First BanCorp. loses $122.6M in 2Q
First BanCorp., the parent company for FirstBank Puerto Rico, reported Wednesday a net loss of $122.6 million for the second quarter of 2013, or $0.60 per diluted share, compared to a net loss of $72.6 million, or $0.35 per diluted share, for the first quarter of 2013 and net income of $9.4 million, or $0.05 per diluted share for the second quarter of 2012.
The negative results were driven by two events: a $72.9 million loss on the previously announced bulk sale of non-performing residential mortgage loans and other real estate owned properties (OREO) properties; and a $66.6 million loss related to the previously announced write-off of assets pledged as collateral to Lehman Brothers Inc. through a transaction struck in 2009.
Financial results for the first quarter of 2013 were similarly adversely impacted by a loss of $68 million related to a bulk sale of non-performing assets, mainly commercial loans, and valuation adjustments to certain loans transferred to held for sale.
“Our initiatives to accelerate improvement of asset quality led to several extraordinary expenses and charges in the second quarter and created significant variability in our financial results,” said First BanCorp President Aurelio Alemán. “Excluding the write-down of the collateral pledged to Lehman and the bulk sale of non-performing residential loans, our adjusted net income was $16.8 million compared to an adjusted loss of $4.6 million in the first quarter.”
“Furthermore, OREO adjustments and changes to the Puerto Rico tax code created additional variance in our quarterly results,” said Alemán, who is also the company’s CEO. “While our market is still facing headwinds, with the Puerto Rico government’s approved budget and steps taken to address fiscal issues, the economic environment should continue to show signs of stabilization.”
Despite the setbacks, FirstBank said it had made “significant progress in credit quality metrics,” including a decrease in non-performing assets for the 13th consecutive quarter, declining by $334.7 million, or 31 percdent, from the first quarter of 2013.
Non-performing loans, including non-performing loans held for sale, declined by $229.6 million, or 28 percent, from the first quarter of 2013. Meanwhile, OREO decreased by $42.2 million, or 23 percent, from the first quarter of 2013.
“We are very pleased with the progress achieved in the de-risking of our balance sheet, our non-performing assets to total assets ratio is at the lowest level since the peak in 2010,” Alemán said.
“Franchise metrics continue to improve, our net interest margin expanded to more than 4 percent, we achieved growth on core deposits and strong loan origination activity at over $900 million during the second quarter,” he added.
“Further asset quality improvements through proactive portfolio management and sales of held for sale loans and OREO continues to be our top priority and our team is keenly focused on opportunities for further earnings generation and optimization of our expense base,” Alemán noted.
Finally, the bank also reported an expense of $3.2 million related to the amendments approved by the government to the Puerto Rico Internal Revenue Code in June, retroactive to January 2013.