5 million increase in interest income on commercial and construction loans, due to a $3.6 million increase in interest income associated with a $156.9 million increase in the average balance of this portfolio, which includes the full effect of the $150.0 million commercial and industrial participated loan funded late in the fourth quarter of 2023 in connection with the financial closing of a public-private partnership (P3) for improvement of infrastructure for toll roads, and higher market interest rates. This variance was partially offset by $1.1 million associated with the effect of one less day in the first quarter of 2024. |
|
|
|
|
|
|
– |
A $0.9 million increase in interest income on consumer loans and finance leases, due to a $1.6 million increase in interest income related to an increase of $48.2 million in the average balance of this portfolio, mainly in the auto loans and finance leases portfolios, and higher yields, partially offset by $0.7 million associated with the effect of one less day in the first quarter of 2024. |
|
|
|
|
|
|
Partially offset by: |
||
|
|
|
|
|
– |
A $0.2 million decrease in interest income on residential mortgage loans, mainly driven by higher collections on nonaccrual loans during the fourth quarter of 2023, including $0.5 million recognized on the payoff of a nonaccrual loan in the Puerto Rico region. |
|
|
|
|
|
|
||
Net interest margin for the first quarter of 2024 was 4.16%, a 2 basis points increase when compared to the fourth quarter of 2023, mostly reflecting a change in asset mix from lower-yielding interest-earning assets to higher-yielding interest-earning assets, partially offset by an increase in the cost of interest-bearing deposits.
NON-INTEREST INCOME
The following table sets forth information concerning non-interest income for the last five quarters:
|
|
Quarter Ended |
||||||||||||||||||
|
|
March 31, 2024 |
|
December 31, 2023 |
|
September 30, 2023 |
|
June 30, 2023 |
|
March 31, 2023 |
||||||||||
|
(In thousands) |
|
|
|
|
|
|
|
|
|
||||||||||
|
Service charges and fees on deposit accounts |
$ |
9,662 |
|
$ |
9,662 |
|
$ |
9,552 |
|
$ |
9,287 |
|
$ |
9,541 |
|||||
|
Mortgage banking activities |
|
2,882 |
|
|
|
2,094 |
|
|
|
2,821 |
|
|
|
2,860 |
|
|
|
2,812 |
|
|
Gain on early extinguishment of debt |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,605 |
|
|
|
– |
|
|
Insurance commission income |
|
5,507 |
|
|
|
2,379 |
|
|
|
2,790 |
|
|
|
2,747 |
|
|
|
4,847 |
|
|
Card and processing income |
|
11,312 |
|
|
|
11,015 |
|
|
|
10,841 |
|
|
|
11,135 |
|
|
|
10,918 |
|
|
Other non-interest income |
|
4,620 |
|
|
|
8,459 |
|
|
|
4,292 |
|
|
|
8,637 |
|
|
|
4,400 |
|
|
Non-interest income |
$ |
33,983 |
|
|
$ |
33,609 |
|
|
$ |
30,296 |
|
|
$ |
36,271 |
|
|
$ |
32,518 |
|
Contacts
First BanCorp.
Ramon Rodriguez
Senior Vice President
Corporate Strategy and Investor Relations
[email protected]
(787) 729-8200 Ext. 82179
