First BanCorp., the bank holding company for FirstBank Puerto Rico, reported net income of $31.0 million for the second quarter of 2018, or $0.14 per diluted share, compared to $33.1 million, or $0.15 per diluted share, for the first quarter of 2018 and $28.0 million, or $0.13 per diluted share, for the second quarter of 2017.
“With continued momentum from the beginning of the year, we achieved another solid quarter of profitability posting $31.0 million of net income, or $0.14 per share, and pre-tax, pre-provision income of $61.4 million,” said Aurelio Alemán, president of First BanCorp.
On a non-GAAP basis, adjusted net income of $30.2 million — which excludes the effect of several events that management said 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 $31.3 million for the first quarter of 2018.
During the quarter ended June 30, 2018, First BanCorp reported a $1.4 million ($0.9 million after-tax) positive effect in earnings related to a $2.1 million net loan loss reserve release in connection with revised estimates of the reserves associated with the effects of Hurricanes Irma and María, primarily related to commercial loans, partially offset by $0.7 million in hurricane-related expenses recorded in the second quarter.
Meanwhile, during the quarter ended March 31, 2018, the financial institution reported the following special items:
- A $4.8 million ($2.9 million after-tax) positive effect in earnings related to a $6.4 million net loan loss reserve release in connection with revised estimates of the reserves associated with the effects of Hurricanes Irma and María, partially offset by $1.6 million in hurricane-related expenses recorded in the first quarter.
- A $5.6 million ($3.4 million after-tax) charge to the provision for loan and lease losses associated with three non-performing commercial and construction loans totaling $57.2 million that were transferred to held for sale during the first quarter.
- A $2.3 million gain on the repurchase and cancellation of $23.8 million in trust preferred securities reflected in the statement of income 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 90 percent of the $23.8 million par value. The 10 percent discount resulted in the gain of $2.3 million. The gain, realized at the holding company level, has no effect on the income tax expense in 2018.
For the quarter ended June 30, 2017, First BanCorp reported a $0.4 million recovery of previously recognized other-than-temporary impairment (“OTTI”) charges on non-performing bonds of the Government Development Bank for Puerto Rico and the Puerto Rico Public Buildings Authority sold in the second quarter of 2017, reflected in the statement of income set forth below as part of “Net gain (loss) on investments and impairments.” No tax expense was recognized for the recovery on the sale of bonds in 2017.
“Puerto Rico is recovering at a steady pace and our franchise continues to deliver strong core results. Net interest income and margin improved nicely driven by higher loan yields and a more favorable funding mix, loan originations increased approximately 20 percent vs prior quarter approaching pre-hurricane levels while economic activity is contributing to a stronger pipeline for the remainder of 2018,” Alemán said.
Credit quality continues to move in the right direction as delinquency trends and non-performing asset levels show improvement. Core deposit growth was strong again this quarter, the most significant growth was non-interest bearing demand deposits which increased 15 percent, or $297 million. Our earnings continue to drive growth in our capital base; tangible book value per share was $8.40 at the end of the quarter, he said.
“After several years of economic contraction, we are seeing evidence of recovery in our main market demonstrated by improving trend of several key indicators such as employment, cement sales, retail sales, tax collections and auto sales resulting in overall strengthening of consumer confidence,” said Alemán. “We will continue to look for growth opportunities as rebuilding efforts strengthen in our main market.”
During the second quarter, First BanCorp’s net interest income increased by $5.8 million to $130.5 million, compared to $124.7 million for the first quarter of 2018, primarily due to the upward repricing of variable rate commercial loans, an increase in cash interest received from non-performing commercial loans, liquidity invested in higher-yielding investment securities, and an improved funding mix.