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Share Name | Share Symbol | Market | Type |
---|---|---|---|
First Bancorp New | NYSE:FBP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.20 | -1.15% | 17.12 | 17.18 | 16.96 | 17.07 | 749,805 | 00:13:42 |
2014 Third Quarter Highlights and Comparison with Second Quarter
First BanCorp. (the “Corporation”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported net income of $23.2 million for the third quarter of 2014, or $0.11 per diluted share, compared to $21.2 million, or $0.11 per diluted share, for the second quarter of 2014 and $15.9 million, or $0.08 per diluted share, for the third quarter of 2013.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We are very pleased to report net income of $23.2 million for the third quarter of 2014, a 46% increase compared to the third quarter of 2013 and our highest net income since returning to profitability. Our pre-tax, pre-provision income was strong at $50.8 million for the third quarter, up $2.1 million compared to the second quarter of 2014. The third quarter was highlighted by increased origination activity in commercial and residential loans and over $105 million in core deposit growth.”
Mr. Alemán continued, “Despite the still challenging economic environment and its impact on the consumer in Puerto Rico, we have stayed the course in the execution of our strategies. While our overall loan portfolio declined slightly due to some pay downs of commercial loans and lower consumer loan volumes, our pipeline remains stable. We continue to proactively manage our expense base and implement efficiency initiatives. Our non-performing assets and loans declined slightly this quarter. We also saw a decrease in inflows of non-performing loans as well as a decrease in adversely classified loans compared to the second quarter of 2014.”
Mr. Alemán stated further: “Earnings generation over the past three quarters has strengthened our capital position. Asset quality improvement remains our top priority, we will continue to invest in our franchise and improve operating efficiency, and evaluate market opportunities in order to achieve consistent, profitable growth in the future and generate appropriate returns for our shareholders.”
This press release includes certain non-GAAP financial measures, including adjusted pre-tax, pre-provision income, adjusted net interest income and margin, and certain capital ratios and should be read in conjunction with the accompanying tables (Exhibit A), which are an integral part of this press release.
ADJUSTED PRE-TAX, PRE-PROVISION INCOME TRENDS
One metric that management believes is useful in analyzing performance is the level of earnings adjusted to exclude tax expense, the provision for loan and lease losses, securities gains or losses, fair value adjustments on derivatives measured at fair value and equity in earnings or loss of unconsolidated entity, which is a non-GAAP financial measure. In addition, from time to time, earnings are adjusted also for items judged by management to be outside of ordinary banking activities and/or for items that, while they may be associated with ordinary banking activities, are so unusually large that management believes that a complete analysis of the Corporation’s performance requires consideration also of results that exclude such amounts (for additional information about this non-GAAP financial measure, see “Adjusted Pre-Tax, Pre-Provision Income” in “Basis of Presentation”).
The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters including adjusted pre-tax, pre-provision income of $50.8 million in the third quarter of 2014, up $2.1 million from the prior quarter:
(Dollars in thousands) Quarter Ended September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 Income before income taxes$
23,265
$ 20,949 $ 17,970 $ 15,634 $ 19,616 Add: Provision for loan and lease losses 26,999 26,744 31,915 22,969 22,195 Add/Less: Net loss (gain) on investments and impairments 245 (291 ) - - - Less: Unrealized gain on derivative instruments (418 ) (262 ) (313 ) (355 ) (232 ) Add: Acquisitions of mortgage loans from Doral related expenses 659 576 - - - Add: Secondary offering costs (1) - - - - 1,669 Add: Credit card processing platform conversion costs - - - - 1,715 Less: National gross receipt tax - outside Puerto Rico (2) - - - (473 ) - Add: Branch consolidations and restructuring expenses/valuation adjustments - 236 718 1,421 - Add: Loss contingency - attorneys' fees Lehman litigation - - - 2,500 - Add/Less: Equity in loss (earnings) of unconsolidated entity - 670 6,610 5,893 5,908 Adjusted pre-tax, pre-provision income (3) $ 50,750 $ 48,622 $ 56,900 $ 47,589 $ 50,871 Change from most recent prior quarter-amount $ 2,128 $ (8,278 ) $ 9,311 $ (3,282 ) $ 14,976 Change from most recent prior quarter-percentage 4.4 % -14.5 % 19.6 % -6.5 % 41.7 % (1) Offering of common stock by certain of the Corporation's existing stockholders. (2) Represents the impact of the national gross receipts tax related to the trade or business outside of Puerto Rico that was reversed in the fourth quarter of 2013 after enactment of Act No. 117. (3) See "Basis of Presentation" for definition.The increase in adjusted pre-tax, pre-provision income from the 2014 second quarter primarily reflected:
Adjusted non-interest expenses in the last two quarters exclude: (i) professional service fees related to acquisitions of mortgage loans from Doral Financial Corporation ("Doral"); and (ii) expenses related to branch consolidations and other restructuring efforts. See Basis of Presentation section below for a reconciliation of this non-GAAP financial measure to the corresponding GAAP measure.
Adjusted non-interest income excludes the equity in earnings (loss) of unconsolidated entity, gain or loss on sales of investment securities and other-than-temporary impairment (“OTTI”) on investment securities. See Basis of Presentation section below for a reconciliation of this non-GAAP financial measure to the corresponding GAAP measure.
Partially offset by:
NET INTEREST INCOME
Net interest income, excluding fair value adjustments on derivatives (“valuations”), and net interest income on a tax-equivalent basis are non-GAAP measures. (See “Basis of Presentation – Net Interest Income, Excluding Valuations and on a Tax-Equivalent Basis” below for additional information.) The following table reconciles net interest income in accordance with GAAP to net interest income, excluding valuations, and net interest income on a tax-equivalent basis. The table also reconciles net interest spread and net interest margin on a GAAP basis to these items excluding valuations and on a tax-equivalent basis.
(Dollars in thousands) Quarter EndedSeptember 30,2014
June 30,2014
March 31,2014
December 31,2013
September 30,2013
Net Interest Income Interest Income - GAAP $ 156,662 $ 158,423 $ 160,571 $ 162,690 $ 162,203
Unrealized gain on derivative instruments
(418 ) (262 ) (313 ) (355 ) (232 ) Interest income excluding valuations 156,244 158,161 160,258 162,335 161,971 Tax-equivalent adjustment 3,995 5,005 5,223 5,122 4,420 Interest income on a tax-equivalent basis excluding valuations 160,239 163,166 165,481 167,457 166,391 Interest Expense - GAAP 28,968 28,516 29,251 30,031 31,298 Net interest income - GAAP $ 127,694 $ 129,907 $ 131,320 $ 132,659 $ 130,905 Net interest income excluding valuations $ 127,276 $ 129,645 $ 131,007 $ 132,304 $ 130,673 Net interest income on a tax-equivalent basis excluding valuations $ 131,271 $ 134,650 $ 136,230 $ 137,426 $ 135,093 Average Balances Loans and leases $ 9,476,576 $ 9,560,792 $ 9,662,735 $ 9,665,013 $ 9,639,612 Total securities and other short-term investments 2,768,923 2,811,178 2,816,253 2,719,241 2,719,973 Average Interest-Earning Assets $ 12,245,499 $ 12,371,970 $ 12,478,988 $ 12,384,254 $ 12,359,585 Average Interest-Bearing Liabilities $ 10,245,634 $ 10,395,437 $ 10,542,793 $ 10,450,671 $ 10,409,792 Average Yield/Rate Average yield on interest-earning assets - GAAP 5.08 % 5.14 % 5.22 % 5.21 % 5.21 % Average rate on interest-bearing liabilities - GAAP 1.12 % 1.10 % 1.13 % 1.14 % 1.19 % Net interest spread - GAAP 3.96 % 4.04 % 4.09 % 4.07 % 4.02 % Net interest margin - GAAP 4.14 % 4.21 % 4.27 % 4.25 % 4.20 % Average yield on interest-earning assets excluding valuations 5.06 % 5.13 % 5.21 % 5.20 % 5.20 % Average rate on interest-bearing liabilities excluding valuations 1.12 % 1.10 % 1.13 % 1.14 % 1.19 % Net interest spread excluding valuations 3.94 % 4.03 % 4.08 % 4.06 % 4.01 % Net interest margin excluding valuations 4.12 % 4.20 % 4.26 % 4.24 % 4.19 % Average yield on interest-earning assets on a tax-equivalent basis and excluding valuations 5.19 % 5.29 % 5.38 % 5.36 % 5.34 % Average rate on interest-bearing liabilities excluding valuations 1.12 % 1.10 % 1.13 % 1.14 % 1.19 % Net interest spread on a tax-equivalent basis and excluding valuations 4.07 % 4.19 % 4.25 % 4.22 % 4.15 % Net interest margin on a tax-equivalent basis and excluding valuations 4.25 % 4.37 % 4.43 % 4.40 % 4.34 %Net interest income, excluding valuations, amounted to $127.3 million, a decrease of $2.4 million when compared to the second quarter of 2014. The net interest margin decreased to 4.12% for the third quarter of 2014 from 4.20% for the second quarter of 2014. The decreases in net interest income and margin were mainly due to:
Partially offsetting the aforementioned items were:
PROVISION FOR LOAN AND LEASE LOSSES
The provision for loan and lease losses for the third quarter of 2014 was $27.0 million, an increase of $0.3 million, compared to $26.7 million for the second quarter of 2014. The Corporation recorded a negative provision for loan losses of $7.1 million for the commercial and construction loan portfolio in Florida compared to a negative provision of $10.5 million in the second quarter of 2014. Despite higher loan loss recoveries, the variance in the provision mainly reflects the impact in the previous quarter of reserve releases related to updated appraisals.
The provision for residential mortgage loans in the third quarter of 2014 increased by $2.0 million to $5.9 million compared to the second quarter of 2014 primarily due to an increase in charge-offs and the overall increase in portfolio size. The provision for consumer loans of $19.0 million in the third quarter of 2014 remained relatively flat as compared to the second quarter of 2014, an increase of $0.2 million.
The provision for commercial and construction loans in Puerto Rico in the third quarter of 2014 decreased by $5.3 million to $8.9 million compared to the second quarter of 2014 mainly related to lower specific reserve requirements on certain noncollateral dependent loans, including the specific reserve of a commercial and industrial loan determined impaired during the third quarter that was less than the estimated loss previously held as part of the general reserve, partially offset by an increase in net charge-offs of commercial and industrial loans and the impact in the previous quarter of a $4.8 million reserve release associated with the enhancements to the general allowance estimation process.
See Credit Quality discussion below for additional information regarding the allowance for loan and lease losses, including variances in charge-offs and loss recoveries.
NON-INTEREST INCOME
Quarter Ended September 30, June 30, March 31, December 31, September 30, (In thousands) 2014 2014 2014 2013 2013 Service charges on deposit accounts $ 3,235 $ 3,290 $ 3,203 $ 3,162 $ 3,157 Mortgage banking activities 3,809 3,036 3,368 3,906 3,521 Net (loss) gain on investments and impairments (245 ) 291 - - - Broker-dealer income - - 459 97 - Branch consolidations - valuation adjustments on fixed assets - - - (529 ) - Other operating income 9,375 9,984 10,930 11,742 9,290 Equity in (loss) earnings of unconsolidated entity - (670 ) (6,610 ) (5,893 ) (5,908 ) Non-interest income $ 16,174 $ 15,931 $ 11,350 $ 12,485 $ 10,060Non-interest income for the third quarter of 2014 amounted to $16.2 million, compared to $15.9 million for the second quarter of 2014. The increase was primarily due to:
The aforementioned were partially offset by a $0.2 million decrease in realized gains on loan sales and securitization activities attributable to lower sales. Loans sold and securitized in the secondary market to government-sponsored entities in the third quarter of 2014 amounted to $75.1 million with a related gain of $2.7 million, compared to $83.1 million and a gain of $2.9 million recorded in the second quarter of 2014.
Partially offset by:
Non-interest expenses in the third quarter of 2014 amounted to $93.6 million, a decrease of $4.5 million from $98.1 million for the second quarter of 2014. The main drivers of the decrease were:
INCOME TAXES
The Corporation recorded an income tax expense for the third quarter of 2014 of $0.1 million compared to an income tax benefit of $0.3 million for the second quarter of 2014. The income tax benefit in the previous quarter mainly resulted from the $1.8 million adjustment recorded to reduce the liability for uncertain tax positions of prior years that was partially offset by a $1.0 million charge to the Alternative Minimum Tax (“AMT”) expense in the second quarter. Under the Puerto Rico Internal Revenue Code, the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns and, thus, the Corporation is not able to utilize losses from one subsidiary to offset gains in another subsidiary. As of September 30, 2014, the deferred tax asset, net of a valuation allowance of $505.2 million, amounted to $9.9 million.
CREDIT QUALITY
Non-Performing Assets
(Dollars in thousands) September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 Non-performing loans held for investment: Residential mortgage $ 185,025 $ 175,404 $ 172,796 $ 161,441 $ 142,002 Commercial mortgage 169,967 166,218 145,535 120,107 127,374 Commercial and Industrial 130,917 143,669 113,996 114,833 127,584 Construction 30,111 38,830 50,387 58,866 64,241 Consumer and Finance leases 43,496 40,510 39,061 40,302 37,184 Total non-performing loans held for investment 559,516 564,631 521,775 495,549 498,385 OREO 112,803 121,842 138,622 160,193 133,284 Other repossessed property 17,467 16,114 15,587 14,865 14,125 Total non-performing assets, excluding loans held for sale $ 689,786 $ 702,587 $ 675,984 $ 670,607 $ 645,794 Non-performing loans held for sale 54,641 54,755 54,755 54,801 80,234 Total non-performing assets, including loans held for sale (1) $ 744,427 $ 757,342 $ 730,739 $ 725,408 $ 726,028 Past-due loans 90 days and still accruing (2) $ 143,535 $ 143,916 $ 118,049 $ 120,082 $ 127,735 Non-performing loans held for investment to total loans held for investment 6.01 % 5.96 % 5.45 % 5.14 % 5.24 % Non-performing loans to total loans 6.54 % 6.49 % 5.98 % 5.67 % 6.01 %Non-performing assets, excluding non-performing loans held for sale to total assets, excluding non-performing loans held for sale
5.48 % 5.63 % 5.30 % 5.32 % 5.08 % Non-performing assets to total assets 5.89 % 6.05 % 5.70 % 5.73 % 5.68 %(1) Purchased credit impaired loans of $104.3 million accounted for under ASC 310-30 as of September 30, 2014, primarily mortgage loans acquired from Doral 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 purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2014 of approximately $15.6 million, primarily related to loans acquired from Doral.
Credit quality metrics variances:
Allowance for Loan and Lease Losses
The following table sets forth an analysis of the allowance for loan and lease losses during the periods indicated:
Quarter Ended (Dollars in thousands) September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 Allowance for loan and lease losses, beginning of period $ 241,177 $ 266,778 $ 285,858 $ 289,379 $ 301,047 Provision for loan and lease losses 26,999 26,744 (1) 31,915 22,969 22,195 Net (charge-offs) recoveries of loans: Residential mortgage (5,734 ) (4,687 ) (6,353 ) (4,544 ) (8,457 ) Commercial mortgage 1,116 (9,126 ) (5,775 ) 2,605 (5,918 ) Commercial and Industrial (16,431 ) (19,036 ) (2) (21,796 ) (9,146 ) (5,718 ) Construction (3,205 ) (2,606 ) (353 ) (435 ) 71 Consumer and finance leases (18,488 ) (16,890 ) (16,718 ) (14,970 ) (13,841 ) Net charge-offs (42,742 ) (52,345 ) (50,995 ) (26,490 ) (33,863 ) Allowance for loan and lease losses, end of period $ 225,434 $ 241,177 $ 266,778 $ 285,858 $ 289,379 Allowance for loan and lease losses to period end total loans held for investment 2.42 % 2.55 % 2.79 % 2.97 % 3.04 % Net charge-offs (annualized) to average loans outstanding during the period 1.80 % 2.19 % 2.11 % 1.10 % 1.41 %Net charge-offs (annualized), excluding charge-offs of $6.9 million related to the acquisition of mortgage loans from Doral, to average loans outstanding during the period
1.80 % 1.90 % 2.11 % 1.10 % 1.41 % Provision for loan and lease losses to net charge-offs during the period 0.63x 0.51x 0.63x 0.87x 0.66xProvision for loan and lease losses to net charge-offs during the period, excluding impact of the acquisition of mortgage loans from Doral
0.63x 0.56x 0.63x 0.87x 0.66x (1) Includes provision of $1.4 million associated with the acquisition of mortgage loans from Doral. (2) Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral.The following table sets forth information concerning the composition of the Corporation’s allowance for loan and lease losses as of September 30, 2014 and June 30, 2014 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)ResidentialMortgage Loans
Commercial (includingCommercial Mortgage,C&I, and Constructionloans)
Consumer andFinance Leases
Total As of September 30, 2014 Impaired loans: Principal balance of loans, net of charge-offs $ 421,823 $ 519,186 $ 32,005 $ 973,014 Allowance for loan and lease losses 17,515 38,331 5,295 61,141 Allowance for loan and lease losses to principal balance 4.15 % 7.38 % 16.54 % 6.28 % PCI loans: Carrying value of PCI loans 99,535 3,418 1,360 104,313 Allowance for PCI loans - - - - Allowance for PCI loans to carrying value - - - - Loans with general allowance: Principal balance of loans 2,298,290 3,946,563 1,993,222 8,238,075 Allowance for loan and lease losses 12,391 91,995 59,907 164,293 Allowance for loan and lease losses to principal balance 0.54 % 2.33 % 3.01 % 1.99 % Total loans held for investment: Principal balance of loans $ 2,819,648 $ 4,469,167 $ 2,026,587 $ 9,315,402 Allowance for loan and lease losses 29,906 130,326 65,202 225,434 Allowance for loan and lease losses to principal balance 1.06 % 2.92 % 3.22 % 2.42 % As of June 30, 2014 Impaired loans: Principal balance of loans, net of charge-offs $ 414,448 $ 465,482 $ 28,928 $ 908,858 Allowance for loan and lease losses 16,464 48,024 3,870 68,358 Allowance for loan and lease losses to principal balance 3.97 % 10.32 % 13.38 % 7.52 % PCI loans: Carrying value of PCI loans 99,997 3,447 2,176 105,620 Allowance for PCI loans - - - - Allowance for PCI loans to carrying value - - - - Loans with general allowance: Principal balance of loans 2,280,714 4,140,745 2,031,164 8,452,623 Allowance for loan and lease losses 13,291 98,736 60,792 172,819 Allowance for loan and lease losses to principal balance 0.58 % 2.38 % 2.99 % 2.04 % Total loans held for investment: Principal balance of loans $ 2,795,159 $ 4,609,674 $ 2,062,268 $ 9,467,101 Allowance for loan and lease losses 29,755 146,760 64,662 241,177 Allowance for loan and lease losses to principal balance 1.06 % 3.18 % 3.14 % 2.55 %Net Charge-Offs
The following table presents annualized net charge-offs to average loans held-in-portfolio:
Quarter Ended September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 Residential mortgage 0.82 % 0.71 % 1.00 % 0.72 % 1.31 % Commercial mortgage -0.24 % 2.00 % 1.27 % -0.57 % 1.23 % Commercial and Industrial 2.54 % 2.69 % (1) 2.90 % 1.21 % 0.81 % Construction 6.57 % 5.25 % 0.65 % 0.81 % -0.11 % Consumer and finance leases 3.62 % 3.27 % 3.23 % 2.91 % 2.71 % Total loans 1.80 % 2.19 % (2) 2.11 % 1.10 % 1.41 %(1) Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral, was 1.81%.
(2) Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral, was 1.90%.
The ratios above are based on annualized net charge-offs and are not necessarily indicative of the results expected in subsequent periods.
STATEMENT OF FINANCIAL CONDITION
Total assets were approximately $12.6 billion as of September 30, 2014, up $120.0 million from June 30, 2014.
The increase was mainly due to:
Partially offset by:
Total loan originations, including refinancings, renewals, and draws from existing revolving and non-revolving commitments, amounted to approximately $821.2 million, compared to $781.3 million in the second quarter of 2014. These figures exclude the credit card utilization activity. The increase was mainly related to commercial and industrial loans in both our Puerto Rico and the Virgin Islands regions.
Total liabilities were approximately $11.3 billion as of September 30, 2014, up $101.9 million from June 30, 2014.
The increase was mainly due to:
Partially offset by:
Total stockholders’ equity amounted to $1.3 billion as of September 30, 2014, an increase of $18.2 million from June 30, 2014, mainly driven by:
Partially offset by:
The Corporation’s total capital, Tier 1 capital, and leverage ratios as of September 30, 2014 were 18.57%, 17.30%, and 12.34%, respectively, compared to total capital, Tier 1 capital and leverage ratios of 18.06%, 16.80%, and 12.04%, respectively, as of the end of the second quarter of 2014. Meanwhile, the total capital, Tier 1 capital, and leverage ratios as of September 30, 2014 of our banking subsidiary, FirstBank Puerto Rico, were 18.21%, 16.95%, and 12.10%, respectively, compared to total capital, Tier 1 capital, and leverage ratios of 17.70%, 16.43%, and 11.79%, respectively, as of the end of the prior quarter. All of the regulatory capital ratios for the Bank are well above the minimum required under the consent order entered into with the FDIC and the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico. Given such consent order, however, the Bank cannot be considered to be a well-capitalized institution.
Based on our current interpretation of the international regulatory capital requirements adopted by the Basel Committee on Banking Supervision (known as “Basel 3”), we anticipate that, when these are effective, we will exceed the fully phased-in minimum capital ratios these rules establish.
Tangible Common Equity
The Corporation’s tangible common equity ratio increased to 9.82% as of September 30, 2014 from 9.76% as of June 30, 2014, and the Tier 1 common equity to risk-weighted assets ratio increased to 14.39% as of September 30, 2014 from 13.92% as of June 30, 2014.
The following table is 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) September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 Tangible Equity: Total equity - GAAP $ 1,324,157 $ 1,306,001 $ 1,255,898 $ 1,215,858 $ 1,220,593 Preferred equity (36,104 ) (36,104 ) (56,810 ) (63,047 ) (63,047 ) Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 ) Purchased credit card relationship (17,235 ) (18,080 ) (18,942 ) (19,787 ) (20,718 ) Core deposit intangible (5,810 ) (6,200 ) (6,591 ) (6,981 ) (7,570 ) Tangible common equity $ 1,236,910 $ 1,217,519 $ 1,145,457 $ 1,097,945 $ 1,101,160 Tangible Assets: Total assets - GAAP $ 12,643,280 $ 12,523,251 $ 12,819,428 $ 12,656,925 $ 12,787,450 Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 ) Purchased credit card relationship (17,235 ) (18,080 ) (18,942 ) (19,787 ) (20,718 ) Core deposit intangible (5,810 ) (6,200 ) (6,591 ) (6,981 ) (7,570 ) Tangible assets $ 12,592,137 $ 12,470,873 $ 12,765,797 $ 12,602,059 $ 12,731,064 Common shares outstanding 212,978 212,760 208,968 207,069 207,043 Tangible common equity ratio 9.82 % 9.76 % 8.97 % 8.71 % 8.65 % Tangible book value per common share $ 5.81 $ 5.72 $ 5.48 $ 5.30 $ 5.32The following table reconciles stockholders’ equity (GAAP) to Tier 1 common equity based on current applicable bank regulatory requirements (known as “Basel 1”):
(Dollars in thousands) As of September 30, June 30, March 31, December 31, September 30, 2014 2014 2014 2013 2013 Tier 1 Common Equity: Total equity - GAAP $ 1,324,157 $ 1,306,001 $ 1,255,898 $ 1,215,858 $ 1,220,593 Qualifying preferred stock (36,104 ) (36,104 ) (56,810 ) (63,047 ) (63,047 ) Unrealized loss on available-for-sale securities (1) 34,301 28,381 56,180 78,734 58,485 Disallowed deferred tax asset (2) - - (25 ) - (43 ) Goodwill (28,098 ) (28,098 ) (28,098 ) (28,098 ) (28,098 ) Core deposit intangible (5,810 ) (6,200 ) (6,591 ) (6,981 ) (7,570 ) Other disallowed assets (23 ) (23 ) (23 ) (23 ) (410 ) Tier 1 common equity $ 1,288,423 $ 1,263,957 $ 1,220,531 $ 1,196,443 $ 1,179,910 Total risk-weighted assets $ 8,954,477 $ 9,079,164 $ 9,255,697 $ 9,405,798 $ 9,402,910 Tier 1 common equity to risk-weighted assets ratio 14.39 % 13.92 % 13.19 % 12.72 % 12.55 %1) Tier 1 capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with regulatory risk-based capital guidelines. In arriving at Tier 1 capital, institutions are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax.
2) Approximately $11.3 million of the Corporation's deferred tax assets as of September 30, 2014 (June 30, 2014 - $9.9 million; March 31, 2014 - $9 million; December 31, 2013 - $7 million; September 30, 2013 - $7.7 million) was included without limitation in regulatory capital pursuant to the risk-based capital guidelines, while approximately $0 of such assets as of September 30, 2014 (June 30, 2014 - $0; March 31, 2014 - $25 thousand; December 31, 2013 - $0; September 30, 2013 - $43 thousand) exceeded the limitation imposed by these guidelines and, as "disallowed deferred tax assets," was deducted in calculating Tier 1 capital. According to regulatory capital guidelines, the deferred tax assets that are dependent upon future taxable income are limited for inclusion in Tier 1 capital to the lesser of: (i) the amount of such deferred tax asset that the entity expects to realize within one year of the calendar quarter-end date, based on its projected future taxable income for that year, or (ii) 10% of the amount of the entity's Tier 1 capital. Approximately $1.4 million of the Corporation's other net deferred tax liability as of September 30, 2014 (June 30, 2014 - $1.2 million deferred tax liability; March 31, 2014 - $0.8 million deferred tax liability; December 31, 2013 - $0.3 million deferred tax asset; September 30, 2013 - $0.3 million deferred tax liability) represented primarily the deferred tax effects of unrealized gains and losses on available-for-sale debt securities, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.
Exposure to Puerto Rico Government
As of September 30, 2014, the Corporation had $364.3 million of credit facilities granted to the Puerto Rico Government, its municipalities and public corporations, of which $316.3 million was outstanding, compared to $340.7 million outstanding as of June 30, 2014. Approximately $201.4 million of the granted credit facilities outstanding consisted of loans to municipalities in Puerto Rico for which, in most cases, the good faith, credit and unlimited taxing power of the applicable municipality have been pledged to their repayment. Approximately $24.8 million consisted of loans to units of the central government, and approximately $90.1 million consisted of loans to public corporations, including a $75.0 million direct exposure to PREPA. In addition, the Corporation had $200.4 million outstanding in financings to the hotel industry in Puerto Rico guaranteed by the Puerto Rico Tourism Development Fund.
In August 2014, PREPA entered into a forbearance agreement with a group of banks, including First Bank, to extend further its maturing credit lines to March 31, 2015.
The Corporation had outstanding $61.1 million in obligations of the Puerto Rico government as part of its available-for-sale investment securities portfolio carried on its books at a fair value of $46.4 million as of September 30, 2014. The fair value of the Puerto Rico government obligations held by the Corporation increased by approximately $1.3 million during the third quarter of 2014.
As of September 30, 2014, the Corporation had $250.9 million of public sector deposits in Puerto Rico, compared to $252.6 million as of June 30, 2014. Approximately 57% is from municipalities in Puerto Rico and 43% is from public corporations and the central government and agencies.
Conference Call / Webcast Information
First BanCorp’s senior management will host an earnings conference call and live webcast on Tuesday, October 28, 2014, 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.firstbankpr.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.firstbankpr.com, until October 28, 2015. A telephone replay will be available one hour after the end of the conference call through November 28, 2014 at (877) 344-7529 or (412) 317-0088 for international callers. The conference number is 10054531.
Safe Harbor
This press release may contain “forward-looking statements” concerning the Corporation’s future economic performance. The words or phrases “expect,” “anticipate,” “look forward,” “should,” “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 wishes to caution readers not to place undue reliance on any such “forward-looking statements,” which speak only as of the date made, and to advise 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: uncertainty about whether the Corporation and FirstBank will be able to fully comply with the written agreement dated June 3, 2010 that the Corporation entered into with the Federal Reserve Bank of New York (the “New York Fed”) and the consent order dated June 2, 2010 that FirstBank entered into with the FDIC and the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico (the “FDIC Order”) that, among other things, require FirstBank to maintain certain capital levels and reduce its special mention, classified, delinquent, and non-performing assets; the risk of being subject to possible additional regulatory actions; uncertainty as to the availability of certain funding sources, such as brokered CDs; the Corporation’s reliance on brokered CDs and its ability to obtain, on a periodic basis, approval from the FDIC to issue brokered CDs to fund operations and provide liquidity in accordance with the terms of the FDIC Order; the risk of not being able to fulfill the Corporation’s cash obligations or resume paying dividends to the Corporation’s stockholders in the future due to the Corporation’s inability to receive approval from the New York Fed or the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) to receive dividends from FirstBank or FirstBank’s failure to generate sufficient cash flow to make a dividend payment to the Corporation; the strength or weakness of the real estate markets and of the consumer and commercial credit sectors and their impact on the credit quality of the Corporation’s loans and other assets, which has contributed and may continue to contribute to, among other things, high levels of non-performing assets, charge-offs, and provisions and may subject the Corporation to further risk from loan defaults and foreclosures; the ability of FirstBank to realize the benefit of its deferred tax asset; adverse changes in general economic conditions in Puerto Rico, the U.S., and the U.S. Virgin Islands and 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 may reduce interest margins, impact funding sources, and affect demand for all of the Corporation’s products and services and reduce the Corporation’s revenues, earnings, and the value of the Corporation’s assets; a credit default by the Puerto Rico government or any of its public corporations or other instrumentalities, 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; an adverse change in the Corporation’s ability to attract new clients and retain existing ones; a decrease in demand for the Corporation’s products and services and lower revenues and earnings because of the continued recession in Puerto Rico, the current fiscal problems of the Puerto Rico government and recent credit downgrades of the Puerto Rico government’s debt; the risk that any portion of the unrealized losses in the Corporation’s investment portfolio is determined to be other-than-temporary, including unrealized losses on Puerto Rico government obligations; uncertainty about regulatory and legislative changes for financial services companies in Puerto Rico, the U.S., and the U.S. Virgin Islands 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, including those determined by the Federal Reserve Board, the New York Fed, the FDIC, government-sponsored housing agencies, and regulators in Puerto Rico and the U.S. and British Virgin Islands; the risk of possible failure or circumvention of controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; the risk that the FDIC may further increase the deposit insurance premium and/or require special assessments 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 additional impairments on 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 of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Corporation’s businesses, business practices, and cost of operations; 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 set forth when management believes they will be helpful to an 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 to the comparable GAAP financial measure, can be found in the text or in the attached tables to this earnings release.
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. Tangible assets are total assets less goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card 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. 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.
Tier 1 Common Equity to Risk-Weighted Assets Ratio
The Tier 1 common equity to risk-weighted assets ratio is calculated by dividing (a) Tier 1 capital less non-common elements including qualifying perpetual preferred stock and qualifying trust preferred securities by (b) risk-weighted assets, which assets are calculated in accordance with current applicable bank regulatory requirements (Basel 1). The Tier 1 common equity ratio is not required by GAAP or on a recurring basis by applicable bank regulatory requirements. Management is currently monitoring this ratio, along with the other ratios discussed above, in evaluating the Corporation’s capital levels and believes that, at this time, the ratio may be of interest to investors.
Adjusted Pre-Tax, Pre-Provision Income
Adjusted pre-tax, pre-provision income is a non-GAAP performance metric that management believes is useful in analyzing underlying performance trends, particularly in times of economic stress. Adjusted pre-tax, pre-provision income, as defined by management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, gains on sale and OTTI of investment securities, fair value adjustments on derivatives, equity in earnings or loss of unconsolidated entity as well as certain items identified as unusual, non-recurring or non-operating.
In addition, from time to time, adjusted pre-tax, pre-provision income will reflect the omission of revenue or expense items that management judges to be outside of ordinary banking activities and/or of items that, while they may be associated with ordinary banking activities, are so unusually large that management believes that a complete analysis of the Corporation’s performance requires consideration also of adjusted pre-tax, pre-provision income that excludes such amounts.
Net Interest Income, Excluding Valuations and on a Tax-Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis. The presentation of net interest income excluding valuations provides additional information about the Corporation’s net interest income and facilitates comparability and analysis. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and certain loans, on a common basis that facilitates comparison of results to results of peers.
Financial measures adjusted to exclude the effect of expenses related to the acquisitions of mortgage loans from Doral, expenses related to branch consolidations and other restructuring expenses, equity in earnings (loss) of unconsolidated entity, gains or losses on sales of investment securities and OTTI of investment securities.
To supplement the Corporation’s financial statements presented in accordance with GAAP, the Corporation provides additional measures of adjusted non-interest expenses and adjusted non-interest income. Adjusted non-interest expenses exclude professional service fees specifically related to the acquisitions of mortgage loans from Doral, expenses related to branch consolidations in Puerto Rico, and expenses associated with the restructuring of some business units. Adjusted non-interest income excludes equity in earnings (loss) of unconsolidated entity, gains (losses) on sales of investments and OTTI of investment securities. Management believes that these non-GAAP measures enhance the ability of analysts and investors to analyze trends in the Corporation’s business and to better understand the performance of the Corporation. In addition, the Corporation may utilize these non-GAAP financial measures as a guide in its budgeting and long-term planning process. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. The following table shows reconciliations of these non-GAAP financial measures to the corresponding measures calculated and presented in accordance with GAAP.
(Dollars in thousands) 2014 Third Quarter As Reported (GAAP)Branch consolidationand optimizationexpenses
Equity in loss ofunconsolidatedentity
Acquisition ofmortgage loansfrom Doralrelatedexpenses
OTTI on debtsecurities
Adjusted (Non-GAAP)
Non-interest income $ 16,174 $ - $ - $ - $ 245 $ 16,419 Non-interest expenses $ 93,604 $ - $ - $ (659 ) $ - $ 92,945 (Dollars in thousands) 2014 Second QuarterAs Reported(GAAP)
Branch consolidationand optimizationexpenses
Equity in loss ofunconsolidatedentity
Acquisition ofmortgage loansfrom Doralrelatedexpenses
Gain on sale ofinvestments
Adjusted (Non-GAAP)
Non-interest income $ 15,931 $ - $ 670 $ (291 ) $ 16,310 Non-interest expenses $ 98,145 $ (236 ) $ - $ (576 ) $ 97,333 FIRST BANCORP Condensed Consolidated Statements of Financial Condition As of September 30, June 30, December 31, (In thousands, except for share information) 2014 2014 2013 ASSETS Cash and due from banks $ 953,038 $ 660,709 $ 454,302 Money market investments: Time deposits with other financial institutions 300 300 300 Other short-term investments 16,657 16,653 201,069 Total money market investments 16,957 16,953 201,369 Investment securities available for sale, at fair value 1,977,137 1,997,408 1,978,282 Other equity securities 25,752 29,141 28,691 Total investment securities 2,002,889 2,026,549 2,006,973 Investment in unconsolidated entity - - 7,279 Loans, net of allowance for loan and lease losses of $225,434 (June 30, 2014 - $241,177; December 31, 2013 - $285,858) 9,089,968 9,225,924 9,350,312 Loans held for sale, at lower of cost or market 80,014 72,105 75,969 Total loans, net 9,169,982 9,298,029 9,426,281 Premises and equipment, net 167,916 170,056 166,946 Other real estate owned 112,803 121,842 160,193 Accrued interest receivable on loans and investments 48,516 52,092 54,012 Other assets 171,179 177,021 179,570 Total assets $ 12,643,280 $ 12,523,251 $ 12,656,925 LIABILITIES Deposits: Non-interest-bearing deposits $ 862,422 $ 851,038 $ 851,212 Interest-bearing deposits 8,840,752 8,779,750 9,028,712 Total deposits 9,703,174 9,630,788 9,879,924 Securities sold under agreements to repurchase 900,000 900,000 900,000 Advances from the Federal Home Loan Bank (FHLB) 325,000 320,000 300,000 Other borrowings 231,959 231,959 231,959 Accounts payable and other liabilities 158,990 134,503 129,184 Total liabilities 11,319,123 11,217,250 11,441,067 STOCKHOLDERS' EQUITYPreferred Stock, authorized 50,000,000 shares: issued 22,828,174 shares;outstanding 1,444,146 (June 30, 2014 - 1,444,146 shares outstanding;December 31, 2013 - 2,521,872 shares outstanding); aggregateliquidation value of $36,104 (June 30, 2014 - $36,104; December 31, 2013 - $63,047)
36,104 36,104 63,047 Common stock, $0.10 par value, authorized 2,000,000,000 shares; issued, 213,642,311 shares (June 30, 2014 - 213,399,037 shares issued; December 31, 2013 - 207,635,157 shares issued) 21,364 21,340 20,764 Less: Treasury stock (at par value) (66 ) (64 ) (57 ) Common stock outstanding, 212,977,588 shares outstanding (June 30, 2014 - 212,760,158 shares outstanding; December 31, 2013 - 207,068,978 shares outstanding) 21,298 21,276 20,707 Additional paid-in capital 915,231 914,382 888,161 Retained earnings 385,847 362,646 322,679 Accumulated other comprehensive loss (34,323 ) (28,407 ) (78,736 ) Total stockholders' equity 1,324,157 1,306,001 1,215,858 Total liabilities and stockholders' equity $ 12,643,280 $ 12,523,251 $ 12,656,925 FIRST BANCORP Condensed Consolidated Statements of Income (Loss) Quarter Ended Nine-Month Period Ended (In thousands, except per share information) September 30, June 30, September 30, September 30, September 30, 2014 2014 2013 2014 2013 Net interest income: Interest income $ 156,662 $ 158,423 $ 162,203 $ 475,656 $ 483,098 Interest expense 28,968 28,516 31,298 86,735 100,812 Net interest income 127,694 129,907 130,905 388,921 382,286 Provision for loan and lease losses 26,999 26,744 22,195 85,658 220,782 Net interest income after provision for loan and lease losses 100,695 103,163 108,710 303,263 161,504 Non-interest income (loss): Service charges on deposit accounts 3,235 3,290 3,157 9,728 9,635 Mortgage banking activities 3,809 3,036 3,521 10,213 12,924 Net (loss) gain on investments and impairments (245 ) 291 - 46 (159 ) Equity in (loss) earnings of unconsolidated entity - (670 ) (5,908 ) (7,280 ) (10,798 ) Impairment of collateral pledged to Lehman - - - - (66,574 ) Other non-interest income 9,375 9,984 9,290 30,748 26,998 Total non-interest income (loss) 16,174 15,931 10,060 43,455 (27,974 ) Non-interest expenses: Employees' compensation and benefits 33,964 35,023 32,823 101,929 99,493 Occupancy and equipment 14,727 14,482 15,109 43,527 45,062 Business promotion 3,925 4,142 3,538 12,040 10,726 Professional fees 11,533 11,371 11,840 32,944 36,707 Taxes, other than income taxes 4,528 4,504 4,718 13,607 14,009 Insurance and supervisory fees 9,493 10,784 11,513 31,267 37,018 Net loss on other real estate owned operations 4,326 6,778 7,052 16,941 29,191 Other non-interest expenses 11,108 11,061 12,561 32,279 36,281 Total non-interest expenses 93,604 98,145 99,154 284,534 308,487 Income (loss) before income taxes23,265
20,949 19,616 62,184 (174,957 ) Income tax (expense) benefit (64 ) 276 (3,676 ) (675 ) (4,319 ) Net income (loss) $ 23,201 $ 21,225 $ 15,940 $ 61,509 $ (179,276 ) Net income (loss) attributable to common stockholders $ 23,201 $ 22,505 $ 15,940 $ 63,168 $ (179,276 ) Earnings (loss) per common share: Basic $ 0.11 $ 0.11 $ 0.08 $ 0.30 $ (0.87 ) Diluted $ 0.11 $ 0.11 $ 0.08 $ 0.30 $ (0.87 )About First BanCorp.
First BanCorp. is the parent corporation of FirstBank Puerto Rico, a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida, and of FirstBank Insurance Agency. First BanCorp. and FirstBank Puerto Rico operate within U.S. banking laws and regulations. The Corporation operates a total of 143 branches, stand-alone offices, and in-branch service centers throughout Puerto Rico, the U.S. and British Virgin Islands, and Florida. Among the subsidiaries of FirstBank Puerto Rico are First Federal Finance Corp., a small loan company; FirstBank Puerto Rico Securities, a broker-dealer subsidiary; First Management of Puerto Rico; and FirstMortgage, Inc., a mortgage origination company. In the U.S. Virgin Islands, FirstBank operates First Express, a small loan company. 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.firstbankpr.com.
EXHIBIT A
Table 1 - Selected Financial Data(In thousands, except for per share
and financial ratios data)
Quarter Ended Nine-Month Period Ended September 30, June 30, September 30, September 30, September 30, 2014 2014 2013 2014 2013 Condensed Income Statements: Total interest income $ 156,662 $ 158,423 $ 162,203 $ 475,656 $ 483,098 Total interest expense 28,968 28,516 31,298 86,735 100,812 Net interest income 127,694 129,907 130,905 388,921 382,286 Provision for loan and lease losses 26,999 26,744 22,195 85,658 220,782 Non-interest income (loss) 16,174 15,931 10,060 43,455 (27,974 ) Non-interest expenses 93,604 98,145 99,154 284,534 308,487 Income (loss) before income taxes23,265
20,949 19,616 62,184 (174,957 ) Income tax (expense) benefit (64 ) 276 (3,676 ) (675 ) (4,319 ) Net income (loss) 23,201 21,225 15,940 61,509 (179,276 ) Net income (loss) attributable to common stockholders 23,201 22,505 15,940 63,168 (179,276 ) Per Common Share Results: Net earnings (loss) per share basic $ 0.11 $ 0.11 $ 0.08 $ 0.30 $ (0.87 ) Net earnings (loss) per share diluted $ 0.11 $ 0.11 $ 0.08 $ 0.30 $ (0.87 ) Cash dividends declared $ - $ - $ - $ - $ - Average shares outstanding 210,466 208,202 205,579 208,151 205,512 Average shares outstanding diluted 212,359 210,144 207,316 209,811 205,512 Book value per common share $ 6.05 $ 5.97 $ 5.59 $ 6.05 $ 5.59 Tangible book value per common share (1) $ 5.81 $ 5.72 $ 5.32 $ 5.81 $ 5.32 Selected Financial Ratios (In Percent): Profitability: Return on Average Assets 0.73 0.67 0.50 0.65 (1.86 ) Interest Rate Spread (2) 4.07 4.19 4.15 4.17 3.94 Net Interest Margin (2) 4.25 4.37 4.34 4.35 4.15 Return on Average Total Equity 7.01 6.66 5.19 6.43 (17.65 ) Return on Average Common Equity 7.21 6.95 5.47 6.69 (18.51 ) Average Total Equity to Average Total Assets 10.44 10.10 9.68 10.10 10.56 Total capital 18.57 18.06 16.89 18.57 16.89 Tier 1 capital 17.30 16.80 15.61 17.30 15.61 Leverage 12.34 12.04 11.65 12.34 11.65 Tangible common equity ratio (1) 9.82 9.76 8.65 9.82 8.65 Tier 1 common equity to risk-weight assets (1) 14.39 13.92 12.55 14.39 12.55 Dividend payout ratio - - - - - Efficiency ratio (3) 65.06 67.30 70.34 65.81 87.07 Asset Quality: Allowance for loan and lease losses to loans held for investment 2.42 2.55 3.04 2.42 3.04 Net charge-offs (annualized) to average loans 1.80 2.19 (4) 1.41 2.04 (4) 4.97 (6) Provision for loan and lease losses to net charge-offs 63.17 51.09 (5) 65.54 58.64 (5) 60.19 (7) Non-performing assets to total assets 5.89 6.05 5.68 5.89 5.68 Non-performing loans held for investment to total loans held for investment 6.01 5.96 5.24 6.01 5.24 Allowance to total non-performing loans held for investment 40.29 42.71 58.06 40.29 58.06 Allowance to total non-performing loans held for investment excluding residential real estate loans 60.20 61.96 81.20 60.20 81.20 Other Information: Common Stock Price: End of period $ 4.75 $ 5.44 $ 5.68 $ 4.75 $ 5.681) Non-GAAP measure. See pages 13-14 for GAAP to Non-GAAP reconciliations.
2) On a tax-equivalent basis and excluding changes in the fair value of derivative instruments (Non-GAAP measure). See page 4 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 net charge-offs to average loans ratio, excluding the impact associated with the acquisition of mortgage loans from Doral, was 1.90% for the quarter ended June 30, 2014 and 1.94% for the nine-month period ended September 30, 2014, respectively.
5) The provision for loan and lease losses to net charge-offs ratio, excluding the impact associated with the acquisition of mortgage loans from Doral, was 55.72% for the quarter ended June 30, 2014 and 60.52% for the nine-month period ended September 30, 2014, respectively.
6) The net charge-offs to average loans ratio, excluding the impact associated with the bulk sales of assets and the transfer of loans to held for sale, was 1.87% for the nine-month period ended September 30, 2013.
7) The provision for loan and lease losses to net charge-offs ratio, excluding the impact associated with the bulk sales of assets and the transfer of loans to held for sale, was 66.07% for the nine-month period ended September 30, 2013.
Table 2 - 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) September 30, June 30, September 30, September 30, June 30, September 30, September 30, June 30, September 30, Quarter ended 2014 2014 2013 2014 2014 2013 2014 2014 2013 Interest-earning assets: Money market & other short-term investments $ 744,738 $ 729,302 $ 639,285 $ 473 $ 454 $ 456 0.25 % 0.25 % 0.28 % Government obligations (2) 339,261 335,813 342,739 1,956 2,101 2,008 2.29 % 2.51 % 2.32 % Mortgage-backed securities 1,657,816 1,717,748 1,705,745 11,985 14,191 14,847 2.87 % 3.31 % 3.45 % FHLB stock 26,788 27,995 30,884 283 273 311 4.19 % 3.91 % 4.00 % Equity securities 320 320 1,320 - - - 0.00 % 0.00 % 0.00 % Total investments (3) 2,768,923 2,811,178 2,719,973 14,697 17,019 17,622 2.11 % 2.43 % 2.57 % Residential mortgage loans 2,803,138 2,635,082 2,580,758 39,401 36,707 37,273 5.58 % 5.59 % 5.73 % Construction loans 195,108 198,665 257,188 1,910 1,691 2,141 3.88 % 3.41 % 3.30 % C&I and commercial mortgage loans 4,434,798 4,658,776 4,755,518 49,043 50,473 48,971 4.39 % 4.35 % 4.09 % Finance leases 237,374 243,014 241,256 4,707 4,985 5,188 7.87 % 8.23 % 8.53 % Consumer loans 1,806,158 1,825,255 1,804,892 50,481 52,291 55,196 11.09 % 11.49 % 12.13 % Total loans (4) (5) 9,476,576 9,560,792 9,639,612 145,542 146,147 148,769 6.09 % 6.13 % 6.12 % Total interest-earning assets $ 12,245,499 $ 12,371,970 $ 12,359,585 $ 160,239 $ 163,166 $ 166,391 5.19 % 5.29 % 5.34 % Interest-bearing liabilities: Brokered CDs $ 3,097,358 $ 3,124,808 $ 3,149,417 $ 7,482 $ 7,496 $ 8,295 0.96 % 0.96 % 1.04 % Other interest-bearing deposits 5,691,643 5,838,450 5,773,400 11,862 11,970 13,158 0.83 % 0.82 % 0.90 % Other borrowed funds 1,131,959 1,131,959 1,131,959 8,675 8,217 8,321 3.04 % 2.91 % 2.92 % FHLB advances 324,674 300,220 355,016 949 833 1,524 1.16 % 1.11 % 1.70 % Total interest-bearing liabilities $ 10,245,634 $ 10,395,437 $ 10,409,792 $ 28,968 $ 28,516 $ 31,298 1.12 % 1.10 % 1.19 % Net interest income $ 131,271 $ 134,650 $ 135,093 Interest rate spread 4.07 % 4.19 % 4.15 % Net interest margin 4.25 % 4.37 % 4.34 %
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. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received.
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 total non-performing loans.
5) Interest income on loans includes $3.1 million, $2.8 million and $3.7 million for the quarters ended September 30, 2014, June 30, 2014, and September 30, 2013, 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) September 30, September 30, September 30, September 30, September 30, September 30, Nine-Month Period Ended 2014 2013 2014 2013 2014 2013 Interest-earning assets: Money market & other short-term investments $ 739,456 $ 709,240 $ 1,427 $ 1,494 0.26 % 0.28 % Government obligations (2) 339,295 337,156 6,115 5,847 2.41 % 2.32 % Mortgage-backed securities 1,691,816 1,642,080 42,268 35,933 3.34 % 2.93 % FHLB stock 27,724 31,775 897 1,048 4.33 % 4.41 % Equity securities 320 1,348 - - 0.00 % 0.00 % Total investments (3) 2,798,611 2,721,599 50,707 44,322 2.42 % 2.18 % Residential mortgage loans 2,663,641 2,730,842 111,066 112,688 5.57 % 5.52 % Construction loans 203,359 292,594 5,616 7,032 3.69 % 3.21 % C&I and commercial mortgage loans 4,638,218 4,787,841 150,828 145,371 4.35 % 4.06 % Finance leases 242,173 239,407 14,882 15,396 8.22 % 8.60 % Consumer loans 1,818,628 1,793,811 155,787 166,002 11.45 % 12.37 % Total loans (4) (5) 9,566,019 9,844,495 438,179 446,489 6.12 % 6.06 % Total interest-earning assets $ 12,364,630 $ 12,566,094 $ 488,886 $ 490,811 5.29 % 5.22 % Interest-bearing liabilities: Brokered CDs $ 3,135,572 $ 3,298,338 $ 22,585 $ 30,566 0.96 % 1.24 % Other interest-bearing deposits 5,817,613 5,740,514 36,524 40,349 0.84 % 0.94 % Other borrowed funds 1,131,959 1,131,959 25,020 24,717 2.96 % 2.92 % FHLB advances
308,388
376,847 2,606 5,180 1.13 % 1.84 % Total interest-bearing liabilities $ 10,393,532 $ 10,547,658 $ 86,735 $ 100,812 1.12 % 1.28 % Net interest income $ 402,151 $ 389,999 Interest rate spread 4.17 % 3.94 % Net interest margin 4.35 % 4.15 %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. Changes in the fair value of derivative instruments are excluded from interest income because the changes in valuation do not affect interest paid or received.
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 total non-performing loans.
5) Interest income on loans includes $8.8 million, and $10.8 million for the nine-month period ended September 30, 2014 and 2013, respectively, of income from prepayment penalties and late fees related to the Corporation's loan portfolio.
Table 4 - Non-Interest Income
Quarter Ended Nine-Month Period Ended September 30, June 30, September 30, September 30, September 30, (In thousands) 2014 2014 2013 2014 2013 Service charges on deposit accounts $ 3,235 $ 3,290 $ 3,157 $ 9,728 $ 9,635 Mortgage banking activities 3,809 3,036 3,521 10,213 12,924 Insurance income 1,290 1,467 1,303 5,328 4,831 Broker-dealer income - - - 459 - Other operating income 8,085 8,517 7,987 24,961 22,167Non-interest income before net (loss) gain on investments, equity in earnings (loss) of unconsolidated entity, and write-off of collateral pledged with Lehman
16,419 16,310 15,968 50,689 49,557 Net gain on sale of investments - 291 - 291 - OTTI on equity securities - - - - (42 ) OTTI on debt securities (245 ) - - (245 ) (117 ) Net (loss) gain on investments (245 ) 291 - 46 (159 ) Impairment - collateral pledged to Lehman - - - - (66,574 ) Equity in earnings (loss) of unconsolidated entity - (670 ) (5,908 ) (7,280 ) (10,798 ) $ 16,174 $ 15,931 $ 10,060 $ 43,455 $ (27,974 )Table 5 - Non-Interest Expenses
Quarter Ended Nine-Month Period Ended September 30, June 30, September 30, September 30, September 30, (In thousands) 2014 2014 2013 2014 2013 Employees' compensation and benefits $ 33,964 $ 35,023 $ 32,823 $ 101,929 $ 99,493 Occupancy and equipment 14,727 14,246 15,109 42,573 45,062 Deposit insurance premium 8,335 9,579 10,479 27,736 33,426 Other insurance and supervisory fees 1,158 1,205 1,034 3,531 3,592 Taxes, other than income taxes 4,528 4,504 4,718 13,607 14,009 Professional fees: Collections, appraisals and other credit related fees 2,480 2,363 2,780 6,188 7,224 Outsourcing technology services 4,840 4,600 4,338 13,654 9,942 Other professional fees 3,554 3,843 4,086 11,878 10,771 Credit and debit card processing expenses 3,741 3,882 2,682 11,447 8,040 Credit card processing platform conversion costs - - 1,715 - 1,715 Branch consolidations and other restructuring expenses - 236 - 954 - Business promotion 3,925 4,142 3,478 12,040 10,529 Communications 2,143 1,894 1,866 5,916 5,565 Net loss on OREO operations 4,326 6,778 7,052 16,941 27,312 Secondary offering costs - - 1,669 - 1,669 Terminated preferred stock exchange offer expenses - - - - 1,333 Acquisitions of loans from Doral related expenses 659 576 - 1,235 - Bulk sales expenses - - - - 8,840 Other 5,224 5,274 5,325 14,905 19,965 Total $ 93,604 $ 98,145 $ 99,154 $ 284,534 $ 308,487 Table 6 - Selected Balance Sheet Data (In thousands) As of September 30, June 30, December 31, 2014 2014 2013 Balance Sheet Data: Loans, including loans held for sale $ 9,395,416 $ 9,539,206 $ 9,712,139 Allowance for loan and lease losses 225,434 241,177 285,858 Money market and investment securities 2,019,846 2,043,501 2,208,342 Intangible assets 51,143 52,378 54,866 Deferred tax asset, net 9,853 8,738 7,644 Total assets 12,643,280 12,523,251 12,656,925 Deposits 9,703,174 9,630,788 9,879,924 Borrowings 1,456,959 1,451,959 1,431,959 Total preferred equity 36,104 36,104 63,047 Total common equity 1,322,376 1,298,304 1,231,547 Accumulated other comprehensive loss, net of tax (34,323 ) (28,407 ) (78,736 ) Total equity 1,324,157 1,306,001 1,215,858 Table 7 - Consolidated Loan Portfolio (In thousands) As of September 30, June 30, December 31, 2014 2014 2013 Residential mortgage loans $ 2,819,648 $ 2,795,159 $ 2,549,008 Commercial loans: Construction loans 141,689 148,266 168,713 Commercial mortgage loans 1,812,094 1,813,930 1,823,608 Commercial and Industrial loans 2,515,384 2,647,478 2,788,250 Loans to local financial institutions collateralized by real estate mortgages - - 240,072 Commercial loans 4,469,167 4,609,674 5,020,643 Finance leases 236,115 240,593 245,323 Consumer loans 1,790,472 1,821,675 1,821,196 Loans held for investment 9,315,402 9,467,101 9,636,170 Loans held for sale 80,014 72,105 75,969 Total loans $ 9,395,416 $ 9,539,206 $ 9,712,139 Table 8 - Loan Portfolio by Geography (In thousands) As of September 30, 2014 Puerto Rico Virgin Islands United States Consolidated Residential mortgage loans $ 2,139,435 $ 343,620 $ 336,593 $ 2,819,648 Commercial loans: Construction loans 92,734 25,631 23,324 141,689 Commercial mortgage loans 1,445,044 71,888 295,162 1,812,094 Commercial and Industrial loans 2,131,996 109,943 273,445 2,515,384 Commercial loans 3,669,774 207,462 591,931 4,469,167 Finance leases 236,115 - - 236,115 Consumer loans 1,705,885 48,841 35,746 1,790,472 Loans held for investment 7,751,209 599,923 964,270 9,315,402 Loans held for sale 37,909 40,325 1,780 80,014 Total loans $ 7,789,118 $ 640,248 $ 966,050 $ 9,395,416
(In thousands) As of June 30, 2014 Puerto Rico Virgin Islands United States Consolidated Residential mortgage loans $ 2,132,586 $ 342,516 $ 320,057 $ 2,795,159 Commercial loans: Construction loans 94,979 30,855 22,432 148,266 Commercial mortgage loans 1,423,948 72,262 317,720 1,813,930 Commercial and Industrial loans 2,260,456 149,884 237,138 2,647,478 Commercial loans 3,779,383 253,001 577,290 4,609,674 Finance leases 240,593 - - 240,593 Consumer loans 1,738,203 49,737 33,735 1,821,675 Loans held for investment 7,890,765 645,254 931,082 9,467,101 Loans held for sale 31,168 40,153 784 72,105 Total loans $ 7,921,933 $ 685,407 $ 931,866 $ 9,539,206 (In thousands) As of December 31, 2013 Puerto Rico Virgin Islands United States Consolidated Residential mortgage loans $ 1,906,982 $ 348,816 $ 293,210 $ 2,549,008 Commercial loans: Construction loans 105,830 33,744 29,139 168,713 Commercial mortgage loans 1,464,085 74,271 285,252 1,823,608 Commercial and Industrial loans 2,436,709 125,757 225,784 2,788,250 Loans to a local financial institution collateralized by real estate mortgages 240,072 - - 240,072 Commercial loans 4,246,696 233,772 540,175 5,020,643 Finance leases 245,323 - - 245,323 Consumer loans 1,739,478 49,689 32,029 1,821,196 Loans held for investment 8,138,479 632,277 865,414 9,636,170 Loans held for sale 35,394 40,575 - 75,969 Total loans $ 8,173,873 $ 672,852 $ 865,414 $ 9,712,139
Table 9 - Consolidated Non-Performing Assets
(Dollars in thousands) September 30, June 30, December 31, 2014 2014 2013 Non-performing loans held for investment: Residential mortgage $ 185,025 $ 175,404 $ 161,441 Commercial mortgage 169,967 166,218 120,107 Commercial and Industrial 130,917 143,669 114,833 Construction 30,111 38,830 58,866 Consumer and Finance leases 43,496 40,510 40,302 Total non-performing loans held for investment 559,516 564,631 495,549 OREO 112,803 121,842 160,193 Other repossessed property 17,467 16,114 14,865 Total non-performing assets, excluding loans held for sale $ 689,786 $ 702,587 $ 670,607 Non-performing loans held for sale 54,641 54,755 54,801 Total non-performing assets, including loans held for sale (1) $ 744,427 $ 757,342 $ 725,408 Past-due loans 90 days and still accruing (2) $ 143,535 $ 143,916 $ 120,082 Allowance for loan and lease losses $ 225,434 $ 241,177 $ 285,858 Allowance to total non-performing loans held for investment 40.29 % 42.71 % 57.69 % Allowance to total non-performing loans held for investment, excluding residential real estate loans 60.20 % 61.96 % 85.56 %(1) Purchased credit impaired loans of $104.3 million accounted for under ASC 310-30 as of September 30, 2014, primarily mortgage loans acquired from Doral 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 purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2014 of approximately $15.6 million, primarily related to loans acquired from Doral.
Table 10 - Non-Performing Assets by Geography (In thousands) September 30, June 30, December 31, 2014 2014 2013 Puerto Rico: Non-performing loans held for investment: Residential mortgage $ 159,740 $ 149,946 $ 139,771 Commercial mortgage 147,909 142,417 101,255 Commercial and Industrial 124,406 137,046 109,224 Construction 25,780 30,229 43,522 Finance leases 4,501 3,414 3,082 Consumer 36,722 34,768 34,660 Total non-performing loans held for investment 499,058 497,820 431,514 OREO 99,721 101,051 123,851 Other repossessed property 17,437 16,056 14,806 Total non-performing assets, excluding loans held for sale $ 616,216 $ 614,927 $ 570,171 Non-performing loans held for sale 14,636 14,750 14,796 Total non-performing assets, including loans held for sale (1) $ 630,852 $ 629,677 $ 584,967 Past-due loans 90 days and still accruing (2) $ 140,229 $ 139,173 $ 118,097 Virgin Islands: Non-performing loans held for investment: Residential mortgage $ 13,576 $ 12,797 $ 8,439 Commercial mortgage 7,044 7,708 6,827 Commercial and Industrial 6,511 6,623 5,609 Construction 4,173 8,442 11,214 Consumer 861 876 514 Total non-performing loans held for investment 32,165 36,446 32,603 OREO 7,904 14,597 14,894 Other repossessed property 3 - 5 Total non-performing assets, excluding loans held for sale $ 40,072 $ 51,043 $ 47,502 Non-performing loans held for sale 40,005 40,005 40,005 Total non-performing assets, including loans held for sale $ 80,077 $ 91,048 $ 87,507 Past-due loans 90 days and still accruing $ 2,766 $ 4,743 $ 1,985 United States: Non-performing loans held for investment: Residential mortgage $ 11,709 $ 12,661 $ 13,231 Commercial mortgage 15,014 16,093 12,025 Commercial and Industrial - - - Construction 158 159 4,130 Consumer 1,412 1,452 2,046 Total non-performing loans held for investment 28,293 30,365 31,432 OREO 5,178 6,194 21,448 Other repossessed property 27 58 54 Total non-performing assets, excluding loans held for sale $ 33,498 $ 36,617 $ 52,934 Non-performing loans held for sale - - - Total non-performing assets, including loans held for sale $ 33,498 $ 36,617 $ 52,934 Past-due loans 90 days and still accruing $ 540 $ - $ -
(1) Purchased credit impaired loans of $104.3 million accounted for under ASC 310-30 as of September 30, 2014, primarily mortgage loans acquired from Doral 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 purchased credit impaired loans with individual delinquencies over 90 days and still accruing with a carrying value as of September 30, 2014 of approximately $15.6 million, primarily related to loans acquired from Doral.
Table 11 - Allowance for Loan and Lease Losses
Quarter Ended Nine-Month Period Ended (Dollars in thousands) September 30, June 30, September 30, September 30, September 30, 2014 2014 2013 2014 2013 Allowance for loan and lease losses, beginning of period $ 241,177 $ 266,778 $ 301,047 $ 285,858 $ 435,414 Provision for loan and lease losses 26,999 26,744 (1) 22,195 85,658 (1) 220,782(3)
Net (charge-offs) recoveries of loans: Residential mortgage (5,734 ) (4,687 ) (8,457 ) (16,774 ) (123,455 )(4)
Commercial mortgage 1,116 (9,126 ) (5,918 ) (13,785 ) (65,207 )(5)
Commercial and Industrial (16,431 ) (19,036 ) (2) (5,718 ) (57,263 ) (2) (96,067 )(6)
Construction (3,205 ) (2,606 ) 71 (6,164 ) (40,812 )(7)
Consumer and finance leases (18,488 ) (16,890 ) (13,841 ) (52,096 ) (41,276 ) Net charge-offs (42,742 ) (52,345 ) (2) (33,863 ) (146,082 ) (2) (366,817 )(8)
Allowance for loan and lease losses, end of period $ 225,434 $ 241,177 $ 289,379 $ 225,434 $ 289,379 Allowance for loan and lease losses to period end total loans held for investment 2.42 % 2.55 % 3.04 % 2.42 % 3.04 % Net charge-offs (annualized) to average loans outstanding during the period 1.80 % 2.19 % 1.41 % 2.04 % 4.97 %Net charge-offs (annualized), excluding charge-offs related to the acquisition of mortgage loans from Doral, loans sold and loans transferred to held for sale, to average loans outstanding during the period
1.80 % 1.90 % 1.41 % 1.94 % 1.87 % Provision for loan and lease losses to net charge-offs during the period 0.63x 0.51x 0.66x 0.59x 0.60xProvision for loan and lease losses to net charge-offs during the period, excluding impact of the acquisition of mortgage loans from Doral, loans sold and the transfer of loans to held for sale
0.63x 0.56x 0.66x 0.61x 0.66x (1) Includes provision of $1.4 million associated with the acquisition of mortgage loans from Doral. (2) Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral. (3) Includes provision of $132.0 million associated with the bulk sales and the transfer of loans to held for sale. (4) Includes net charge-offs totaling $99.0 million associated with the bulk sales. (5) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale. (6) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets. (7) Includes net charge-offs of $34.2 million associated with the bulk sales and the transfer of loans to held for sale. (8) Includes net charge-offs of $232.4 million associated with the bulk sales and the transfer of loans to held for sale.Table 12 – Net Charge-Offs to Average Loans
Nine-Month Period Ended Year ended September 30, December 31, December 31, December 31, December 31, 2014 2013 2012 2011 2010 Residential mortgage 0.84 % 4.77 % (3) 1.32 % 1.32 % 1.80 % (8) Commercial mortgage 1.00 % 3.44 % (4) 1.41 % 3.21 % 5.02 % (9) Commercial and Industrial 2.72 % (1) 3.52 % (5) 1.21 % 1.57 % 2.16 % (10) Construction 4.04 % 15.11 % (6) 10.49 % 16.33 % 23.80 % (11) Consumer and finance leases 3.37 % 2.76 % 1.92 % 2.33 % 2.98 % Total loans 2.04 % (2) 4.01 % (7) 1.74 % 2.68 % 4.76 % (12)(1) Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral, was 2.51%.
(2) Includes net charge-offs totaling $6.9 million associated with the acquisition of mortgage loans from Doral. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the acquisition of mortgage loans from Doral, was 1.94%.
(3) Includes net charge-offs totaling $99.0 million associated with the bulk loan sales. The ratio of residential mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales, was 1.13%.(4) Includes net charge-offs of $54.6 million associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale in the first quarter of 2013. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets and the transfer of loans to held for sale, was 0.45%.
(5) Includes net charge-offs totaling $44.7 million associated with the bulk sale of adversely classified commercial assets. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the bulk sale of adversely classified commercial assets, was 2.04%.(6) Includes net charge-offs of $34.2 million associated with the bulk loan sales and the transfer of loans to held for sale. The ratio of construction loan net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 2.91%.
(7) Includes net charge-offs of $232.4 million associated with the bulk loan sales and the transfer of loans to held for sale. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the bulk loan sales and the transfer of loans to held for sale, was 1.68%.
(8) Includes net charge-offs totaling $7.8 million associated with non-performing residential mortgage loans sold in a bulk sale. (9) Includes net charge-offs totaling $29.5 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of commercial mortgage net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 3.38%. (10) Includes net charge-offs totaling $8.6 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of commercial and industrial net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 1.98%.(11) Includes net charge-offs totaling $127.0 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of construction net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 18.93%.
(12) Includes net charge-offs totaling $165.1 million associated with the transfer of loans to held for sale in the fourth quarter of 2010. The ratio of total net charge-offs to average loans, excluding charge-offs associated with the transfer of loans to held for sale, was 3.60%.
First BanCorp.John B. Pelling III, 305-577-6000 Ext. 162Investor Relations Officerjohn.pelling@firstbankpr.com
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