Storms deal $10.8M net loss to First BanCorp. in 3Q17
First BanCorp., the bank holding company for FirstBank Puerto Rico, reported a net loss of $10.8 million for the third quarter of 2017, or $0.05 per diluted share, compared to net income of $28.0 million, or $0.13 per diluted share, for the second quarter of 2017 and net income of $24.1 million, or $0.11 per diluted share, for the third quarter of 2016.
Financial results for the third quarter include charges of $66.5 million ($40.7 million after-tax) to the provision for loan and lease losses and $0.6 million ($0.4 million after-tax) to non-interest expenses related to the impacts of two strong hurricanes — Irma and María — that affected the corporation’s service areas in September.
“While the third quarter hurricanes presented unprecedented challenges to our business and communities, we are so very proud on how our teams responded and the outstanding teamwork, dedication and care they have shown to serve the affected customers during this very challenging time,” said First BanCorp. President Aurelio Alemán.
“Immediately after the storms passed through our three geographic regions, we secured our people and their families, ensured a safe working environment for our employees and focused our entire organization on serving our customers’ needs,” he said.
At present, First BanCorp. has 90 percent of the 48 Puerto Rico branches up and running and 92 percent of its 11 Eastern Caribbean branches. The main challenge continues to be restoration of the power grid and telecommunications infrastructure, which continue to impact the economic recovery of the bank’s communities, executives said.
Meanwhile, the report noted that the corporation established a $66.5 million provision for loan losses directly related to the initial estimate, based on available information, of inherent losses resulting from the impact of the storms.
“Execution of contingency preparedness and recovery plans for Hurricanes Irma and María demonstrated the operational strength and agility of our institution,” Alemán said.
“The re-building efforts literally began the day after the storms hit and we continue working diligently to assist our customers and communities in the rebuilding process,” he added, crediting the bank’s online technology service platforms keeping services available for consumers and commercial clients.
As the corporation gathers additional information on overall economic prospects in the affected areas together with loan officers’ further assessments of individual borrowers, the loss estimate will be revised as needed, the financial institution confirmed.
Interruptions in regular collection efforts caused by Hurricanes Irma and María adversely impacted the corporation’s non-performing loan statistics.
Non-performing residential mortgage loans increased in the third quarter by $23.2 million to $178.5 million as of Sept. 30, 2017 and non-performing consumer loans increased in the third quarter by $5.4 million to $26.5 million as of Sept. 30, 2017.
The corporation implemented its disaster response plan as these storms approached its service areas, it noted.
To operate in disaster response mode, the corporation incurred expenses for, among other things, buying diesel and generators for electric power, debris removal, security matters, and emergency communication with customers regarding the status of bank operations.
The disaster response plan costs combined with the payroll and rental costs during the idle time caused by the storms totaled $2.9 million as of Sept. 30, 2017, including $600,000 in donations and other storm relief efforts and employee assistance.
The corporation will incur additional costs through the end of 2017 as the it addresses ongoing operational issues.
Also, certain of its facilities and their contents were damaged by the storms. The corporation has recognized asset impairments of approximately $600,000 as of Sept. 30, 2017, and First BanCorp. may identify additional impairments through the end of 2017, it noted.
The Corporation maintains insurance for both casualty losses as well as for disaster response costs and certain revenue lost through business interruption. Management believes that recovery of $2.9 million of the $3.5 million above-mentioned costs and asset impairments identified as of Sept. 30, 2017 is probable.
“The unique circumstances under which we have operated due to Hurricanes Irma and María has adversely affected our earnings performance for the third quarter,” Alemán said.
“Most franchise metrics remained strong, with pre-tax pre-provision income of $53.5 million, lower expenses, and higher core deposits. Excluding the impact of these storms, we were poised to achieve another strong quarter,” he said.