First BanCorp., the bank holding company for FirstBank Puerto Rico, announced Thursday the reversal of a significant portion of the valuation allowance recorded against the deferred tax assets of its subsidiary bank, FirstBank.
The reversal results in the recognition of a one-time income tax benefit in the fourth quarter of 2014 of approximately $302.9 million, or $1.42 per diluted share.
First BanCorp.’s February 2015 earnings release noted the continuing evaluation of FirstBank’s deferred tax asset valuation allowance.
First BanCorp. has now concluded that, as of Dec. 31, 2014, “it is more likely than not that FirstBank will generate sufficient taxable income within the applicable net operating loss carry-forward periods to realize a significant portion of its deferred tax assets.”
“This conclusion, and the resulting partial reversal of the deferred tax asset valuation allowance, is based upon consideration of a number of factors, including FirstBank’s completion of a sixth consecutive quarter of profitability and forecast of future profitability, under several potential scenarios where First BanCorp. has assigned more weight to its continued profitability than potential future growth which it is planning to achieve,” bank officials said.
As a result of the partial reversal, First BanCorp.’s deferred tax asset amounted to $313.0 million as of Dec. 31, 2014, net of a valuation allowance of $204.6 million. As more objective information on the Bank’s planned growth and/or increased profitability becomes available, additional reversals of valuation allowance may be necessary.
The ability to recognize the remaining deferred tax assets that continue to be subject to a valuation allowance will be evaluated on a quarterly basis to determine if there are any significant events that would affect FirstBank’s ability to utilize these deferred tax assets.
As a result of this adjustment and the related effect on the deposit insurance premium assessment, First BanCorp.’s results for the fourth quarter and year ended Dec. 31, 2014 are higher than the results announced on Feb. 5, 2015. As revised, First BanCorp.’s net income for the fourth quarter of 2014 increased to $330.8 million, or $1.56 per diluted share, compared to the $26.3 million net income, or $0.12 per diluted share, previously announced in the February 5, 2015 earnings release.
This result compares to $23.2 million, or $0.11 per diluted share, for the third quarter of 2014 and $14.8 million, or $0.07 per diluted share, for the fourth quarter of 2013. The revised net income for the year ended December 31, 2014 amounted to $392.3 million, or $1.87 per diluted share, compared to the $87.8 million net income, or $0.42 per diluted share, previously announced in the February 5, 2015 earnings release.
This result compares to a net loss of $164.5 million, or $0.80 loss per diluted share, for the year ended December 31, 2013.
The revised book value per common share as of Dec. 31, 2014 was $7.68 (First BanCorp. disclosed book value per share of $6.25 in the Feb. 5, 2015 earnings release) and the revised tangible book value per common share was $7.45 (First BanCorp. disclosed tangible book value per common share of $6.02 in the Feb. 5, 2015 earnings release).
The revised tangible common equity ratio as of December 31, 2014 was 12.51 percent