Market Overview

First BanCorp. Announces Earnings for the Quarter Ended June 30, 2019

Share:
  • Net income of $41.3 million, or $0.19 per diluted share, for the second quarter of 2019, compared to $43.3 million, or $0.20 per diluted share, for the first quarter of 2019.
  • On a non-GAAP basis, adjusted net income for the second quarter of 2019 increased by $3.8 million to $40.8 million, or $0.18 per diluted share (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 $37.0 million for the first quarter of 2019, or $0.17 per diluted share.
  • Income before income taxes of $59.3 million for the second quarter of 2019, compared to $60.9 million for the first quarter of 2019.
  • On a non-GAAP basis, adjusted pre-tax, pre-provision income of $71.0 million for the second quarter of 2019, compared to $70.4 million for the first quarter of 2019.
  • Net interest income increased by $2.3 million to $142.5 million for the second quarter of 2019, compared to $140.2 million for the first quarter of 2019, primarily due to the growth in the average volume of consumer and commercial performing loan portfolios.
  • Net interest margin was 4.90% for the second quarter of 2019, relatively flat compared to 4.92% for the first quarter of 2019.
  • Provision for loan and lease losses increased by $0.7 million to $12.5 million for the second quarter of 2019, compared to $11.8 million for the first quarter of 2019.
  • Non-interest income decreased by $0.3 million to $22.2 million for the second quarter of 2019 compared to $22.5 million for the first quarter of 2019, primarily due to the effect in the first quarter of 2019 of seasonal insurance contingent commissions of $2.7 million, partially offset by higher revenues in the second quarter of 2019 from mortgage banking activities and an increase in fee-based income from credit and debit cards interchange fees.
  • Non-interest expenses increased by $2.9 million to $92.9 million for the second quarter of 2019, compared to $90.0 million for the first quarter of 2019.
  • Income tax expense of $18.0 million for the second quarter of 2019, compared to $17.6 million for the first quarter of 2019.
  • Credit quality variances:
  • Non-performing assets ("NPAs") decreased in the quarter by $30.8 million, to $384.1 million as of June 30, 2019.
  • Non-performing loan inflows amounted to $23.2 million in the second quarter of 2019, compared to inflows of $24.1 million in the first quarter of 2019.
  • The annualized net charge-off rate was 1.07% for the second quarter of 2019, compared to 1.10% for the first quarter of 2019.
  • Total deposits, excluding brokered certificates of deposit ("CDs") and government deposits, decreased by $34.5 million to $7.6 billion as of June 30, 2019, reflecting decreases of $21.8 million in the Virgin Islands and $18.8 million in Florida, partially offset by a $6.1 million increase in Puerto Rico.
  • Brokered CDs increased in the quarter by $6.0 million to $515.7 million as of June 30, 2019.
  • Government deposits increased in the quarter by $139.9 million to $1.0 billion as of June 30, 2019, reflecting an increase of $101.2 million in Puerto Rico, primarily related to an increase in the balance of transactional accounts of certain municipalities, and a $38.7 million increase in the Virgin Islands.
  • Total loans increased in the quarter by $117.6 million to $9.1 billion as of June 30, 2019. The increase consisted of growth of $97.6 million in the consumer loan portfolio, primarily in auto loans, finance leases, personal loans, and credit card loans in Puerto Rico, and an increase of $75.1 million in commercial and construction loans, reflecting increases in all regions. These increases were partially offset by a decline of $55.1 million in residential mortgage loans.
  • Total loan originations, including refinancings, renewals and draws from existing commitments (other than credit card utilization activity), amounted to $885.4 million in the second quarter of 2019, compared to $881.5 million in the first quarter of 2019. The increase consisted of a $19.7 million increase in consumer loan originations and a $10.9 million increase in residential mortgage loan originations, partially offset by a $26.6 million reduction in commercial and construction loan originations, primarily reflected in the Florida region.
  • Total capital, common equity Tier 1 capital ("CET1"), Tier 1 capital, and leverage ratios of 24.25%, 20.63%, 21.03%, and 15.64%, respectively, as of June 30, 2019. The tangible common equity ratio was 16.64% as of June 30, 2019.

First BanCorp. (the "Corporation") (NYSE:FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported net income of $41.3 million, or $0.19 per diluted share, for the second quarter of 2019, compared to $43.3 million, or $0.20 per diluted share, for the first quarter of 2019, and $31.0 million, or $0.14 per diluted share, for the second quarter of 2018.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: "We reported another strong quarter of core earnings with net income of $41.3 million or $0.19 per share. Pre-tax, pre-provision income reached another record level at $71 million this quarter. Franchise metrics continue to move in a positive direction. Our loan portfolio grew $118 million, representing our fourth consecutive quarter of loan growth. On a year-over-year basis the loan portfolio has grown over $425 million, almost 5%, reflecting a 19% increase in the consumer portfolio, a 7% increase in the commercial and construction portfolio, and a decrease in the residential loan portfolio of approximately 5%, consistent with previously mentioned strategies. Origination activity was healthy at $885 million and the pipeline for the remainder of the year continues to be strong.

We continue achieving organic reductions in NPAs with a $31 million reduction during the quarter, a 7% decrease which resulted in a ratio of NPAs to asset of 3.06%. Year-over-year we have reduced our NPAs by $237 million, or 38%. We have achieved this through organic reductions with minimal impact on our earnings. Inflows to NPAs for the quarter declined and credit quality improved in almost every asset class.

Our capital continues to grow with tangible book value now at $9.57 per share and our common equity tier 1 capital ratio is 20.6%. Our organization is poised for growth and our teams are well prepared for executing on opportunities within our markets."

SPECIAL ITEMS

The financial results for the second and first quarters of 2019 and the second quarter of 2018 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, 2019

- A $0.8 million ($0.5 million after-tax) benefit resulting from hurricane-related insurance recoveries related to impairments, repairs and maintenance costs incurred on facilities in the British Virgin Islands.

Quarter ended March 31, 2019

- A $6.4 million ($4.0 million after-tax) positive effect in earnings related to loan loss reserve releases resulting from revised estimates of the hurricane-related qualitative reserves associated with the effects of Hurricanes Irma and Maria, primarily related to consumer and commercial loans.

- A $2.3 million expense recovery related to an employee retention benefit payment (the "Benefit") received by the Bank by virtue of the Disaster Tax Relief and Airport Extension Act of 2017, as amended (the "Act"). The Corporation recorded the Benefit as an offset to the employees' compensation and benefits expenses recognized in the first quarter of 2019. See Non-interest expenses below for additional information.

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 resulting from revised estimates of the hurricane-related qualitative 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 of 2018.

The following table reconciles for the second and first quarters of 2019 and the second quarter of 2018 the reported net income to adjusted net income and adjusted earnings per share, non-GAAP financial measures that exclude the Special Items identified above:

Quarter Ended Quarter Ended Quarter Ended
(In thousands) June 30, 2019 March 31, 2019 June 30, 2018
 
Net income, as reported (GAAP)

$ 41,287

$ 43,314

$ 31,032

Adjustments:
Hurricane-related loan loss reserve release

-

(6,425)

(2,057)

Hurricane-related expenses

-

-

654

Benefit from hurricane-related insurance recoveries

(820)

-

-

Employee retention benefit - Disaster Tax Relief and Airport Extension Act of 2017

-

(2,317)

-

Income tax impact of adjustments (1)

308

2,409

547

Adjusted net income (Non-GAAP)

$ 40,775

$ 36,981

$ 30,176

Preferred stock dividends

(669)

(669)

(669)

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

$ 40,106

$ 36,312

$ 29,507

 
Weighted-average diluted shares outstanding

$ 216,978

216,950

216,666

 
Earnings Per Share - diluted (GAAP)

$ 0.19

$ 0.20

$ 0.14

 
Adjusted Earnings Per Share - diluted (Non-GAAP)

$ 0.18

$ 0.17

$ 0.14

 
(1) See Basis of Presentation for the individual tax impact related to each reconciling item.

This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted pre-tax, pre-provision income, adjusted net interest income and margin, tangible common equity, tangible book value per common share, 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

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