First BanCorp., the bank holding company for FirstBank Puerto Rico, reported net income of $36.3 million, or $0.16 per diluted share, for the third quarter of 2018, compared to $31.0 million, or $0.14 per diluted share, for the second quarter of 2018 and a net loss of $10.8 million, or $0.05 per diluted share, for the third quarter of 2017.
“We are pleased to report another positive quarter of profitability and solid core financial results,” said First BanCorp. President Aurelio Alemán.
“Our net income of $36 million was up 17 percent from the second quarter and our pre-tax, pre-provision income was $60 million. The Puerto Rico economy continues to show improvement in key economic metrics and rebuilding activities are enabling our growth opportunities,” he said.
The financial institution’s loan portfolio grew this quarter despite “meaningful organic reductions” in resolution of non-performing assets, he said.
Loan originations and renewals for the third quarter were up in all major categories: commercial and construction increased to $423 million; consumer and auto loan originations increased to $316 million; and residential mortgage reached $142 million.
Net of non-performing loan reductions, the performing loan book grew approximately $107 million in Puerto Rico and more than $50 million in Florida.
Core deposits remained flat while improving the mix of non-interest bearing which now represents 25 percent of our deposit base. Increased investor demand and the excellent work by our credit and special assets teams led to a reduction of non-performing assets of $98.6 million this quarter. Non-performing assets declined by 16 percent and now represent 4.3 percent of assets.
“We’re excited to be celebrating our 70th anniversary as a Puerto Rico corporation and this October also marks our 25th year as a listed company on the New York Stock Exchange,” he said.
September marked another anniversary for the corporation, “one year since the devastating storms that ravished our markets.”
“We’re very pleased with the progress achieved, and of what our team has been able to accomplish and our contribution to the recovery,” he said. “Over the past year, our dedicated employees volunteered significant hours to support our communities, we originated and renewed approximately $3 billion in loans and credit facilities, we grew our core deposits by $1 billion, or 13 percent, reduced our non-performing assets by 18 percent, and today our total capital exceeds $1.9 billion.”
Every key metric has moved in a positive direction and capital continues to build, he said.
“With the economic recovery still underway we remain realistic about the remaining challenges, but optimistic about growth opportunities in our market as our franchise continues to deliver solid operating results,” he added.
First BanCorp’s financial results for the third and second quarters of 2018 and the third quarter of 2017 include several items that are not expected to reoccur, namely:
- A $2.7 million ($1.7 million after-tax) positive effect in earnings related to a $2.8 million loan loss reserve release in connection with revised estimates of the hurricane-related qualitative reserves associated with the effects of Hurricanes Irma and María, primarily related to consumer loans, and a $500,000 gain from hurricane-related insurance proceeds resulting from insurance recoveries in excess of fixed asset impairment charges, partially offset by $500,000 of hurricane-related expenses recorded in the third quarter.
- A $1.4 million ($0.9 million after-tax) positive effect in earnings during the quarter ended June 30, 2018 related to a $2.1 million loan loss reserve release in connection with revised estimates of the hurricane-related qualitative reserves associated with the effects of Hurricanes Irma and María, primarily related to commercial loans, partially offset by $700,000 of hurricane-related expenses recorded in the second quarter.
- A $67.1 million ($41.0 million after-tax) adverse effect during the quarter ended Sept. 30, 2017 related to Hurricanes Irma and María, which includes the following items: (i) a $66.5 million charge to establish a hurricane-related qualitative reserve, and (ii) approximately $600,000 of hurricane-related expenses related to hurricane relief efforts and assistance to employees. The amounts were partially offset by expected insurance recoveries of $1.7 million for compensation and rental costs that the corporation incurred when Hurricanes Irma and María precluded employees from working during September 2017.
- A $1.4 million gain on the repurchase and cancellation of $7.3 million in trust preferred securities reflected in the statement of operations set forth below as “Gain on early extinguishment of debt.” The Corporation repurchased and cancelled the repurchased trust preferred securities, resulting in a commensurate reduction in the related Floating Rate Junior Subordinated Debenture. The Corporation’s purchase price equated to 81 percent of the $7.3 million par value. The 19 percent discount, plus accrued interest, resulted in the gain of $1.4 million. The gain, realized at the holding company level, had no effect on the income tax expense in 2017.
- Costs of $100,000 associated with a secondary offering of the corporation’s common stock by certain stockholders completed in the third quarter of 2017. The costs, incurred at the holding company level, had no effect on the income tax expense in 2017.