• January 29, 2018
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First Bancorp reports 2017 Q4 financial results

• Net income of $24.2 million for the fourth quarter, or $0.11 per diluted share, compared to a net loss of $10.8 million, or $0.05 per diluted share, for the third quarter of 2017. Financial results for the fourth and third quarters of 2017 include charges to the provision for loan and lease losses of $4.8 million ($2.9 million after-tax) and $66.5 million ($40.7 million after-tax), respectively, related to the estimate of inherent losses resulting from the impact of Hurricanes Maria and Irma.

• On a non-GAAP basis, adjusted net income of $28.1 million (which excludes Special Items, which are discussed below and consist of storm-related charges and other 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 $27.4 million for the third quarter of 2017.

• Net interest income decreased by $0.6 million to $122.3 million, compared to $122.8 million for the third quarter of 2017, primarily due to a reduction in the average balance of commercial loans and a decrease in the average balance and yield of U.S. agency mortgage-backed securities (“MBS”).

• Net interest margin was 4.26% compared to 4.33% for the third quarter of 2017, primarily reflecting higher levels of liquidity during the fourth quarter of 2017.

• Provision for loan and lease losses decreased by $49.3 million to $25.7 million, compared to $75.0 million for the third quarter of 2017. A $4.8 million incremental provision expense related to the impact of the storms was recorded during the fourth quarter, primarily due to an increase in estimated losses associated with storm events for its commercial and construction loan portfolios. On a non-GAAP basis (excluding storm-related charges), adjusted provision for loan and lease losses of $20.9 million, compared to an adjusted provision of $8.5 million for the third quarter.

• Non-interest income decreased by $3.7 million to $15.0 million compared to $18.6 million for the third quarter of 2017, primarily due to the effect in the third quarter of a $1.4 million gain on the repurchase and cancellation of $7.3 million in trust preferred securities. In addition, revenues from mortgage banking activities decreased by $1.2 million and service charges on deposit accounts decreased by $0.9 million, both adversely affected by the drop in business activity due to the storms.

• Non-interest expenses decreased by $0.5 million to $85.1 million, compared to $85.6 million for the third quarter of 2017, primarily reflecting reductions in professional service fees and credit and debit card processing expenses. Non-interest expenses for the fourth quarter of 2017 include $1.9 million of storm-related expenses, including insurance deductibles related to damages assessed on certain other real estate owned (“OREO”) properties and estimated storm-related costs not recoverable under insurance policies, compared to $0.6 million for the third quarter of 2017.

• Income tax expense of $2.2 million, compared to income tax benefit of $8.4 million for the third quarter of 2017, a variance mainly related to the income tax benefit recorded in the third quarter associated with the aforementioned storm-related charges and a final year-end tax provision that resulted in a lower than previously estimated effective tax rate for the year.

• Credit quality variances:

(1)Non-performing assets increased in the quarter by $9.9 million, to $650.6 million as of December 31, 2017, primarily from the identification of storm-impacted commercial credits.
(2)Non-performing loan inflows amounted to $58.3 million, compared to inflows of $103.9 million in the third quarter of 2017.
(3)A net charge-off rate of 1.12%, compared to 0.80% for the third quarter of 2017, an increase driven by charge-offs totaling $8.3 million taken on two collateral-dependent commercial and construction loans in Puerto Rico.

• Total deposits, excluding brokered certificates of deposit (“CDs”) and government deposits, increased in the quarter by $377.0 million to $7.2 billion as of December 31, 2017, reflecting increases of $291.4 million and $91.9 million in Puerto Rico and the Virgin Island regions, respectively, partially offset by a decrease of $6.2 million in the Florida region. The most significant increase was in noninterest-bearing demand deposits, which grew 16%, or $247.5 million, in the fourth quarter, which in part reflects the effect of payment deferral programs and disaster relief funds.

• Brokered CDs decreased in the quarter by $104.8 million to $1.2 billion as of December 31, 2017.

• Government deposits decreased in the quarter by $15.5 million to $652.0 million as of December 31, 2017, primarily due to a reduction in balances of transactional accounts of certain municipalities in Puerto Rico.

• Total loans decreased in the quarter by $21.3 million to $8.9 billion as of December 31, 2017. The decrease reflects reductions of $53.6 million and $24.0 million in the Puerto Rico and the Virgin Island regions, respectively, primarily in commercial and industrial loans, partially offset by a $56.2 million growth in the Florida region.

• Total loan originations, including refinancings, renewals and draws from existing commitments (excluding credit card utilization activity), of $546.0 million for the fourth quarter of 2017, compared to $589.7 million for the third quarter of 2017. The decrease was reflected in all major loan categories, including decreases of $23.4 million, $19.3 million, and $1.1 million in consumer, residential mortgage, and commercial and construction loan originations, respectively, adversely affected, among other things, by the initial drop in business activity after the storms.

• As of December 31, 2017, the Corporation had $214.5 million of direct exposure to loans and obligations of the Commonwealth of Puerto Rico government and instrumentalities, of which $184.6 million, or 86%, represented exposure to municipalities, which is supported by assigned property tax revenues, compared to total exposure of $214.8 million as of September 30, 2017, of which $184.6 million, or 86%, represented exposure to municipalities.

• Total capital, common equity Tier 1 capital, Tier 1 capital, and leverage ratios calculated under the transition provisions of the Basel III rules of 22.53%, 18.96%, 18.97%, and 14.03%, respectively, as of December 31, 2017. Tangible common equity ratio of 14.65% as of December 31, 2017.

• First BanCorp reported net income of $24.2 million for the fourth quarter of 2017, or $0.11 per diluted share, compared to a net loss of $10.8 million, or $0.05 per diluted share, for the third quarter of 2017 and net income of $23.9 million, or $0.11 per diluted share, for the fourth quarter of 2016.

• For the year ended December 31, 2017, the Corporation reported net income of $67.0 million, or $0.30 per diluted share, compared to $93.2 million, or $0.43 per diluted share, for the year ended December 31, 2016.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We are quite pleased with our results for the fourth quarter and fiscal year end 2017. Notwithstanding the uncertain macroeconomic backdrop in Puerto Rico, which was further affected by Hurricanes Irma and Maria in September, our institution continues to improve performance metrics and demonstrate the strength of its earnings capabilities. We generated net income for the fourth quarter of $24.2 million, or $0.11 per diluted share, and $67.0 million, or $0.30 per diluted share for the year. Fiscal year results were affected by the hurricanes, including the $66.5 million storm-related provision in the third quarter and $4.8 million in the fourth quarter as well as impact to overall business volumes. Adjusted pre-tax pre-provision income reached $218 million for 2017, a $10 million increase over 2016.

Despite the continued impact of the hurricanes, our fourth quarter and fiscal year 2017 results demonstrate the strength of our franchise. Loan origination volumes in Puerto Rico and the Virgin Islands have been affected by the hurricanes while our steady growth in Florida continues to support our balance sheet. For the year prior to the hurricanes impact, we were averaging over $920 million in origination and renewal volume per quarter compared to an average $640 million over the past two quarters, we expect this to increase in the later part of 2018. During the fourth quarter, deposits net of government and brokered increased by $377 million; $247 million of this increase was noninterest-bearing deposits, mostly in Puerto Rico. Our nonperforming assets increased by $9.9 million related to storm-impacted commercial credits. Since December 31, 2016, we have reduced nonperforming assets by $83.9 million. We will have a better sense of the impact of the storms on our borrowers following the moratorium in the first quarter. While we continue monitoring the impact of the storms on our economy and our customers, we remain confident that our participation in the rebuilding efforts in Puerto Rico will drive better results in 2018.

On the capital front, during the course of 2017 we repurchased $7.3 million of our trust preferred securities; we successfully completed three secondary offerings, through which our private equity owners reduced their positions to below 5% each and the U.S. Treasury exited its position; we continue paying dividends on our preferred stock; and the Federal Reserve lifted the Written Agreement. We continue growing our capital base and at year end our tangible book value per common share grew to $8.28.

Our leadership team is committed to continuing to enhance shareholder value as we rebuild and navigate the Puerto Rico and Virgin Islands economic turnaround and continue to grow our Florida franchise.”

Re-disseminated by The Asian Banker