First BanCorp. reports net income of $70.7M
First BanCorp., the parent company for FirstBank Puerto Rico, reported net income of $70.7 million, or $0.39 per diluted share, for the second quarter of 2023, which ended June 30, down from the $74.6 million reported for the same quarter a year ago but consistent with the first quarter of 2023.
The slight year-over-year drop is attributed to the provision for future losses.
The bank also reported net interest income of $199.8 million for the second quarter of 2023, compared to $196.1 million for the same period in 2022, and $200.9 million for the first quarter of 2023, while the net interest margin decreased to 4.23% for the second quarter of 2023 from 4.34% for the first quarter of 2023.
The decrease in net interest income and margin primarily reflects higher interest expense on deposits that exceeded the benefit of higher loan yields and portfolio growth, the bank stated.
“We continue to focus on our strategic imperatives as we deliver another strong quarter of profitable growth for the franchise,” said First BanCorp. CEO Aurelio Alemán.
“We generated $70.7 million in net income, or $0.39 per share, which translated into a strong Return on Average Assets of 1.51% for the quarter. Our well diversified loan portfolio expanded for the sixth consecutive quarter, credit quality metrics remained stable, and our enduring expense management discipline is evidenced by an industry-low efficiency ratio of approximately 47.83%,” he said.
“Our organization is well positioned to continue gaining market share in the markets we serve by employing our long-standing client-centric omnichannel sales and service approach,” Alemán added.
The bank’s total loans increased by $140.4 million from the prior quarter to $11.7 billion as of June 30. On a portfolio basis, the total loan growth consisted of increases of $88.2 million in consumer loans, primarily auto loans and leases, and $70.8 million in commercial and construction loans, partially offset by a decrease of $18.6 million in residential mortgage loans. In terms of geography, the total loan growth consisted of increases of $79.3 million in the Puerto Rico region, $42.5 million in the U.S. Virgin Islands region, and $18.6 million in the Florida region — two markets where it also does business.
Total deposits increased by $767.7 million to $16.8 billion. Excluding brokered certificates of deposit and government deposits, total deposits decreased by $104.3 million to $13 billion as of June 30, consisting of reductions of $77.3 million in the Puerto Rico region, $22.5 million in the Florida region and $4.5 million in the U.S. Virgin Islands region. The decrease in total deposits, excluding brokered CDs and government deposits, is net of a $149.4 million increase in time deposits.
Brokered CDs increased by $110.7 million during the second quarter of 2023 to $363.6 million as of June 30, or 2.2% of total deposits.
Meanwhile, government deposits, which are fully collateralized, increased in the second quarter of 2023 by $761.3 million and totaled $3.4 billion as of June 30. The increase in government deposits reflected growth of $698 million in the Puerto Rico region, $62.5 million in the U.S. Virgin Islands region, and $800,000 in the Florida region.
“Despite higher rates and inflationary pressures, economic trends in our main market remain positive driven by the unprecedented inflow of federal funds that are expected to support economic activity over the next decade coupled with new investors coming into our market. Credit demand remains solid, labor market trends continue to improve, and strong consumer sentiment is evidenced by the rise in auto and retail sales,” Alemán said.
“We’re highly encouraged by the economic prospects in Puerto Rico and its potential for continued growth,” he said.
As for the expected interest rate increase of a quarter point announced by the Federal Reserve, Alemán said Puerto Rico’s strong economy — buoyed by a low unemployment rate, bustling passenger activity at the airport and the influx of $1.8 billion in federal recovery funds — will mitigate any effect from the hike.
“We have a series of metrics that I believe we shouldn’t ignore because we’re a reflection of the economy and we’ve been able to achieve these results because of the economic activity we have going on in Puerto Rico,” Alemán said in an interview with News is my Business. “There’s enough economic activity and repayment capacity to continue to sustain that additional increase.”
As for First BanCorp.’s operations in Florida, Alemán said although there has been an effect in loan volumes, the rate increases have not held back the franchise’s growth.
“Florida is still a state with a high inward migration, the population keeps growing, so I don’t see an impact there as has been seen in other states, where people are leaving,” he said. “We’re not seeing an accelerated growth in Florida like we’ve seen in Puerto Rico, but there hasn’t been a drop.”
Earlier this week, First BanCorp. announced a stock repurchase program of up to $225 million of its outstanding common stock that it expects to execute through the end of the third quarter of 2024, as News is my Business reported.