First BanCorp. reported better-than-expected second quarter results Tuesday, taking in $9.4 million in net income, a significant improvement over the $14.9 million net loss reported for the same year-ago quarter. The current results are also positive in comparison to the $13.2 million net loss reported during the first quarter of this year.
The positive quarterly result put an end to six quarters of consecutive losses, as the bank took steps to control its bad loan losses and inject capital into the operations.
“We are very pleased to report our first quarterly profit in over three years. We are encouraged by the improvements achieved which reflect the prudent and proactive strategies that we have employed, and demonstrate the commitment of the management team and the progress in the execution of our plan to return to profitability,” said First BanCorp President Aurelio Alemán. “This plan includes the expansion of our products mix, improvement on net interest margin, reduction of our risk profile, and improvements in the quality of earnings and operating metrics.”
Net losses for the six-month period ended June 30 were $3.8 million, compared to a net loss of $43.3 million for the same period in 2011.
However First BanCorp.’s balance sheet was positively impacted by growth of $6.6 million in net interest income and an increase in its net interest margin — excluding fair value adjustments —by 24 basis points to 3.44 percent. The latter result was highlighted by at least one important analyst firm as “an encouraging development for the quarter.”
“First BanCorp surprised us with its [second quarter] return to profitability, an event we anticipated [would happen] in the third quarter,” said B. Riley Senior Analyst Joe Gladue. “Though the biggest driver of the unexpected black ink was greater release of the loan loss reserve than expected, there were other encouraging developments in the quarter. Most notable was the net interest margin expansion.”
Provision for loan and lease losses of $24.9 million, down $11.3 million, was another area that significantly improved First BanCorp’s results, Gladue noted.
“FBP’s return to profitability is a significant step. While progress on asset quality and loan growth remains slow, they are headed in the right direction. Meanwhile, net interest margin expansion is driving improved earnings,” Gladue said.
First BanCorp is one of several local banks that have struggled with asset quality issues for several years. While Gladue noted that credit costs have begun to decline, the company still faces a weak Puerto Rico economy that has just recently begun showing signs of improvement.
“Our improved performance this quarter reflects lower estimated credit losses on the commercial and construction loan portfolios and our focus on more profitable and diversified banking activities,” Alemán said. “Improvements in the funding mix through growth in lower cost deposits and deposit pricing strategies continued to impact net interest income and margin favorably.”
As for asset performance, First BanCorp said total non-performing assets decreased by $24.2 million, while the level of non-performing loans decreased for the ninth consecutive quarter by $53.7 million from the previous quarter to $1.07 billion.