Market Overview

First BanCorp. Announces Earnings for the Quarter Ended June 30, 2018

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2018 Second Quarter Highlights and Comparison with First Quarter

  • Net income of $31.0 million, or $0.14 per diluted share, compared to
    $33.1 million, or $0.15 per diluted share, for the first quarter of
    2018.
  • On a non-GAAP basis, adjusted net income of $30.2 million (which
    excludes the effect of events that are discussed in the Special Items
    section below and consist 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), compared to adjusted net income of $31.3 million for the
    first quarter of 2018.
  • Net interest income increased by $5.8 million to $130.5 million,
    compared to $124.7 million for the first quarter of 2018, primarily
    due to the upward repricing of variable rate commercial loans, an
    increase in cash interest received from non-performing commercial
    loans, liquidity invested in higher-yielding investment securities,
    and an improved funding mix.
  • Net interest margin was 4.49% compared to 4.40% for the first quarter
    of 2018.
  • Provision for loan and lease losses decreased by $1.0 million to $19.5
    million, compared to $20.5 million for the first quarter of 2018. The
    decrease was primarily due to the effect in the previous quarter of a
    $5.6 million charge to the provision associated with three commercial
    and construction loans transferred to held for sale and upgrades in
    the credit risk-rating of certain commercial loans in the second
    quarter, partially offset by higher provisions on consumer and
    residential mortgage loans. The effect in the provision related to
    downgrades in the credit-risk classification of certain large
    commercial loans in the second quarter was similar to the effect
    recorded for credit-risk downgrades in the first quarter of 2018.
  • On a non-GAAP basis, the adjusted provision for loan and lease losses
    amounted to $21.6 million (which excludes the effect of a $2.1 million
    net loan loss reserve release associated with the hurricane-related
    loss estimate), compared to an adjusted provision of $21.3 million for
    the first quarter of 2018 (which excludes the effect of a $6.4 million
    net loan loss reserve release associated with the hurricane-related
    loss estimate and the $5.6 million charge related to loans transferred
    to held for sale). The variance consists of increases of $5.1 million
    and $3.3 million in the adjusted provision for consumer and
    residential mortgage loans, respectively, partially offset by an $8.1
    million decrease in the adjusted provision for commercial and
    construction loans.
  • Non-interest income decreased by $2.3 million to $20.5 million
    compared to $22.8 million for the first quarter of 2018. The decrease
    was primarily due to the effect in the previous quarter of a $2.3
    million gain on the repurchase and cancellation of $23.8 million in
    trust preferred securities ("TRUPs") and a $1.6 million decrease in
    insurance commissions income associated with seasonal contingent
    commissions received in the previous quarter. These variances were
    partially offset by a $0.7 million increase in revenues from mortgage
    banking activities, and an increase of $0.5 million in fee income from
    merchant-related transactions and credit and debit cards interchange
    fees.
  • Non-interest expenses increased by $4.2 million to $90.2 million,
    compared to $86.0 million for the first quarter of 2018. The increase
    was primarily due to a $5.5 million increase in losses on other real
    estate owned ("OREO") operations associated with higher write-downs on
    commercial properties and a $1.4 million increase in business
    promotion expenses, partially offset by a $1.1 million decrease in
    employees' compensation and benefits expense driven by the normal
    seasonal decline in payroll taxes and bonus expenses, and a $0.9
    million decrease in hurricane-related expenses. Non-interest expenses
    for the second quarter of 2018 included $0.7 million of
    hurricane-related expenses, compared to $1.6 million for the first
    quarter of 2018.
  • Income tax expense of $10.2 million, compared to $7.8 million for the
    first quarter of 2018, a variance mainly related to a $1.8 million
    excess tax benefit recognized during the first quarter of 2018 upon
    the vesting of shares granted under the Corporation's stock-based
    compensation plan.
  • Credit quality variances:
    • Non-performing assets decreased in the quarter by $15.9 million,
      to $621.3 million as of June 30, 2018, primarily due to the split
      loan restructuring of a $34 million commercial mortgage loan and
      the sale of a $10.4 million non-performing commercial mortgage
      loan transferred to held for sale in the previous quarter.
    • Non-performing loan inflows amounted to $105.2 million, compared
      to inflows of $49.8 million in the first quarter of 2018. The
      increase was driven by the inflow of two large commercial mortgage
      loans totaling $69.8 million tied to a legacy commercial loan
      relationship that operates in both the Florida and Puerto Rico
      regions. Non-performing loan inflows were more than offset by
      $51.3 million in loans restored to accrual status, including the
      aforementioned $34 million split loan restructuring as well as
      residential and consumer loans brought current, collections and
      charge-offs totaling $38.7 million, the $10.4 million commercial
      mortgage loan sold in the second quarter, and approximately $8.0
      million of non-performing loans transferred to the OREO portfolio.
    • The OREO portfolio balance decreased by $11.3 million driven by
      write-downs and the sale of a $3.4 million commercial property.
    • Annualized net charge-off rate for the second quarter of 1.07%,
      compared to 1.21% for the first quarter of 2018, a decrease driven
      by the effect in the previous quarter of charge-offs totaling $9.7
      million taken on loans transferred to held for sale.
  • Total deposits, excluding brokered CDs and government deposits,
    increased in the quarter by $180.5 million to $7.6 billion as of June
    30, 2018, reflecting increases of $151.1 million and $49.3 million in
    Puerto Rico and the Virgin Island regions, respectively, partially
    offset by a decrease of $20.0 million in the Florida region. The most
    significant increase was in noninterest-bearing demand deposits, which
    grew 15%, or $297.3 million, in the second quarter. Hurricane-related
    factors, such as the effect of disaster relief funds, and settlements
    of insurance claims continue to contribute to this growth.
  • Brokered CDs decreased in the quarter by $133.4 million to $822.7
    million as of June 30, 2018.
  • Government deposits increased in the quarter by $104.6 million to
    $800.2 million as of June 30, 2018, primarily due to an increase in
    the balance of transactional deposit accounts of certain
    municipalities in Puerto Rico.
  • Total loans decreased in the quarter by $66.2 million to $8.7 billion
    as of June 30, 2018. The decrease includes the effect of $20.2 million
    in loans sold during the second quarter, including the sale of the
    aforementioned $10.4 million non-performing commercial mortgage loan
    and $9.8 million of seasoned residential mortgage loans sold in the
    secondary market. Total loans in Puerto Rico and the Virgin Island
    regions decreased by $42.5 million and $23.7 million, respectively.
    The decrease in the Puerto Rico region reflects declines of $71.9
    million in commercial and construction loans and $12.4 million in
    residential mortgage loans, partially offset by a $41.8 million
    increase in consumer loans.
  • Total loan originations, including refinancings, renewals and draws
    from existing commitments (excluding credit card utilization
    activity), amounted to $726.8 million for the second quarter of 2018,
    compared to $606.3 million for the first quarter of 2018. The increase
    was reflected in all major loan categories, including increases of
    $60.4 million, $40.5 million, and $19.6 million in consumer,
    commercial and construction, and residential mortgage loan
    originations, respectively.
  • As of June 30, 2018, the Corporation had $213.2 million of direct
    exposure to loans and obligations of the Commonwealth of Puerto Rico
    government and instrumentalities, of which $183.5 million, or 86%,
    represented exposure to municipalities, which is supported by assigned
    property tax revenues, compared to total exposure of $213.4 million as
    of March 31, 2018, of which $183.5 million, or 86%, represented
    exposure to municipalities.
  • Total capital, common equity Tier 1 capital, Tier 1 capital, and
    leverage ratios of 23.48%, 19.74%, 20.16%, and 14.35%, respectively,
    as of June 30, 2018. Tangible common equity ratio of 14.78% as of June
    30, 2018.

First BanCorp. (the "Corporation") (NYSE:FBP), the bank holding company
for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported
net income of $31.0 million for the second quarter of 2018, or $0.14 per
diluted share, compared to $33.1 million, or $0.15 per diluted share,
for the first quarter of 2018 and $28.0 million, or $0.13 per diluted
share, for the second quarter of 2017.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp.,
commented: "With continued momentum from the beginning of the year, we
achieved another solid quarter of profitability posting $31.0 million of
net income, or $0.14 per share, and pre-tax, pre-provision income of
$61.4 million.

Puerto Rico is recovering at a steady pace and our franchise continues
to deliver strong core results. Net interest income and margin improved
nicely driven by higher loan yields and a more favorable funding mix,
loan originations increased approximately 20% vs prior quarter
approaching pre-hurricane levels while economic activity is contributing
to a stronger pipeline for the remainder of 2018. Credit quality
continues to move in the right direction as delinquency trends and
non-performing asset levels show improvement. Core deposit growth was
strong again this quarter, the most significant growth was non-interest
bearing demand deposits which increased 15%, or $297 million. Our
earnings continue to drive growth in our capital base; tangible book
value per share was $8.40 at the end of the quarter.

After several years of economic contraction, we are seeing evidence of
recovery in our main market demonstrated by improving trend of several
key indicators such as employment, cement sales, retail sales, tax
collections and auto sales resulting in overall strengthening of
consumer confidence. We will continue to look for growth opportunities
as rebuilding efforts strengthen in our main market."

SPECIAL ITEMS

The financial results for the second and first quarters of 2018 and the
second quarter of 2017 include the following 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"):

Quarter ended June 30, 2018

  • A $1.4 million ($0.9 million after-tax) positive effect in earnings
    related to a $2.1 million net loan loss reserve release in connection
    with revised estimates of the reserves associated with the effects of
    Hurricanes Irma and Maria, primarily related to commercial loans,
    partially offset by $0.7 million of hurricane-related expenses
    recorded in the second quarter.

Quarter ended March 31, 2018

  • A $4.8 million ($2.9 million after-tax) positive effect in earnings
    related to a $6.4 million net loan loss reserve release in connection
    with revised estimates of the reserves associated with the effects of
    Hurricanes Irma and Maria, partially offset by $1.6 million of
    hurricane-related expenses recorded in the first quarter.
  • A $5.6 million ($3.4 million after-tax) charge to the provision for
    loan and lease losses associated with three non-performing commercial
    and construction loans totaling $57.2 million that were transferred to
    held for sale during the first quarter.
  • A $2.3 million gain on the repurchase and cancellation of $23.8
    million in trust preferred securities reflected in the statement of
    income set forth below as "Gain on early extinguishment of debt." The
    Corporation repurchased and cancelled the repurchased trust preferred
    securities, resulting in a commensurate reduction in the related
    Floating Rate Junior Subordinated Debenture. The Corporation's
    purchase price equated to 90% of the $23.8 million par value. The 10%
    discount resulted in the gain of $2.3 million. The gain, realized at
    the holding company level, has no effect on the income tax expense in
    2018.

Quarter ended June 30, 2017

  • A $0.4 million recovery of previously recognized other-than-temporary
    impairment ("OTTI") charges on non-performing bonds of the Government
    Development Bank for Puerto Rico (the "GDB") and the Puerto Rico
    Public Buildings Authority sold in the second quarter of 2017,
    reflected in the statement of income set forth below as part of "Net
    gain (loss) on investments and impairments." No tax expense was
    recognized for the recovery on the sale of bonds in 2017.

The following table reconciles for the second and first quarters of 2018
and the second quarter of 2017 the reported net income to adjusted net
income, a non-GAAP financial measure that excludes the Special Items
identified above:

     
Quarter Ended Quarter Ended Quarter Ended
(In thousands) June 30, 2018 March 31, 2018 June 30, 2017
 
Net income, as reported (GAAP) $ 31,032 $ 33,148 $ 27,998
Adjustments:
Hurricane-related loan loss reserve release (2,057 ) (6,407 ) -
Hurricane-related expenses 654 1,596 -
Charge to the provision related to loans transferred to held for sale - 5,645 -
Gain from recovery of investments previously written-off - - (371 )
Gain on repurchase and cancellation of trust preferred securities - (2,316 ) -
Income tax impact of adjustments (1)   547     (324 )   -  
Adjusted net income (Non-GAAP) $ 30,176   $ 31,342   $ 27,627  
 
(1) See Basis of Presentation for the individual tax impact
for each reconciling item.

This press release includes certain non-GAAP financial measures,
including adjusted net income, adjusted provision for loan and lease
losses, adjusted net charge-offs, adjusted non-interest income, adjusted
non-interest expenses, adjusted pre-tax, pre-provision income, adjusted
net interest income and margin, certain capital ratios, and certain
other financial measures that exclude the effect of items that
management identifies as Special Items because they are not reflective
of core operating performance, are not expected to reoccur with any
regularity or may reoccur at uncertain times and in uncertain amounts,
and should be read in conjunction with the discussion below in Basis
of Presentation – Use of Non-GAAP Financial Measures
and the
accompanying tables (Exhibit A), which are an integral part of this
press release.

INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX,
PRE-PROVISION INCOME (NON-GAAP)

Income before income taxes for the second quarter of 2018 amounted to
$41.2 million, compared to $40.9 million for the first quarter of 2018.
The following table reconciles income before income taxes to adjusted
pre-tax, pre-provision income for the last five quarters. Adjusted
pre-tax, pre-provision income for the second quarter of 2018 amounted to
$61.4 million, up $0.7 million from the first quarter of 2018:

 

             
(Dollars in thousands) Quarter Ended
June 30, March 31, December 31, September 30, June 30,
  2018     2018     2017     2017     2017  
 
Income (loss) before income taxes $ 41,191 $ 40,906 $ 26,377 $ (19,150 ) $ 37,288
Add: Provision for loan and lease losses 19,536 20,544 25,703 75,013 18,096
(Less)/Add: Net (gain) loss on investments and impairments - - - - (371 )
Less: Gain on early extinguishment of debt - (2,316 ) - (1,391 ) -
Less: Hurricane-related idle time payroll and rental costs
expected insurance recoveries - - (157 ) (1,662 ) -
Add: Hurricane-related expenses 654 1,596 1,945 599 -
Add: Secondary offering costs   -     -     -     118     -  
Adjusted pre-tax, pre-provision income (1) $ 61,381   $ 60,730   $ 53,868   $ 53,527   $ 55,013  
 
Change from most recent prior quarter (amount) $ 651 $ 6,862 $ 341 $ (1,486 ) $ (403 )
Change from most recent prior quarter (percentage) 1.1 % 12.7 % 0.6 % -2.7 % -0.7 %
   
(1) See Basis of Presentation for additional information.

Adjusted pre-tax, pre-provision income is a non-GAAP financial measure
that management believes is useful to investors in analyzing the
Corporation's performance and trends. This metric is income (loss)
before income taxes adjusted to exclude the provision for loan and lease
losses and gains or losses on sales of investment securities and
impairments. In addition, from time to time, earnings are adjusted also
for additional items regarded as Special Items, such as the gain on the
repurchase and cancellation of trust preferred securities,
hurricane-related expenses and insurance recoveries, and secondary
offering costs reflected above, 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. (See Basis of Presentation - Adjusted Pre-Tax,
Pre-Provision Income
for additional information about this non-GAAP
financial measure).

NET INTEREST INCOME

Net interest income on a tax-equivalent basis is a non-GAAP financial
measure. See Basis of Presentation – Net Interest Income on a
Tax-Equivalent Basis
below for additional information.
The following table reconciles net interest income in accordance with
GAAP to net interest income on a tax-equivalent basis for the last five
quarters. The table also reconciles net interest spread and net
interest margin on a GAAP basis to these items on a tax-equivalent basis.

 

(Dollars in thousands)          
Quarter Ended
June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017
Net Interest Income
Interest income - GAAP $ 155,633 $ 149,418 $ 147,826 $ 147,995 $ 147,374
Tax-equivalent adjustment   5,163     4,778     3,507     3,789     4,782  
Interest income on a tax-equivalent basis $ 160,796 $ 154,196 $ 151,333 $ 151,784 $ 152,156
 
Interest expense - GAAP   25,162     24,725     25,560     25,163     23,470  
 
Net interest income - GAAP $ 130,471   $ 124,693     $ 122,266     $ 122,832     $ 123,904  
 
Net interest income on a tax-equivalent basis $ 135,634   $ 129,471   $ 125,773   $ 126,621   $ 128,686  
 
Average Balances
Loans and leases $ 8,693,347 $ 8,778,968 $ 8,806,036 $ 8,855,406 $ 8,863,529
Total securities, other short-term investments and interest-bearing
cash balances
  2,959,281     2,720,438     2,593,716     2,395,298     2,336,986  
Average interest-earning assets $ 11,652,628   $ 11,499,406   $ 11,399,752   $ 11,250,704   $ 11,200,515  
 
Average interest-bearing liabilities $ 8,054,865   $ 8,194,442   $ 8,411,399   $ 8,404,242   $ 8,327,615  
 
Average Yield/Rate
Average yield on interest-earning assets - GAAP 5.36 % 5.27 % 5.14 % 5.22 % 5.28 %
Average rate on interest-bearing liabilities - GAAP   1.25 %   1.22 %   1.21 %   1.19 %   1.13 %
Net interest spread - GAAP   4.11 %   4.05 %   3.93 %   4.03 %   4.15 %
Net interest margin - GAAP   4.49 %   4.40 %   4.26 %   4.33 %   4.44 %
 
Average yield on interest-earning assets on a tax-equivalent basis 5.53 % 5.44 % 5.27 % 5.35 % 5.45 %
Average rate on interest-bearing liabilities   1.25 %   1.22 %   1.21 %   1.19 %   1.13 %
Net interest spread on a tax-equivalent basis   4.28 %   4.22 %   4.06 %   4.16 %   4.32 %
Net interest margin on a tax-equivalent basis   4.67 %   4.57 %   4.38 %   4.47 %   4.61 %

Net interest income for the second quarter of 2018 amounted to $130.5
million, an increase of $5.8 million when compared to net interest
income of $124.7 million for the first quarter of 2018. The increase in
net interest income was mainly due to:

  • A $3.3 million increase in interest income on commercial and
    construction loans, primarily due to the upward repricing of variable
    rate loans, a $1.2 million cash interest collection on a
    non-performing commercial loan in the second quarter, and the positive
    effect of one additional day in the second quarter that resulted in an
    increase of approximately $0.5 million in interest income on
    commercial and construction loans.
  • A $1.6 million increase in interest income on consumer loans,
    primarily due to a $0.7 million reduction in interest income reversals
    from non-performing loans, the positive effect of one additional day
    in the second quarter that resulted in an increase of approximately
    $0.6 million in interest income on consumer loans, and a $0.3 million
    increase related to a higher level of late charge collections,
    primarily on credit card loans.
  • A $1.1 million increase in interest income from interest-bearing cash
    balances due to both an increase of $114.7 million in the average
    balance of deposits maintained at the Federal Reserve Bank of New York
    and increases in the Federal Funds target rate. The growth in
    non-interest bearing deposits provided higher liquidity levels in the
    second quarter.
  • A $0.7 million increase in interest income on investment securities,
    primarily related to the effect of purchases of U.S. agency debt
    securities executed in the second quarter amounting to $302.9 million
    (average yield of 3.13%), partially offset by a $0.2 million increase
    in the premium amortization expense of U.S. agency mortgage-backed
    securities ("MBS") resulting from higher prepayment speeds.

Partially offset by:

  • A $0.5 million decrease in interest income on residential mortgage
    loans, primarily due to a decrease of $31.6 million in the average
    balance of this portfolio.
  • A $0.4 million increase in interest expense, primarily related to the
    upward repricing of variable rate repurchase agreements and junior
    subordinated debentures that resulted in an increase of approximately
    $0.6 million in interest expense and an increase of $0.3 million
    associated with one additional day in the second quarter. These
    variances were partially offset by an improved funding mix resulting
    from a reduction of $139.6 million in the average balance of total
    interest-bearing liabilities, commensurate with an increase of $266.6
    million in the average balance of non-interest-bearing deposits. The
    Corporation used portions of the increased liquidity to pay off
    maturing brokered CDs.

Net interest margin was 4.49%, up 9 basis points from the first quarter
of 2018. The increase in the net interest margin was related to various
factors including the upward repricing of variable rate commercial
loans, the one-time $1.2 million cash interest collection on a
non-performing commercial loan, the aforementioned improved funding mix
driven by the increase in the proportion of interest-earning assets
funded by the growth in non-interest-bearing deposits, and liquidity
invested in higher-yielding investment securities.

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses for the second quarter of 2018
was $19.5 million, compared to $20.5 million for the first quarter of
2018. As mentioned above, a net loan loss reserve release of
approximately $2.1 million was recorded in the second quarter of 2018 in
connection with revised estimates of the reserves associated with the
effects of Hurricanes Maria and Irma, compared to a $6.4 million net
loan loss reserve release recorded in the first quarter of 2018.
Relationship officers have closely monitored the performance of
hurricane-affected customers. Information provided by these officers and
statistics on the performance of consumer and residential credits were
factored into the determination of the allowance for loan and lease
losses as of June 30, 2018. The reserve release recorded in the second
quarter was attributable to several factors including updated
assessments about the performance and repayment prospects of certain
individually assessed commercial loans. As of June 30, 2018, the
hurricane-related qualitative allowance amounted to $42.2 million.

During the first quarter of 2018, the Corporation transferred to held
for sale three non-performing commercial and construction loans. The
aggregate recorded investment in these loans was written down to $57.2
million, which resulted in charge-offs of $9.7 million and an
incremental loss of $5.6 million reflected in the provision for loan and
lease losses for the first quarter of 2018.

On a non-GAAP basis (excluding the hurricane-related adjustments and
charges related to the loans transferred to held for sale), the adjusted
provision for loan and lease losses for the second quarter of 2018
increased by $0.3 million to $21.6 million, compared to the adjusted
provision of $21.3 million for the first quarter of 2018. The $0.3
million increase in the adjusted provision for loan and lease losses was
driven by the following factors:

  • A $5.1 million increase in the adjusted provision for consumer loans,
    mainly related to higher 90 days past due delinquency levels on credit
    card loans, higher charge-offs on personal loans, and the effect of
    refinements discussed below in the measurement of qualitative factors
    used in the determination of the general reserve of consumer loans.
  • A $3.3 million increase in the adjusted provision for residential
    mortgage loans, mainly related to the effect in the previous quarter
    of a higher amount of loans brought current after the expiration of
    the payment-deferral programs granted to customers affected by
    Hurricanes Maria and Irma, and higher charge-offs recorded in the
    second quarter.

Partially offset by:

  • An $8.1 million decrease in the adjusted provision for commercial and
    construction loans, primarily related to the upgrade in the
    credit-risk classification of certain commercial and industrial loans
    and the effect in the previous quarter of charges to increase the
    specific reserve of certain commercial loans. In addition, as further
    explained below, refinements to both the determination of the
    historical loss rates and the measurement of qualitative factors used
    in the estimation process of the general reserve of commercial loans
    resulted in a $1.6 million decrease in the provision for commercial
    and construction loans in the second quarter of 2018.

In the second quarter of 2018, the Corporation implemented enhancements
to the methodology behind the calculation of the allowance for loan and
lease losses, which include, among others, a revised procedure whereby
historical loss rates for each commercial loan regulatory-based credit
risk category (i.e. , pass, special mention, substandard and doubtful)
are now calculated using the historical charge-offs and portfolio
balances over their average loss emergence period (the "raw loss rate")
for each credit-risk classification instead of the previous aggregation
methodology whereby historical losses and portfolio balances of special
mention loans were allocated to pass or substandard categories based on
the historical proportion of the loans in the special mention risk
category that ultimately were cured or resulted in being uncollectible.
In addition, the Corporation implemented refinements to the measurement
of qualitative factors in the estimation process of the allowance for
loan losses related to commercial and consumer loans for each of the
regions where the Corporation operates.

Although the net effect of these refinements was immaterial to the total
provision expense, on a portfolio basis these enhancements resulted in a
$1.6 million decrease in the provision for commercial and construction
loans, offset by a $1.6 million increase in the provision for consumer
loans.

See Credit Quality – Allowance for Loan and Lease Losses and Basis
of Presentation
below for additional information regarding the
allowance for loan and lease losses, including variances in net
charge-offs, and the reconciliation of the provision for loan and lease
losses in accordance with GAAP to the adjusted provision for loan and
lease losses that excludes the hurricane-related adjustments and charges
to the provision for loan and lease losses related to loans transferred
to held for sale.

 

   

NON-INTEREST INCOME

    Quarter Ended
June 30,   March 31, December 31, September 30, June 30,
(In thousands)   2018   2018   2017   2017   2017
 
Service charges on deposit accounts $ 5,344 $ 5,088 $ 4,924 $ 5,797 $ 5,803
Mortgage banking activities 4,835 4,165 1,912 3,117 4,846
Net gain (loss) on investments and impairments - - - - 371
Gain on early extinguishment of debt - 2,316 - 1,391 -
Other operating income   10,293   11,215   8,114   8,340   9,529
Non-interest income $ 20,472 $ 22,784 $ 14,950 $ 18,645 $ 20,549

Non-interest income for the second quarter of 2018 amounted to $20.5
million, compared to $22.8 million for the first quarter of 2018.
Non-interest income for the first quarter of 2018 includes the $2.3
million gain on the repurchase and cancellation of $23.8 million in
trust preferred securities.

On a non-GAAP basis, excluding the effect of the repurchase and
cancellation of trust preferred securities, GAAP non-interest income of
$20.5 million for the second quarter remained flat compared to the
adjusted non-interest income of $20.5 million for the first quarter of
2018. Some of the most significant factors follow:

  • A $0.7 million increase in revenues from mortgage banking activities
    driven by a higher volume of sales in the secondary market. Total
    loans sold in the secondary market to U.S. government-sponsored
    entities amounted to $96.4 million with a related net gain of $2.7
    million, including gains of $0.2 million on To-Be-Announced MBS
    ("TBA") hedges, in the second quarter of 2018, compared to total loans
    sold in the secondary market of $74.5 million with a related net gain
    of $1.9 million, including TBA hedge gains of $0.6 million, in the
    first quarter of 2018. The total amount of loans sold in the secondary
    market in the second quarter included $9.8 million of seasoned
    residential mortgage loans sold to Fannie Mae that resulted in a $0.2
    million gain.
  • A $0.6 million positive variance related to the effect in the previous
    quarter of a lower of cost or market adjustment that reduced the
    carrying value of a construction loan held for sale, included as part
    of "Other operating income" in the table above.
  • A $0.5 million increase in transaction fee income from
    merchant-related transactions and credit and debit cards interchange
    fees, included as part of "Other operating income" in the table above.
  • A $0.3 million increase in service charges on deposit accounts,
    primarily related to an increase in the number of cash management
    transactions of commercial clients.

Offset by:

  • A $1.6 million decrease in income from insurance commissions,
    primarily reflecting the effect in the previous quarter of seasonal
    contingent commissions received by the insurance agency based on the
    prior year's production of insurance policies, included as part of
    "Other operating income" in the table above.
  • A $0.8 million adverse variance related to the effect in the previous
    quarter of a gain realized on the sale of fixed assets of a closed
    banking branch in Florida, included as part of "Other operating
    income" in the table above.

         

NON-INTEREST EXPENSES

  Quarter Ended
June 30, March 31, December 31, September 30, June 30,
(In thousands)   2018   2018   2017   2017   2017
 
Employees' compensation and benefits $ 39,555 $ 40,684 $ 37,655 $ 37,128 $ 38,409
Occupancy and equipment 13,746 15,105 15,067 13,745 13,759
Deposit insurance premium 2,443 2,649 3,054 3,179 3,721
Other insurance and supervisory fees 1,258 1,206 1,363 1,174 1,134
Taxes, other than income taxes 3,637 3,856 3,366 3,763 3,745
Professional fees:
Collections, appraisals and other credit related fees 1,650 1,599 2,341 2,295 2,452
Outsourcing technology services 5,127 5,123 5,088 5,403 5,398
Other professional fees 3,416 3,338 3,721 4,325 3,950
Credit and debit card processing expenses 3,766 3,537 3,078 3,737 3,566
Business promotion 4,016 2,576 2,768 3,244 3,192
Communications 1,582 1,482 1,374 1,603 1,628
Net loss on OREO operations 5,655 190 2,201 1,351 3,369
Other   4,365   4,682   4,060   4,667   4,746
Total $ 90,216 $ 86,027 $ 85,136 $ 85,614 $ 89,069

Non-interest expenses in the second quarter of 2018 amounted to $90.2
million, an increase of $4.2 million from $86.0 million in the first
quarter of 2018. Non-interest expenses for the second and first quarters
of 2018 include hurricane-related expenses totaling $0.7 million and
$1.6 million, respectively, substantially all included as part of
"Occupancy and equipment" in the above table.

On a non-GAAP basis, excluding the effect of the aforementioned
hurricane-related expenses, adjusted non-interest expenses of $89.6
million for the second quarter of 2018 increased $5.2 million, compared
to adjusted non-interest expenses of $84.4 million for the first quarter
of 2018. The $5.2 million increase in adjusted non-interest expenses was
primarily due to:

  • A $5.4 million increase in the adjusted net loss on OREO operations,
    primarily due to a $5.9 million adverse change in fair value
    adjustments on OREO properties.
  • A $1.4 million increase in adjusted business promotion expenses,
    including a $0.9 million increase related to the timing of
    advertising, public relations, and sponsorship activities and a $0.2
    million increase in costs of the credit card rewards program
    associated with a higher volume of purchases.
  • A $0.2 million increase in credit and debit card processing expenses.

Partially offset by:

  • A $1.1 million decrease in adjusted employees' compensation and
    benefits expenses driven by a $1.6 million seasonal decline in payroll
    taxes and bonus expenses, partially offset by headcount increase and
    certain severance payments.
  • A $0.4 million decrease in adjusted occupancy and equipment costs,
    primarily related to certain software-support costs renegotiated in
    the second quarter.
  • A $0.3 million decrease related to higher reserve releases for
    unfunded loan commitments, primarily related to the credit-risk rating
    upgrade of a commercial line of credit, included as part of "other
    non-interest expenses" in the table above.
  • A $0.2 million decrease in the Federal Deposit Insurance Corporation
    ("FDIC") insurance premium expense reflecting, among other things, the
    effect of reductions in brokered CDs, improved liquidity metrics tied
    to the growth in non-interest-bearing deposits, and an improvement in
    the risk profile of the Bank's balance sheet.

INCOME TAXES

The Corporation recorded an income tax expense of $10.1 million for the
second quarter of 2018 compared to $7.8 million for the first quarter of
2018. The increase was mainly related to a $1.8 million excess tax
benefit recognized during the first quarter of 2018 upon the vesting of
shares granted under the Corporation's stock-based compensation plan.
The effective tax rate, excluding entities with pre-tax losses from
which a tax benefit cannot be recognized, decreased to 25% compared to
the effective tax rate of 27% as of the end of the first quarter of
2018. As of June 30, 2018, the Corporation had a net deferred tax asset
of $283.3 million (net of a valuation allowance of $181.2 million,
including a valuation allowance of $144.6 million against the deferred
tax assets of the Corporation's banking subsidiary, FirstBank).

CREDIT QUALITY

         

 

Non-Performing Assets

 
 
(Dollars in thousands) June 30, March 31, December 31, September 30, June 30,
  2018     2018     2017     2017     2017  
Non-performing loans held for investment:
Residential mortgage $ 162,539 $ 171,380 $ 178,291 $ 178,530 $ 155,330
Commercial mortgage 142,614 115,179 156,493 137,059 122,035
Commercial and Industrial 76,887 85,325 85,839 84,317 65,575
Construction 14,148 16,236 52,113 46,720 47,391
Consumer and Finance leases   22,953     23,857     16,818     26,506     21,082  
Total non-performing loans held for investment   419,141     411,977     489,554     473,132     411,413  
 
OREO 143,355 154,639 147,940 152,977 150,045
Other repossessed property   4,271     5,646     4,802     6,320     5,588  
Total non-performing assets, excluding loans held for sale $ 566,767 $ 572,262 $ 642,296 $ 632,429 $ 567,046
 
Non-performing loans held for sale   54,546     64,945     8,290     8,290     8,079  
Total non-performing assets, including loans held for sale (1) $ 621,313   $ 637,207   $ 650,586   $ 640,719   $ 575,125  
 
Past-due loans 90 days and still accruing (2) $ 171,737 $ 163,045 $ 160,725 $ 140,656 $ 131,246
Non-performing loans held for investment to total loans held for
investment
4.85 % 4.74 % 5.53 % 5.33 % 4.64 %
Non-performing loans to total loans 5.43 % 5.43 % 5.60 % 5.41 % 4.71 %

Non-performing assets, excluding non-performing loans held for
sale, to total assets, excluding non-performing loans held for sale

4.60 % 4.72 % 5.24 % 5.20 % 4.76 %
Non-performing assets to total assets 5.02 % 5.22 % 5.31 % 5.26 % 4.83 %
     
(1)

Purchased credit impaired ("PCI") loans of $152.2 million
accounted for under ASC 310-30 as of June 30, 2018, primarily
mortgage loans acquired from Doral Bank in the first quarter of
2015 and from Doral Financial in the second quarter of 2014, are
excluded and not considered non-performing due to the application
of the accretion method, under which these loans will accrete
interest income over the remaining life of the loans using
estimated cash flow analysis.

 

(2)

Amount includes PCI loans with individual delinquencies over 90
days and still accruing with a carrying value as of June 30, 2018
of approximately $30.3 million, primarily related to the loans
acquired from Doral Bank in the first quarter of 2015 and from
Doral Financial in the second quarter of 2014.

 

Variances in credit quality metrics:

  • Total non-performing assets decreased by $15.9 million to $621.3
    million as of June 30, 2018, compared to $637.2 million as of March
    31, 2018. Total non-performing loans, including non-performing loans
    held for sale, decreased by $3.2 million from $476.9 million as of the
    end of the first quarter of 2018 to $473.7 million as of June 30, 2018.

The decrease in non-performing assets was mainly due to:

  • The split loan restructuring of a $34 million commercial mortgage loan
    in Puerto Rico. This loan relationship was restructured in the second
    quarter using the A/B note workout strategy in which note A, with an
    outstanding balance of $29.4 million as of June 30, 2018 (net of
    approximately $3.6 million of payments collected in the second
    quarter), was underwritten to comply with the Corporation's lending
    standards at current market rates. The A note was restored to accrual
    status at the time of the restructuring in the second quarter
    considering the borrower's sustained historical repayment performance
    before the restructuring that demonstrated its ability to make timely
    interest and principal payments under the restructured terms. The B
    note consists of amounts mostly charged-off in prior periods and is
    fully charged-off as of June 30, 2018.
  • The sale of a $10.4 million non-performing commercial mortgage loan
    held for sale. This loan was transferred to held for sale in the first
    quarter of 2018 and the sale resulted in a $0.1 million partial
    recovery of previously-recorded charge-offs.
  • An $11.2 million decrease in the OREO portfolio balance. The decrease
    was driven by sales of $12.7 million, including the sale of a $3.4
    million commercial property, and fair value adjustments and
    impairments to the OREO value of $8.9 million, partially offset by
    additions of $10.4 million.
  • An $8.8 million decrease in non-performing residential mortgage loans
    driven by loans brought current, charge-offs, and collections that, in
    the aggregate, offset the inflows in the second quarter.
  • An $8.4 million decrease in non-performing commercial and industrial
    loans driven by charge-offs and collections.
  • A $2.1 million decrease in non-performing construction loans driven by
    charge-offs and a $0.8 million land loan restored to accrual status
    during the second quarter.
  • A $1.4 million decrease in non-real estate repossessed properties,
    including autos and boats, driven by sales.
  • A $0.9 million decrease in non-performing consumer loans driven by
    charge-offs and collections.

Partially offset by:

  • The inflow of two large commercial mortgage loans totaling $69.8
    million related to one legacy commercial loan relationship, consisting
    of a $46.8 million loan in the Florida region and a $23.0 million loan
    in the Puerto Rico region.
  • Inflows to non-performing loans held for investment were $105.2
    million, an increase of $55.3 million, compared to inflows of $49.8
    million in the first quarter of 2018. The variance primarily reflects
    the effect of the aforementioned inflow of two large commercial
    mortgage loans totaling $69.8 million, partially offset by lower
    inflows of residential mortgage and consumer loans. Inflows to
    non-performing residential mortgage loans were $16.8 million in the
    second quarter of 2018, a decrease of $10.2 million, compared to
    inflows of $27.0 million in the first quarter of 2018. Inflows to
    non-performing consumer loans were $14.9 million, a decrease of $1.5
    million, compared to inflows of $16.3 million in the first quarter of
    2018.
  • Adversely classified commercial and construction loans, including
    loans held for sale, decreased by $16.9 million to $490.4 million as
    of June 30, 2018, driven by the upgrade in the credit risk
    classification of several commercial loans totaling $56.3 million,
    including the aforementioned $34 million loan restructured through a
    loan split, and the aforementioned sale of a $10.4 million
    non-performing commercial mortgage loan. These variances were
    partially offset by the downgrade in the credit risk classification of
    two commercial relationships in Puerto Rico totaling $63.5 million,
    including the aforementioned $23.0 million commercial mortgage loan
    classified as non-performing during the second quarter.
  • Total troubled debt restructuring ("TDR") loans held for investment
    were $557.2 million as of June 30, 2018, down $15.2 million from March
    31, 2018. Approximately $393.9 million of total TDR loans held for
    investment were in accrual status as of June 30, 2018.

Early Delinquency

Total loans in early delinquency (i.e., 30-89 days past due loans, as
defined in regulatory report instructions) amounted to $143.5 million as
of June 30, 2018, a decrease of $59.0 million compared to $202.5 million
as of March 31, 2018. The variances by major portfolio categories follow:

  • Commercial and construction loans in early delinquency decreased in
    the second quarter by $50.9 million to $15.5 million as of June 30,
    2018, primarily related to the aforementioned $46.8 million commercial
    mortgage loan classified as non-performing in the Florida region
    during the second quarter. When compared to pre-hurricane levels of
    $6.0 million as of June 30, 2017, commercial and construction loans in
    early delinquency increased by $9.5 million to $15.5 million as of
    June 30, 2018.
  • Consumer loans in early delinquency decreased in the second quarter by
    $6.9 million to $59.7 million as of June 30, 2018, and residential
    mortgage loans in early delinquency decreased in the second quarter by
    $1.2 million to $68.3 million as of June 30, 2018. When compared to
    pre-hurricane levels, consumer loans in early delinquency decreased by
    $23.2 million to $59.7 million from $82.9 million as of June 30, 2017,
    and residential mortgage loans in early delinquency decreased by $36.4
    million to $68.3 million from $104.7 million as of June 30, 2017.

 

Allowance For Loan and Lease Losses

 

The following table sets forth information concerning the
allowance for loan and lease losses during the periods indicated:

 
    Quarter Ended
(Dollars in thousands) June 30, March 31, December 31, September 30, June 30,
2018 2018 2017 2017 2017
 
Allowance for loan and lease losses, beginning of period $ 225,856 $ 231,843 $ 230,870 $ 173,485 $ 203,231
Provision for loan and lease losses 19,536 (1) 20,544 (2) (3) 25,703 (7) 75,013 (8) 18,096
Net (charge-offs) recoveries of loans:
Residential mortgage (4,855) (3,036) (5,341) (6,856) (6,076)
Commercial mortgage (3,859) (6,761) (4) (6,850) (223) (30,417)
Commercial and Industrial (3,734) (1,868) (545) (624) (1,754)
Construction (680) (5,164) (5) (2,764) (31) (462)
Consumer and finance leases (10,229) (9,702) (9,230) (9,894) (9,133)
Net charge-offs (23,357) (26,531) (6) (24,730) (17,628) (47,842)
Allowance for loan and lease losses, end of period $ 222,035 $ 225,856 $ 231,843 $ 230,870 $ 173,485
 
Allowance for loan and lease losses to period end total loans held
for investment (9)
2.57% 2.60% 2.62% 2.60% 1.96%
Net charge-offs (annualized) to average loans outstanding during the
period
1.07% 1.21% 1.12% 0.80% 2.16%

Net charge-offs (annualized), excluding charge-offs of $9.7
million related to loans transferred to held for sale in the first
quarter of 2018, to average loans outstanding during the period

1.07% 0.77% 1.12% 0.80% 2.16%
Provision for loan and lease losses to net charge-offs during the
period
0.84x 0.77x 1.04x 4.26x 0.38x

Provision for loan and lease losses to net charge-offs during the
period, excluding effect of the hurricane-related qualitative
reserve releases in the second and first quarters of 2018, loans
transferred to held for sale in the first quarter of 2018, and the
hurricane-related provision in the fourth and third quarters of
2017

0.92x 1.26x 0.96x 0.48x 0.38x
   
 
(1) Net of a $2.1 million net loan loss reserve release associated
with the effect of Hurricanes Irma and Maria.
(2) Net of a $6.4 million net loan loss reserve release associated
with the effect of Hurricanes Irma and Maria.
(3) Includes a provision of $5.6 million associated with $57.2
million in loans transferred to held for sale.
(4) Includes charge-offs totaling $4.6 million associated with $27.2
million in commercial mortgage loans transferred to held for sale.
(5) Includes a charge-off of $5.1 million associated with a $30.0
million construction loan transferred to held for sale.
(6) Includes charge-offs totaling $9.7 million associated with $57.2
million in loans transferred to held for sale.
(7) Includes a provision of $4.8 million associated with the effect
of Hurricanes Irma and Maria.
(8) Includes a provision of $66.5 million associated with the effect
of Hurricanes Irma and Maria.
(9) The ratio of allowance for loan and lease losses to total loans
held for investment, excluding the hurricane-related qualitative
allowance, was 2.08%, 2.06%, 1.99% and 1.85% as of June 30, 2018, as
of March 31, 2018, as of December 31, 2017, and as of September 30,
2017, respectively.
  • The ratio of the allowance for loan and lease losses to total loans
    held for investment was 2.57% as of June 30, 2018, compared to 2.60%
    as of March 31, 2018, primarily reflecting charge-offs taken against
    previously-established reserves. The ratio of the total allowance to
    non-performing loans held for investment was 52.97% as of June 30,
    2018, compared to 54.82% as of March 31, 2018.

The following table sets forth information concerning the composition of
the Corporation's allowance for loan and lease losses as of June 30,
2018 and March 31, 2018 by loan category and by whether the allowance
and related provisions were calculated individually for impairment
purposes or through a general valuation allowance:

(Dollars in thousands)  

Residential
Mortgage Loans

 

Commercial Loans
(including Commercial
Mortgage,
C&I, and

Construction)

 

Consumer and
Finance Leases

    Total
 
As of June 30, 2018
Impaired loans:
Principal balance of loans, net of charge-offs $ 409,085 $ 298,207 $ 32,842 $ 740,134
Allowance for loan and lease losses 19,804 23,857 5,853 49,514
Allowance for loan and lease losses to principal balance 4.84 % 8.00 % 17.82 % 6.69 %
 
PCI loans:
Carrying value of PCI loans 148,025 4,217 - 152,242
Allowance for PCI loans 10,954 400 - 11,354
Allowance for PCI loans to carrying value 7.40 % 9.49 % - 7.46 %
 
Loans with general allowance:
Principal balance of loans 2,680,891 3,324,616 1,742,408 7,747,915
Allowance for loan and lease losses 24,372 72,410 64,385 161,167
Allowance for loan and lease losses to principal balance 0.91 % 2.18 % 3.70 % 2.08 %
 
Total loans held for investment:
Principal balance of loans $ 3,238,001 $ 3,627,040 $ 1,775,250 $ 8,640,291
Allowance for loan and lease losses 55,130 96,667 70,238 222,035
Allowance for loan and lease losses to principal balance 1.70 % 2.67 % 3.96 % 2.57 %
 
As of March 31, 2018
 
Impaired loans:
Principal balance of loans, net of charge-offs $ 417,610 $ 293,971 $ 34,699 $ 746,280
Allowance for loan and lease losses 22,546 29,310 5,074 56,930
Allowance for loan and lease losses to principal balance 5.40 % 9.97 % 14.62 % 7.63 %
 
PCI loans:
Carrying value of PCI loans 151,067 4,214 - 155,281
Allowance for PCI loans 10,873 378 - 11,251
Allowance for PCI loans to carrying value 7.20 % 8.97 % - 7.25 %
 
Loans with general allowance:
Principal balance of loans 2,699,191 3,395,241 1,699,897 7,794,329
Allowance for loan and lease losses 22,967 72,486 62,222 157,675
Allowance for loan and lease losses to principal balance 0.85 % 2.13 % 3.66 % 2.02 %
 
Total loans held for investment:
Principal balance of loans $ 3,267,868 $ 3,693,426 $ 1,734,596 $ 8,695,890
Allowance for loan and lease losses 56,386 102,174 67,296 225,856
Allowance for loan and lease losses to principal balance 1.73 % 2.77 % 3.88 % 2.60 %

Net Charge-Offs

 

 

The following table presents annualized net charge-offs to average
loans held-in-portfolio:

    Quarter Ended
June 30,   March 31, December 31,   September 30,   June 30,
2018 2018 2017 2017 2017
 
Residential mortgage 0.61% 0.38% 0.66% 0.84% 0.74%
 
Commercial mortgage 0.98% 1.69% (1) 1.73% 0.06% 7.42%
 
Commercial and Industrial 0.73% 0.36% 0.10% 0.12% 0.34%
 
Construction 2.25% 17.37% (2) 7.86% 0.09% 1.19%
 
Consumer and finance leases 2.34% 2.22% 2.13% 2.29% 2.13%
 
Total loans 1.07% 1.21% (3) 1.12% 0.80% 2.16%
   

(1) Includes net charge-offs totaling $4.6 million associated with
$27.2 million in commercial mortgage loans transferred to held for
sale. The ratio of commercial mortgage net charge-offs to average
loans, excluding the charge-offs associated with commercial
mortgage loans transferred to held for sale, was 0.55%.

 

(2) Includes a charge-off of $5.1 million associated with a $30.0
million construction loan transferred to held for sale. The ratio
of construction net charge-offs to average loans, excluding the
charge-off associated with the construction loan transferred to
held for sale, was 0.22%.

 

(3) Includes net charge-offs totaling $9.7 million associated with
$57.2 million in loans transferred to held for sale. The ratio of
total loans net charge-offs to average loans, excluding the
charge-offs associated with loans transferred to held for sale,
was 0.77%.

 

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 for the second quarter of 2018 were $23.4 million, or an
annualized 1.07% of average loans, compared to $26.5 million, or an
annualized 1.21% of average loans, in the first quarter of 2018. On a
non-GAAP basis, excluding charge-offs of $9.7 million taken on loans
transferred to held for sale in the first quarter of 2018, net
charge-offs of $23.4 million for the second quarter of 2018 increased by
$6.5 million, compared to adjusted net charge-offs of $16.9 million for
the first quarter of 2018. The increase of $6.5 million in adjusted net
charge-offs was mainly related to:

  • A $4.2 million increase in adjusted commercial and construction loan
    net charge-offs, primarily related to a $3.5 million charge-off taken
    on a commercial and industrial loan in Puerto Rico.
  • A $1.8 million increase in residential mortgage loan net charge-offs,
    primarily related to a higher amount of charge-offs for loans
    evaluated for impairment purposes based on their respective
    delinquency status and loan-to-value ratio.
  • A $0.5 million increase in consumer loan net charge-offs, primarily
    related to small personal loans in Puerto Rico.

STATEMENT OF FINANCIAL CONDITION

Total assets were approximately $12.4 billion as of June 30, 2018, up
$184.5 million from March 31, 2018.

The increase was mainly due to:

  • A $220.4 million increase in investment securities driven by purchases
    in the second quarter of U.S. agency debt securities totaling $302.9
    million (average yield of 3.13%), including $225.5 million of U.S.
    agency MBS and $77.4 million of U.S. agency callable debt securities.
    This was partially offset by prepayments of $49.8 million of U.S.
    agency MBS, the maturity of a $20.0 million U.S. agency debt security
    during the second quarter, and a decrease of $7.4 million in the fair
    value of available-for-sale investment securities, primarily U.S.
    agency MBS due to changes in market interest rates.
  • A $44.6 million increase in cash and cash equivalents, largely driven
    by the growth in non-interest-bearing deposits during the second
    quarter, partially offset by liquidity used to pay off maturing
    brokered CDs and balances invested in higher-yielding investment
    securities.

Partially offset by:

  • A $66.2 million decrease in total loans. The decrease consisted of
    reductions of $42.5 million and $23.7 million in the Puerto Rico and
    the Virgin Island regions, respectively, partially offset by a $0.1
    million increase in the Florida region. The decrease was mainly
    related to a $76.8 million decline in the commercial and construction
    loan portfolio driven by significant payments received in the second
    quarter, including payments that reduced the outstanding balance of
    six commercial lines of credit in Puerto Rico by $32.1 million, five
    large commercial loans paid off during the second quarter totaling
    $63.1 million, and the aforementioned sale of a $10.4 million
    non-performing commercial mortgage loan in Puerto Rico. A decrease of
    $30.0 million in the residential mortgage loan portfolio was more than
    offset by a $40.7 million increase in consumer loans.

The decrease in total loans in the Puerto Rico region includes
reductions of $71.9 million in commercial and construction loans and
$12.4 million in residential mortgage loans, partially offset by a $41.8
million increase in consumer loans. The decrease in commercial and
construction loans was driven by significant repayments that reduced the
balance of certain commercial loans, including the aforementioned
payments that reduced the outstanding balance of six commercial lines of
credit by $32.1 million, a $16.0 million commercial and industrial loan
paid off during the second quarter, the sale of the $10.4 million
commercial mortgage non-performing loan, and charge-offs. The decrease
in residential mortgage loans in Puerto Rico reflects the effect of
collections, charge-offs and $9.0 million of foreclosures recorded in
the second quarter. Loans previously sold to the Government National
Mortgage Association ("GNMA") that meet GNMA's specified delinquency
criteria and are eligible for repurchase increased $5.5 million from
$73.3 million as of March 31, 2018 to $78.7 million as of June 30, 2018.
The Corporation has the right but not the obligation to repurchase such
loans, generally when the borrower fails to make any payment for three
consecutive months, and the accounting guidelines require the
Corporation to bring those loans back to its books and record a
corresponding liability. The increase in consumer loans was driven by
the higher volume of loan originations discussed below.

The reduction in total loans in the Virgin Islands primarily reflects
declines of $16.1 million in commercial and construction loans and $8.2
million in residential mortgage loans, partially offset by a $0.6
million increase in consumer loans. The decrease in commercial and
construction loans was driven by a $6.7 million commercial mortgage loan
paid off in the second quarter and a $5.0 million decrease in the
balance of a commercial line of credit of a U.S. Virgin Islands
government public corporation.

The increase in total loans in the Florida region consisted of an
increase of $11.2 million in commercial and construction loans, despite
the effect of three large commercial loans paid off during the second
quarter totaling $40.4 million, partially offset by reductions of $9.4
million and $1.7 million in residential mortgage and consumer loans,
respectively. The decrease in residential mortgage loans in Florida was
driven by the aforementioned sale of $9.8 million of seasoned
residential mortgage loans to Fannie Mae in the second quarter.

Total loan originations, including refinancings, renewals and draws from
existing commitments (excluding credit card utilization activity)
increased by $119.8 million to $726.8 million in the second quarter of
2018, compared to $606.3 million in the first quarter of 2018, primarily
due to increases in originations of residential mortgage and consumer
loans in Puerto Rico.

Total loan originations in Puerto Rico increased by $101.6 million to
$553.7 million in the second quarter of 2018, compared to $452.1 million
in the first quarter of 2018. The increase in the Puerto Rico region
consisted of increases of $59.4 million in consumer loan originations,
$26.9 million in residential mortgage loan originations, primarily
conforming loan originations, and $15.3 million in commercial and
construction loan originations, primarily driven by the purchase of a
$21 million commercial loan participation.

Total loan originations in the Virgin Islands of $13.8 million in the
second quarter of 2018 decreased by $10.5 million, compared to $24.4
million in the first quarter of 2018. The decrease in the Virgin Islands
region consisted of a $10.8 million decrease in commercial and
construction loan originations, driven by the effect in the previous
quarter of the utilization of an arranged overdraft line of credit of a
government entity, and a $1.7 million decrease in residential mortgage
loan originations, partially offset by a $1.9 million increase in
consumer loan originations.

Total loan originations in the Florida region increased by $29.3 million
to $159.2 million in the second quarter of 2018, compared to $129.9
million in the first quarter of 2018. The increase in the Florida region
consisted of a $36.0 million increase in commercial and construction
loan originations, partially offset by a $5.7 million decrease in
residential mortgage loan originations and a $0.9 million decrease in
consumer loan originations.

  • An $11.3 million increase in the OREO portfolio balance. Refer to the
    discussion in Credit Quality – Non-Performing Assets above for
    additional information.

Total liabilities were approximately $10.5 billion as of June 30, 2018,
up $159.9 million from March 31, 2018.

The increase was mainly due to:

  • A $180.5 million increase in total deposits, excluding brokered CDs
    and government deposits, reflecting increases of $151.1 million and
    $49.3 million in Puerto Rico and the Virgin Island regions,
    respectively, partially offset by a decrease of $20.0 million in the
    Florida region. The most significant increase was in
    noninterest-bearing demand deposits, which grew 15%, or $297.3
    million, during the second quarter of 2018. Storm-related factors,
    such as the effect of disaster relief funds, and settlements of
    insurance claims continued to contribute to this growth. Partially
    offsetting the increase in non-interest bearing deposits were
    decreases in retail CDs and money market and savings accounts.
  • A $104.6 million increase in government deposits, reflecting an
    increase of $93.0 million in Puerto Rico, primarily related to an
    increase in the balance of transactional deposit accounts of certain
    municipalities, and an $11.5 million increase in the Virgin Islands
    region.
  • A $5.5 million increase in other liabilities related to the accounting
    for the above-mentioned rebooked GNMA delinquent loans.

Partially offset by:

  • A $133.4 million decrease in brokered CDs, as the Corporation used
    liquidity to pay off maturing brokered CDs with an all-in cost of
    1.33%.

Total stockholders' equity amounted to $1.9 billion as of June 30, 2018,
an increase of $24.6 million from March 31, 2018, mainly driven by the
earnings generated in the second quarter, partially offset by the
decrease in the fair value of available-for-sale investment securities
recorded as part of other comprehensive income.

The Corporation's common equity tier 1 capital, tier 1 capital, total
capital and leverage ratios under the Basel III rules as of June 30,
2018 were 19.74%, 20.16%, 23.48% and 14.35%, respectively, compared to
common equity tier 1 capital, tier 1 capital, total capital and leverage
ratios of 19.24%, 19.66%, 22.98%, and 14.18%, respectively, as of March
31, 2018. As of June 30, 2018, the Corporation is current on all
interest payments related to its subordinated debt.

Meanwhile, the common equity tier 1 capital, tier 1 capital, total
capital and leverage ratios as of June 30, 2018 of our banking
subsidiary, FirstBank Puerto Rico, were 18.17%, 21.73%, 22.99%, and
15.48%, respectively, compared to common equity tier 1 capital, tier 1
capital, total capital and leverage ratios of 17.70%, 21.26%, 22.52% and
15.35%, respectively, as of March 31, 2018.

Tangible Common Equity

The Corporation's tangible common equity ratio decreased to 14.78% as of
June 30, 2018, compared to 14.80% as of March 31, 2018.

The following table presents a reconciliation of the Corporation's
tangible common equity and tangible assets over the last five quarters
to the comparable GAAP items:

 

(In thousands, except ratios and per share information)
                     
  June 30,   March 31,   December 31,   September 30,   June 30,
  2018     2018     2017     2017     2017  
Tangible Equity:
Total equity - GAAP $ 1,901,679 $ 1,877,104 $ 1,869,097 $ 1,853,751 $ 1,859,910
Preferred equity (36,104 ) (36,104 ) (36,104 ) (36,104 ) (36,104 )
Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 )
Purchased credit card relationship intangible (6,851 ) (7,426 ) (8,000 ) (8,633 ) (9,266 )
Core deposit intangible (4,835 ) (5,084 ) (5,478 ) (5,885 ) (6,297 )
Insurance customer relationship intangible   (699 )   (737 )   (775 )   (813 )   (851 )
 
Tangible common equity $ 1,825,092   $ 1,799,655   $ 1,790,642   $ 1,774,218   $ 1,779,294  
 
Tangible Assets:
Total assets - GAAP $ 12,384,862 $ 12,200,386 $ 12,261,268 $ 12,173,648 $ 11,913,800
Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 )
Purchased credit card relationship intangible (6,851 ) (7,426 ) (8,000 ) (8,633 ) (9,266 )
Core deposit intangible (4,835 ) (5,084 ) (5,478 ) (5,885 ) (6,297 )
Insurance customer relationship intangible   (699 )   (737 )   (775 )   (813 )   (851 )
 
Tangible assets $ 12,344,379   $ 12,159,041   $ 12,218,917   $ 12,130,219   $ 11,869,288  
 
Common shares outstanding   217,185     216,390     216,278     216,175     215,964  
 
Tangible common equity ratio 14.78 % 14.80 % 14.65 % 14.63 % 14.99 %
Tangible book value per common share $ 8.40 $ 8.32 $ 8.28 $ 8.21 $ 8.24

On May 17, 2018, the U.S. Treasury exercised its warrant to purchase
shares of the Corporation's common stock on a cashless basis, resulting
in the issuance of 730,571 shares of common stock.

Exposure to Puerto Rico Government

As of June 30, 2018, the Corporation had $213.2 million of direct
exposure to the Puerto Rico Government, its municipalities and public
corporations, compared to $213.4 million as of March 31, 2018.
Approximately $183.5 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. Approximately $6.7 million
consisted of a loan to a unit of the central government, and
approximately $14.8 million consisted of a loan to an affiliate of a
public corporation. The Corporation's total direct exposure also
includes obligations of the Puerto Rico Government, specifically bonds
of the Puerto Rico Housing Finance Authority, at an amortized cost of
$8.1 million as part of its available-for-sale investment securities
portfolio recorded on its books at a fair value of $6.8 million as of
June 30, 2018.

The exposure to municipalities in Puerto Rico includes $150.5 million of
financing arrangements with Puerto Rico municipalities that were issued
in bond form, but underwritten as loans with features that are typically
found in commercial loans. These bonds are accounted for as
held-to-maturity investment securities.

As of June 30, 2018, the Corporation had $634.4 million of public sector
deposits in Puerto Rico, compared to $541.4 million as of March 31,
2018. Approximately 31% is from municipalities and municipal agencies in
Puerto Rico and 69% is from public corporations and the central
government and agencies in Puerto Rico.

Conference Call / Webcast Information

First BanCorp's senior management will host an earnings conference call
and live webcast on Wednesday, July 25, 2018, 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: www.1firstbank.com
or through a dial-in telephone number at (877) 506-6537 or (412)
380–2001 for international callers. 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
web site, www.1firstbank.com,
until July 25, 2019. A telephone replay will be available one hour after
the end of the conference call through August 25, 2018 at (877) 344-7529
or (412) 317-0088 for international callers. The replay access code is
10122005.

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,"
"look forward," "should," "would," "believes" 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 made, and advises readers
that various factors, including, but not limited to, the following could
cause actual results to differ materially from those expressed in, or
implied by such forward-looking statements: the actual pace and
magnitude of economic recovery in the Corporation's service areas that
were affected by two hurricanes during 2017 compared to Management's
current views on the economic recovery; uncertainties about the
effectiveness and the timing of the completion of the rebuilding taking
place in the regions affected by the hurricanes, including the
rebuilding of the public infrastructure, such as Puerto Rico's power
grid, how and the extent to which government, private or philanthropic
funds will be invested in the affected communities, how many displaced
individuals will return to their homes in both the short- and long-term,
and what other demographic changes will take place, if any; uncertainty
as to the ultimate outcomes of actions taken, or those that may be
taken, by the Puerto Rico government, or the oversight board established
by the Puerto Rico Oversight, Management, and Economic Stability Act
("PROMESA") to address Puerto Rico's financial problems, including the
filing of a form of bankruptcy under Title III of PROMESA, which
provides a court debt restructuring process similar to U.S. bankruptcy
protection, and the effects of measures included in the Puerto Rico
government fiscal plan, or any revisions to it, on our clients and loan
portfolios; the ability of the Puerto Rico government or any of its
public corporations or other instrumentalities to repay its respective
debt obligations, including the effect of payment defaults on the Puerto
Rico government general obligations, bonds of the GDB and certain bonds
of government public corporations, and recent and any future downgrades
of the long-term and short-term debt ratings of the Puerto Rico
government, which could exacerbate Puerto Rico's adverse economic
conditions and, in turn, further adversely impact the Corporation;
uncertainty about whether the Federal Reserve Bank of New York (the "New
York FED" or "Federal Reserve") will continue to provide approvals for
receiving dividends from FirstBank, or making payments of dividends on
non-cumulative perpetual preferred stock, or payments on trust preferred
securities or subordinated debt, incurring, increasing or guaranteeing
debt or repurchasing any capital securities, despite the consents that
have enabled the Corporation to receive quarterly dividends from
FirstBank since the second quarter of 2016, to pay quarterly interest
payments on the Corporation's subordinated debentures associated with
its trust preferred securities since the second quarter of 2016, and to
pay monthly dividends on the non-cumulative perpetual preferred stock
since December 2016; a decrease in demand for the Corporation's products
and services and lower revenues and earnings because of the continued
recession in Puerto Rico; uncertainty as to the availability of certain
funding sources, such as brokered CDs; the Corporation's reliance on
brokered CDs to fund operations and provide liquidity; the risk of not
being able to fulfill the Corporation's cash obligations or resume
paying dividends to the Corporation's common stockholders in the future
due to the Corporation's need to receive regulatory approvals to declare
or pay any dividends and to take dividends or any other form of payment
representing a reduction in capital from FirstBank or FirstBank's
failure to generate sufficient cash flow to make a dividend payment to
the Corporation; the weakness of the real estate markets and of the
consumer and commercial sectors and their impact on the credit quality
of the Corporation's loans and other assets, which have contributed and
may continue to contribute to, among other things, high levels of
non-performing assets, charge-offs and provisions for loan and lease
losses, and may subject the Corporation to further risk from loan
defaults and foreclosures; the ability of FirstBank to realize the
benefits of its net deferred tax assets; adverse changes in general
economic conditions in Puerto Rico, the U.S., the U.S. Virgin Islands,
and the British Virgin Islands, including the interest rate environment,
market liquidity, housing absorption rates, real estate prices, and
disruptions in the U.S. capital markets, which reduced interest margins
and affected funding sources, and have affected demand for all of the
Corporation's products and services and reduced the Corporation's
revenues and earnings and the value of the Corporation's assets, and may
continue to have these effects; an adverse change in the Corporation's
ability to attract new clients and retain existing ones; the risk that
additional portions of the unrealized losses in the Corporation's
investment portfolio are determined to be other-than-temporary,
including additional impairments on the Corporation's remaining $8.1
million of the Puerto Rico government's debt securities; uncertainty
about regulatory and legislative changes for financial services
companies in Puerto Rico, the U.S., and the U.S. and British Virgin
Islands, which could affect the Corporation's financial condition or
performance and could cause the Corporation's actual results for future
periods to differ materially from prior results and anticipated or
projected results; changes in the fiscal and monetary policies and
regulations of the U.S. federal government and the Puerto Rico and other
governments, including those determined by the Federal Reserve Board,
the New York FED, the Federal Deposit Insurance Corporation ("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 controls and procedures and the risk that the
Corporation's risk management policies may not be adequate; the risk
that the FDIC may increase the deposit insurance premium and/or require
special assessments to replenish its insurance fund, causing an
additional increase in the Corporation's non-interest expenses; the
impact on the Corporation's results of operations and financial
condition of acquisitions and dispositions; a need to recognize
impairments on the Corporation's financial instruments, goodwill or
other intangible assets relating to acquisitions; the risk that
downgrades in the credit ratings of the Corporation's long-term senior
debt will adversely affect the Corporation's ability to access necessary
external funds; the impact on the Corporation's businesses, business
practices and results of operations of a potential higher interest rate
environment; uncertainty as to whether FirstBank will be able to
continue to satisfy its regulators regarding, among other things, its
asset quality, liquidity plans, maintenance of capital levels and
compliance with applicable laws, regulations and related requirements;
and general competitive factors and industry consolidation. The
Corporation does not undertake, and specifically disclaims any
obligation, to update any "forward-looking statements" to reflect
occurrences or unanticipated events or circumstances after the date of
such statements, except as required by the federal securities laws.

Basis of Presentation

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. Non-GAAP
financial measures are used when management believes they will 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 comparable GAAP financial measure, as well as the
reconciliation of the non-GAAP financial measure to the comparable GAAP
financial measure, can be found in the text or in the attached tables to
this earnings release. Any analysis of these non-GAAP financial measures
should be used only in conjunction with results presented in accordance
with GAAP.

Tangible Common Equity Ratio and Tangible Book Value per Common Share

The tangible common equity ratio and tangible book value per common
share are non-GAAP financial measures generally used by the financial
community to evaluate capital adequacy. Tangible common equity is total
equity less preferred equity, goodwill, core deposit intangibles, and
other intangibles, such as the purchased credit card relationship
intangible and the insurance customer relationship intangible. Tangible
assets are total assets less goodwill, core deposit intangibles, and
other intangibles, such as the purchased credit card relationship
intangible and the insurance customer relationship intangible.
Management and many stock analysts use the tangible common equity ratio
and tangible book value per common share in conjunction with more
traditional bank capital ratios to compare the capital adequacy of
banking organizations with significant amounts of goodwill or other
intangible assets, typically stemming from the use of the purchase
method of accounting for mergers and acquisitions. Accordingly, the
Corporation believes that disclosure of these financial measures may be
useful to investors. Neither tangible common equity nor tangible assets,
or the related measures should be considered in isolation or as a
substitute for stockholders' equity, total assets, or any other measure
calculated in accordance with GAAP. Moreover, the manner in which the
Corporation calculates its tangible common equity, tangible assets, and
any other related measures may differ from that of other companies
reporting measures with similar names.

Adjusted Pre-Tax, Pre-Provision Income

Adjusted pre-tax, pre-provision income is a non-GAAP performance metric
that management uses and believes that investors may find useful in
analyzing underlying performance trends, particularly in times of
economic stress, including as a result of natural catastrophes such as
the recent hurricanes. Adjusted pre-tax, pre-provision income, as
defined by management, represents net income (loss) excluding income tax
expense (benefit) and the provision for loan and lease losses, as well
as Special Items that management believes are not reflective of core
operating performance, are not expected to reoccur with any regularity
or may reoccur at uncertain times and in uncertain amounts.

Net Interest Income on a Tax-Equivalent Basis

Net interest income, interest rate spread, and net interest margin are
reported 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. 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 facilitates comparison of results to the
results of peers.

Financial measures adjusted to exclude the effect of Special Items
that Management believes are not reflective of core operating
performance, are not expected to reoccur with any regularity or may
reoccur at uncertain times and in uncertain amounts.

To supplement the Corporation's financial statements presented in
accordance with GAAP, the Corporation uses, and believes that investors
would benefit from disclosure of, non-GAAP financial measures that
reflect adjustments to the provision for loan and lease losses, net
charge-offs, non-interest income, non-interest expenses and net income
to exclude items that management identifies as Special Items because
management believes they are not reflective of core operating
performance, are not expected to reoccur with any regularity or may
reoccur at uncertain times and in uncertain amounts. This press release
includes the following non-GAAP financial measures for the second and
first quarters of 2018, and the second quarter of 2017 that reflect the
described items that were excluded for one of those reasons:

  • Adjusted provision for loan and lease losses for the second and first
    quarters of 2018 reflected the following exclusions:
    • The $2.1 million and $6.4 million net loan loss reserve releases
      recorded in the second quarter and first quarter of 2018,
      respectively, related to revised estimates associated with the
      effects of Hurricanes Maria and Irma.
    • The $5.6 million charge to the provision related to the $57.2
      million in loans transferred to held for sale in the first quarter
      of 2018.
  • Adjusted net charge-offs for the first quarter of 2018 reflected the
    following adjustments:
    • Net charge-offs totaling $9.7 million associated with loans
      transferred to held for sale in the first quarter of 2018.
  • Adjusted non-interest income for the first quarter of 2018 and second
    quarter of 2017 reflected the following:
    • Gain of $2.3 million on the repurchase and cancellation of $23.8
      million in trust preferred securities in the first quarter of 2018.
    • Partial recovery of $0.4 million of previously recorded OTTI
      charges on non-performing bonds of the GDB and the Puerto Rico
      Public Buildings Authority sold in the second quarter of 2017.
  • Adjusted non-interest expenses for the second and first quarters of
    2018 reflected the following:
    • Exclusion of hurricane-related expenses of $0.7 million and $1.6
      in the second quarter and first quarter of 2018, respectively.
  • Adjusted net income excluding the effect of all of the items mentioned
    in the above bullets for the second and first quarters of 2018 and the
    second quarter of 2017 and their tax related impacts as follows:
    • Tax expense of $0.8 million and $2.5 million in the second quarter
      and first quarter of 2018, respectively, related to net loan loss
      reserve releases resulting from the revised estimates of the
      reserves associated with the effects of Hurricanes Maria and Irma
      (calculated based on the statutory tax rate of 39%).
    • Tax benefit of $2.2 million in the first quarter of 2018 related
      to the charge to the provision for loan and lease losses recorded
      in connection with the $57.2 million in loans transferred to held
      for sale (calculated based on the statutory tax rate of 39%).
    • Tax benefit of $0.3 million and $0.6 million in the second quarter
      and first quarter of 2018, respectively, related to
      hurricane-related expenses (calculated based on the statutory tax
      rate of 39%).
    • No tax expense was recorded for the gain on repurchase and
      cancellation of trust preferred securities that was recorded at
      the holding company level in the first quarter of 2018 and for the
      partial recovery of previous OTTI charges on non-performing bonds
      sold in the second quarter of 2017.

Management believes that the presentations of the adjusted provision for
loan and lease losses, adjusted net charge-offs, adjusted non-interest
income, adjusted non-interest expenses, and adjusted net income enhance
the ability of analysts and investors to analyze trends in the
Corporation's business and understand the performance of the
Corporation. In addition, the Corporation may utilize these non-GAAP
financial measures as guides in its budgeting and long-term planning
process.

The following table reconciles these non-GAAP financial measures to the
corresponding measures presented in accordance with GAAP.

(Dollars in thousands)
           
2018 Second Quarter

As Reported
(GAAP)

Hurricane-related
allowance release

Hurricane-related expenses Tax effect (1)

Adjusted (Non-
GAAP)

 
Provision for Loan and Lease Losses $ 19,536 $ 2,057 $ - $ - $ 21,593
 
 
Non-interest expenses $ 90,216 $ - $ (654 ) $ - $ 89,562
Occupancy and Equipment 13,746 - (553 ) - 13,193
Business Promotion 4,016 - (24 ) - 3,992
Net loss on other real estate owned operations 5,655 - (77 ) - 5,578
 
Net income $ 31,032 $ (2,057 ) $ 654 $ 547 $ 30,176
 
(1) See Basis of Presentation for the individual tax impact
for each reconciling item.

(Dollars in thousands)
             
2018 First Quarter

As Reported
(GAAP)

Loans Transferred to
Held for Sale

Hurricane-related allowance
release

Hurricane-related
expenses

Repurchase and
Cancellation of
Trust
Preferred

Securities

Tax effect (2)

Adjusted (Non-
GAAP)

 
Total net charge-offs (1) $ 26,531 $ 9,673 $ - $ - $ - $ - $ 16,858
Total net charge-offs to average loans 1.21 % 0.77 %
Commercial mortgage 6,761 (4,573 ) - - - - 2,188
Commercial mortgage net charge-offs to average loans 1.69 % 0.55 %
Construction 5,164 (5,100 ) - - - - 64
Construction net charge-offs to average loans 17.37 % 0.22 %
 
Provision for Loan and Lease Losses $ 20,544 $ (5,645 ) $ 6,407 $ - $ - $ - $ 21,306
 
Non-interest income $ 22,784 $ - $ - $ - $ (2,316 ) $ - $ 20,468
Gain on early extinguishment of debt 2,316 - - - (2,316 ) - -
 
Non-interest expenses $ 86,027 $ - $ - $ (1,596 ) $ - $ - $ 84,431
Employees' compensation and benefits 40,684 - - (5 ) - - 40,679
Occupancy and Equipment 15,105 - - (1,549 ) - - 13,556
Business Promotion 2,576 - - (31 ) - - 2,545
 
Net income $ 33,148 $ 5,645 $ (6,407 ) $ 1,596 $ (2,316 ) $ (324 ) $ 31,342
 
(1) Net charge-offs percentages annualized
(2) See Basis of Presentation for the individual tax impact
for each reconciling item.
(Dollars in thousands)
       
2017 Second Quarter

As Reported
(GAAP)

Gain from Recovery
of Investments

Previously Written-

Off

Tax effect (1) Adjusted (Non-GAAP)
 
Non-interest income $ 20,549 $ (371 ) $ - $ 20,178
Gain (loss) on investments and impairments 371 (371 ) - -
 
Net income $ 27,998 $ (371 ) $ - $ 27,627
 
(1) See Basis of Presentation for the individual tax impact
for each reconciling item.

FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
     
As of
June 30, March 31, December 31,
(In thousands, except for share information)   2018     2018     2017  
ASSETS
 
Cash and due from banks $ 790,809   $ 743,409   $ 705,980  
 
Money market investments:
Time deposits with other financial institutions 300 3,126 3,126
Other short-term investments   97,290     97,289     7,289  
Total money market investments   97,590     100,415     10,415  
 
Investment securities available for sale, at fair value 2,036,010 1,815,504 1,891,016
 
Investment securities held to maturity, at amortized cost 150,486 150,486 150,627
 
Other equity securities   43,400     43,532     43,119  
 
Total investment securities   2,229,896     2,009,522     2,084,762  
 
 
 
Loans, net of allowance for loan and lease losses of $222,035
(March 31, 2018 - $225,856; December 31, 2017 - $231,843) 8,418,256 8,470,034 8,618,633
Loans held for sale, at lower of cost or market   80,815     91,375     32,980  
Total loans, net   8,499,071     8,561,409     8,651,613  
 
Premises and equipment, net 144,507 143,115 141,895
Other real estate owned 143,355 154,639 147,940
Accrued interest receivable on loans and investments 47,171 44,093 57,172
Other assets   432,463     443,784     461,491  
Total assets $ 12,384,862   $ 12,200,386   $ 12,261,268  
 
LIABILITIES
 
Deposits:
Non-interest-bearing deposits $ 2,317,149 $ 2,019,823 $ 1,833,665
Interest-bearing deposits   6,900,934     7,046,642     7,188,966  
Total deposits   9,218,083     9,066,465     9,022,631  
 
Securities sold under agreements to repurchase 200,000 200,000 300,000
Advances from the Federal Home Loan Bank (FHLB) 715,000 715,000 715,000
Other borrowings 184,150 184,150 208,635
Accounts payable and other liabilities   165,950     157,667     145,905  
Total liabilities   10,483,183     10,323,282     10,392,171  
 
STOCKHOLDERS' EQUITY
 

Preferred Stock, authorized 50,000,000 shares; issued 22,828,174
shares; outstanding 1,444,146 shares; aggregate liquidation value
of $36,104

  36,104     36,104     36,104  

Common stock, $0.10 par value, authorized 2,000,000,000 shares;
issued, 221,724,062 shares (March 31, 2018 - 220,877,719 shares
issued; December 31, 2017 - 220,382,343 shares issued)

22,172 22,088 22,038
Less: Treasury stock (at par value)   (453 )   (449 )   (410 )

Common stock outstanding, 217,185,449 shares outstanding (March
31, 2018 - 216,390,329 shares outstanding; December 31, 2017 -
216,278,040 shares outstanding)

  21,719     21,639     21,628  
Additional paid-in capital 937,919 936,342 936,772
Retained earnings 958,044 927,681 895,208
Accumulated other comprehensive loss   (52,107 )   (44,662 )   (20,615 )
Total stockholders' equity   1,901,679     1,877,104     1,869,097  
Total liabilities and stockholders' equity $ 12,384,862   $ 12,200,386   $ 12,261,268  

FIRST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
         
Quarter Ended Six-Month Period Ended
June 30, March 31, June 30, June 30, June 30,
(In thousands, except per share information)   2018     2018     2017     2018     2017  
 
Net interest income:
Interest income $ 155,633 $ 149,418 $ 147,374 $ 305,051 $ 292,602
Interest expense   25,162     24,725     23,470     49,887     46,149  
Net interest income 130,471 124,693 123,904 255,164 246,453
Provision for loan and lease losses   19,536     20,544     18,096     40,080     43,538  
Net interest income after provision for loan and lease losses   110,935     104,149     105,808     215,084     202,915  
 
Non-interest income:
Service charges on deposit accounts 5,344 5,088 5,803 10,432 11,593
Mortgage banking activities 4,835 4,165 4,846 9,000 8,462
Net gain (loss) on investments and impairments - - 371 - (11,860 )
Gain on early extinguishment of debt - 2,316 - 2,316 -
Other non-interest income   10,293     11,215     9,529     21,508     20,597  
Total non-interest income   20,472     22,784     20,549     43,256     28,792  
 
Non-interest expenses:
Employees' compensation and benefits 39,555 40,684 38,409 80,239 77,062
Occupancy and equipment 13,746 15,105 13,759 28,851 27,847
Business promotion 4,016 2,576 3,192 6,592 6,473
Professional fees 10,193 10,060 11,800 20,253 22,756
Taxes, other than income taxes 3,637 3,856 3,745 7,493 7,421
Insurance and supervisory fees 3,701 3,855 4,855 7,556 9,764
Net loss on other real estate owned operations 5,655 190 3,369 5,845 7,445
Other non-interest expenses   9,713     9,701     9,940     19,414     18,183  
Total non-interest expenses   90,216     86,027     89,069     176,243     176,951  
 
Income before income taxes 41,191 40,906 37,288 82,097 54,756
Income tax expense   (10,159 )   (7,758 )   (9,290 )   (17,917 )   (1,217 )
 
Net income $ 31,032   $ 33,148   $ 27,998   $ 64,180   $ 53,539  
 
Net income attributable to common stockholders $ 30,363   $ 32,479   $ 27,329   $ 62,842   $ 52,201  
 
Earnings per common share:
 
Basic $ 0.14   $ 0.15   $ 0.13   $ 0.29   $ 0.24  
Diluted $ 0.14   $ 0.15   $ 0.13   $ 0.29   $ 0.24  

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, and
FirstBank Puerto Rico Securities, a broker-dealer subsidiary. 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
(In thousands, except per share amounts and financial ratios) Quarter Ended Six-Month Period Ended  
June 30, March 31, June 30, June 30, June 30,
  2018     2018     2017     2018     2017  
Condensed Income Statements:
Total interest income $ 155,633 $ 149,418 $ 147,374 $ 305,051 $ 292,602
Total interest expense 25,162 24,725 23,470 49,887 46,149
Net interest income 130,471 124,693 123,904 255,164 246,453
Provision for loan and lease losses 19,536 20,544 18,096 40,080 43,538
Non-interest income 20,472 22,784 20,549 43,256 28,792
Non-interest expenses 90,216 86,027 89,069 176,243 176,951
Income before income taxes 41,191 40,906 37,288 82,097 54,756

 

Income tax expense (10,159 ) (7,758 ) (9,290 ) (17,917 ) (1,217 )

 

Net income 31,032 33,148 27,998 64,180 53,539

 

Net income attributable to common stockholders 30,363 32,479 27,329 62,842 52,201
 
 
Per Common Share Results:
Net earnings per share - basic $ 0.14 $ 0.15 $ 0.13 $ 0.29 $ 0.24
Net earnings per share - diluted $ 0.14 $ 0.15 $ 0.13 $ 0.29 $ 0.24
Cash dividends declared $ - $ - $ - $ - $ -
Average shares outstanding 215,737 214,646 213,900 215,194 213,621
Average shares outstanding diluted 216,666 216,294 216,832 216,483 217,103
Book value per common share $ 8.59 $ 8.51 $ 8.44 $ 8.59 $ 8.44
Tangible book value per common share (1) $ 8.40 $ 8.32 $ 8.24 $ 8.40 $ 8.24
 
Selected Financial Ratios (In Percent):
 
Profitability:
Return on Average Assets 1.01 1.10 0.95 1.06 0.91
Interest Rate Spread (2) 4.28 4.22 4.32 4.25 4.31
Net Interest Margin (2) 4.67 4.57 4.61 4.62 4.59
Return on Average Total Equity 6.65 7.22 6.10 6.93 5.94
Return on Average Common Equity 6.78 7.37 6.22 7.07 6.06
Average Total Equity to Average Total Assets 15.17 15.27 15.50 15.24 15.31
Total capital 23.48 22.98 22.24 23.48 22.24
Common equity Tier 1 capital 19.74 19.24 18.61 19.74 18.61
Tier 1 capital 20.16 19.66 18.61 20.16 18.61
Leverage 14.35 14.18 14.14 14.35 14.14

 

Tangible common equity ratio (1) 14.78 14.80 14.99 14.78 14.99
Dividend payout ratio - - - - -
Efficiency ratio (3) 59.77 58.33 61.66 59.06 64.29

 

 
Asset Quality:
Allowance for loan and lease losses to loans held for investment (4) 2.57 2.60 1.96 2.57 1.96
Net charge-offs (annualized) to average loans (5)(6) 1.07 1.21 2.16 1.14 1.71

 

Provision for loan and lease losses to net charge-offs (7)(8) 83.64 77.43 37.82 80.34 57.55

 

Non-performing assets to total assets 5.02 5.22 4.83 5.02 4.83

 

Non-performing loans held for investment to total loans held for
investment
4.85 4.74 4.64 4.85 4.64
Allowance to total non-performing loans held for investment (9) 52.97 54.82 42.17 52.97 42.17

 

Allowance to total non-performing loans held for investment
excluding residential real estate loans (10)

86.53 93.87 67.75 86.53 67.75

 

 

Other Information:
Common Stock Price: End of period $ 7.65 $ 6.02 $ 5.79 $ 7.65 $ 5.79

 

 
 
1- Non-GAAP financial measure. See page 18 for GAAP to Non-GAAP
reconciliations.

2- On a tax-equivalent basis (Non-GAAP financial measure). See
page 6 for GAAP to Non-GAAP reconciliations and refer to
discussions in Tables 2 and 3 below.

3- Non-interest expenses to the sum of net interest income and
non-interest income. The denominator includes non-recurring income
and changes in the fair value of derivative instruments.

4 - The ratio of the allowance for loan and lease losses to loans
held for investment, excluding the hurricane-related qualitative
allowance, was 2.08% and 2.06% as of June 30, 2018 and March 31,
2018, respectively.
5 - The ratio of net charge-offs to average loans, excluding
charge-offs associated with loans transferred to held for sale, was
0.77% and 0.92% for the quarter ended March 31, 2018 and for the
six-month period ended June 30, 2018.
6 - The ratio of net charge-offs to average loans, excluding
charge-offs associated with the sale of the PREPA credit line, was
1.47% for the six-month period ended June 30, 2017.

7 - The ratio of the provision for loan and lease losses to net
charge-offs, excluding the hurricane-related qualitative reserve
releases and the provision for loans transferred to held for sale,
was 92.45%, 126.39%, and 106.67% for the quarters ended June 30,
2018 and March 31, 2018, and for the six-month period ended June
30, 2018, respectively.

8 - The ratio of the provision for loan and lease losses to net
charge-offs, excluding the effect of the sale of the PREPA credit
line, was 66.19% for the six-month period ended June 30, 2017.

9 - The ratio of the allowance for loan and lease losses to
non-performing loans held for investment, excluding the
hurricane-related qualitative allowance, was 42.92% and 43.47% as
of June 30, 2018 and March 31, 2018, respectively.

10 - The ratio of the allowance for loan and lease losses to
non-performing loans held for investment excluding residential
real estate and the hurricane-related qualitative allowance, was
70.10% and 74.43% as of June 30, 2018 and March 31, 2018,
respectively.

 

 

 

Table 2 - Quarterly Statement of Average Interest-Earning
Assets and Average Interest-Bearing Liabilities (On a
Tax-Equivalent Basis)

 
(Dollars in thousands)
  Average volume   Interest income (1) / expense   Average rate (1)
June 30,   March 31,   June 30, June 30,   March 31,   June 30, June 30,   March 31,   June 30,
Quarter ended   2018   2018   2017   2018   2018   2017 2018   2018   2017  
 
Interest-earning assets:
Money market & other short-term investments $ 780,346 $ 618,468 $ 305,563 $ 3,387 $ 2,256 $ 727 1.74 % 1.48 % 0.95 %
Government obligations (2) 822,416 798,186 698,471 7,103 6,193 4,503 3.46 % 3.15 % 2.59 %
Mortgage-backed securities 1,313,082 1,260,142 1,292,997 10,825 10,625 12,489 3.31 % 3.42 % 3.87 %
FHLB stock 40,812 40,937 37,254 656 693 488 6.45 % 6.87 % 5.25 %
Other investments   2,625   2,705   2,701   2   2   2 0.31 % 0.30 % 0.30 %
Total investments (3)   2,959,281   2,720,438   2,336,986   21,973   19,769   18,209 2.98 % 2.95 % 3.13 %
Residential mortgage loans 3,195,633 3,227,222 3,265,883 42,842 43,350 43,678 5.38 % 5.45 % 5.36 %
Construction loans 121,136 118,907 154,980 1,106 922 1,458 3.66 % 3.14 % 3.77 %
C&I and commercial mortgage loans 3,627,829 3,688,415 3,728,733 48,349 45,189 42,942 5.35 % 4.97 % 4.62 %
Finance leases 272,096 260,119 239,271 4,901 4,660 4,333 7.22 % 7.27 % 7.26 %
Consumer loans   1,476,653   1,484,305   1,474,662   41,625   40,306   41,536 11.31 % 11.01 % 11.30 %
Total loans (4) (5)   8,693,347   8,778,968   8,863,529   138,823   134,427   133,947 6.41 % 6.21 % 6.06 %
Total interest-earning assets $ 11,652,628 $ 11,499,406 $ 11,200,515 $ 160,796 $ 154,196 $ 152,156 5.53 % 5.44 % 5.45 %
 
Interest-bearing liabilities:
Brokered CDs $ 874,766 $ 1,043,255 $ 1,309,399 $ 3,865 $ 4,355 $ 4,695 1.77 % 1.69 % 1.44 %
Other interest-bearing deposits 6,080,949 6,021,699 5,908,238 13,109 12,616 11,653 0.86 % 0.85 % 0.79 %
Other borrowed funds 384,150 414,488 516,187 4,778 4,382 4,830 4.99 % 4.29 % 3.75 %
FHLB advances   715,000   715,000   593,791   3,410   3,372   2,292 1.91 % 1.91 % 1.55 %
Total interest-bearing liabilities $ 8,054,865 $ 8,194,442 $ 8,327,615 $ 25,162 $ 24,725 $ 23,470 1.25 % 1.22 % 1.13 %
Net interest income $ 135,634 $ 129,471 $ 128,686
Interest rate spread 4.28 % 4.22 % 4.32 %
Net interest margin 4.67 % 4.57 % 4.61 %
 

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 39% 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.

See page 6 for GAAP to Non-GAAP reconciliations.

 
2- Government obligations include debt issued by
government-sponsored agencies.
 
3- Unrealized gains and losses on available-for-sale securities are
excluded from the average volumes.
 
4- Average loan balances include the average of non-performing loans.
 

5- Interest income on loans includes $2.1 million, $1.8 million
and $2.0 million for the quarters ended June 30, 2018, March 31,
2018, and June 30, 2017, 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)
 
(Dollars in thousands)
  Average volume   Interest income (1) / expense   Average rate (1)
June 30,   June 30, June 30,   June 30, June 30,     June 30,
Six-Month Period Ended   2018   2017   2018   2017 2018   2017  
 
Interest-earning assets:
Money market & other short-term investments $ 699,854 $ 287,349 $ 5,643 $ 1,211 1.63 % 0.85 %
Government obligations (2) 810,368 713,804 13,296 8,895 3.31 % 2.51 %
Mortgage-backed securities 1,286,756 1,313,664 21,450 24,103 3.36 % 3.70 %
FHLB stock 40,874 38,401 1,349 949 6.66 % 4.98 %
Other investments   2,670   2,700   4   4 0.30 % 0.30 %
Total investments (3)   2,840,522   2,355,918   41,742   35,162 2.96 % 3.01 %
Residential mortgage loans 3,210,984 3,265,886 86,192 87,958 5.41 % 5.43 %
Construction loans 119,996 142,790 2,028 2,602 3.41 % 3.67 %
C&I and commercial mortgage loans 3,657,985 3,742,103 93,538 84,762 5.16 % 4.57 %
Finance leases 266,140 237,013 9,561 8,647 7.24 % 7.36 %
Consumer loans   1,480,455   1,475,113   81,931   82,606 11.16 % 11.29 %
Total loans (4) (5)   8,735,560   8,862,905   273,250   266,575 6.31 % 6.07 %
Total interest-earning assets $ 11,576,082 $ 11,218,823 $ 314,992 $ 301,737 5.49 % 5.42 %
 
Interest-bearing liabilities:
Brokered CDs $ 958,545 $ 1,361,245 $ 8,220 $ 9,500 1.73 % 1.41 %
Other interest-bearing deposits 6,051,489 5,896,570 25,725 22,820 0.86 % 0.78 %
Other borrowed funds 399,235 516,187 9,160 9,415 4.63 % 3.68 %
FHLB advances   715,000   617,873   6,782   4,414 1.91 % 1.44 %
Total interest-bearing liabilities $ 8,124,269 $ 8,391,875 $ 49,887 $ 46,149 1.24 % 1.11 %
Net interest income $ 265,105 $ 255,588
Interest rate spread 4.25 % 4.31 %
Net interest margin 4.62 % 4.59 %
 

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 39% 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.

See page 6 for GAAP to Non-GAAP reconciliation.
 
2- Government obligations include debt issued by
government-sponsored agencies.

 

3- Unrealized gains and losses on available-for-sale securities are
excluded from the average volumes.
 
4- Average loan balances include the average of non-performing loans.
 

5- Interest income on loans includes $3.9 million and $4.1 million
for the six-month periods ended June 30, 2018 and 2017,
respectively, of income from prepayment penalties and late fees
related to the Corporation's loan portfolio.

 

 
Table 4 - Non-Interest Income
    Quarter Ended   Six-Month Period Ended
June 30,   March 31,   June 30, June 30,   June 30,
(In thousands)   2018   2018   2017   2018   2017  
 
Service charges on deposit accounts $ 5,344 $ 5,088 $ 5,803 $ 10,432 $ 11,593
Mortgage banking activities 4,835 4,165 4,846 9,000 8,462
Insurance income 1,780 3,355 1,855 5,135 5,442
Other operating income   8,513   7,860   7,674   16,373   15,155  
 
 

Non-interest income before net gain (loss) on investments, and
gain on early extinguishment of debt

  20,472   20,468   20,178   40,940   40,652  
 
Net gain on sale of investments - - 371 - 371
OTTI on debt securities   -   -   -   -   (12,231 )
Net gain (loss) on investments   -   -   371   -   (11,860 )
 
Gain on early extinguishment of debt   -   2,316   -   2,316   -  
$ 20,472 $ 22,784 $ 20,549 $ 43,256 $ 28,792  
 
Table 5 - Non-Interest Expenses
Quarter Ended Six-Month Period Ended
June 30, March 31, June 30, June 30, June 30,
(In thousands)   2018   2018   2017   2018   2017  
 
Employees' compensation and benefits $ 39,555 $ 40,684 $ 38,409 $ 80,239 $ 77,062
Occupancy and equipment 13,746 15,105 13,759 28,851 27,847
Deposit insurance premium 2,443 2,649 3,721 5,092 7,492
Other insurance and supervisory fees 1,258 1,206 1,134 2,464 2,272
Taxes, other than income taxes 3,637 3,856 3,745 7,493 7,421
Professional fees:
Collections, appraisals and other credit related fees 1,650 1,599 2,452 3,249 4,524
Outsourcing technology services 5,127 5,123 5,398 10,250 10,752
Other professional fees 3,416 3,338 3,950 6,754 7,480
Credit and debit card processing expenses 3,766 3,537 3,566 7,303 6,397
Business promotion 4,016 2,576 3,192 6,592 6,473
Communications 1,582 1,482 1,628 3,064 3,171
Net loss on OREO operations 5,655 190 3,369 5,845 7,445
Other   4,365   4,682   4,746   9,047   8,615  
Total $ 90,216 $ 86,027 $ 89,069 $ 176,243 $ 176,951  

 

Table 6 - Selected Balance Sheet Data
 
(In thousands) As of
  June 30,   March 31,   December 31,
  2018     2018     2017  
Balance Sheet Data:
Loans, including loans held for sale $ 8,721,106 $ 8,787,265 $ 8,883,456
Allowance for loan and lease losses 222,035 225,856 231,843
Money market and investment securities 2,327,486 2,109,937 2,095,177
Intangible assets 40,483 41,345 42,351
Deferred tax asset, net 283,334 289,338 294,809
Total assets 12,384,862 12,200,386 12,261,268
Deposits 9,218,083 9,066,465 9,022,631
Borrowings 1,099,150 1,099,150 1,223,635
Total preferred equity 36,104 36,104 36,104
Total common equity 1,917,682 1,885,662 1,853,608
Accumulated other comprehensive loss, net of tax (52,107 ) (44,662 ) (20,615 )
Total equity 1,901,679 1,877,104 1,869,097
Table 7 - Loan Portfolio      
 

Composition of the loan portfolio including loans held for sale at
period-end.

 
(In thousands) As of
  June 30, March 31, December 31,
  2018   2018   2017
 
Residential mortgage loans $ 3,238,001 $ 3,267,868 $ 3,290,957
 
Commercial loans:
Construction loans 84,683 79,150 111,397
Commercial mortgage loans 1,533,308 1,552,503 1,614,972
Commercial and Industrial loans   2,009,049   2,061,773   2,083,253
Commercial loans   3,627,040   3,693,426   3,809,622
 
Finance leases   283,274   262,863   257,462
 
Consumer loans   1,491,976   1,471,733   1,492,435
Loans held for investment 8,640,291 8,695,890 8,850,476
Loans held for sale   80,815   91,375   32,980
Total loans $ 8,721,106 $ 8,787,265 $ 8,883,456

Table 8 - Loan Portfolio by Geography
         
(In thousands) As of June 30, 2018
Puerto Rico Virgin Islands United States Consolidated
 
Residential mortgage loans $ 2,374,276 $ 265,252 $ 598,473 $ 3,238,001
 
Commercial loans:
Construction loans 40,277 9,043 35,363 84,683
Commercial mortgage loans 1,057,317 81,317 394,674 1,533,308
Commercial and Industrial loans   1,311,854   113,883   583,312   2,009,049
Commercial loans   2,409,448   204,243   1,013,349   3,627,040
 
Finance leases   283,274   -   -   283,274
 
Consumer loans   1,390,099   45,774   56,103   1,491,976
Loans held for investment 6,457,097 515,269 1,667,925 8,640,291
 
Loans held for sale   50,030   30,138   647   80,815
Total loans $ 6,507,127 $ 545,407 $ 1,668,572 $ 8,721,106
 
 
 
(In thousands) As of March 31, 2018
Puerto Rico Virgin Islands United States Consolidated
 
Residential mortgage loans $ 2,396,307 $ 273,557 $ 598,004 $ 3,267,868
 
Commercial loans:
Construction loans 42,148 8,309 28,693 79,150
Commercial mortgage loans 1,062,693 90,817 398,993 1,552,503
Commercial and Industrial loans   1,366,090   121,182   574,501   2,061,773
Commercial loans   2,470,931   220,308   1,002,187   3,693,426
 
Finance leases   262,863   -   -   262,863
 
Consumer loans   1,368,759   45,215   57,759   1,471,733
Loans held for investment 6,498,860 539,080 1,657,950 8,695,890
 
Loans held for sale   50,814   30,000   10,561   91,375
Total loans $ 6,549,674 $ 569,080 $ 1,668,511 $ 8,787,265
 

 

 

 
(In thousands) As of December 31, 2017
Puerto Rico Virgin Islands United States Consolidated
 
Residential mortgage loans $ 2,413,379 $ 282,738 $ 594,840 $ 3,290,957
 
Commercial loans:
Construction loans 41,511 43,314 26,572