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First BanCorp. Announces Earnings for the Quarter and Year Ended December 31, 2021

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  • Net income of $73.6 million and $281.0 million, for the fourth quarter and year ended December 31, 2021, resulting in earnings per diluted share, of $0.35 and $1.31 for the same periods, respectively. Net income was $75.7 million, or $0.36 per diluted share, for the third quarter of 2021 and $102.3 million for the year ended December 31, 2020.

  • Income before income taxes of $115.3 million and $427.8 million for the fourth quarter of 2021 and year ended December 31, 2021 compared to $112.7 million and $116.3 million for the third quarter of 2021 and year ended December 31, 2020.

  • On a non-GAAP basis, adjusted pre-tax, pre-provision income of $104.9 million and $391.5 million for the fourth quarter of 2021 and year ended December 31, 2021, compared to $103.6 million and $299.8 million for the third quarter of 2021 and year ended December 31, 2020.

  • Results for the fourth and third quarters of 2021 included the following items of note:

    • Provision for credit losses was a net benefit of $12.2 million ($7.6 million after-tax, or an increase of $0.06 per diluted share) for the fourth quarter of 2021, reflecting, among other things, continued improvements in the long-term outlook of certain macroeconomic variables, and lower loans outstanding, mainly in the residential mortgage loan portfolio. The provision for credit losses for the third quarter of 2021 was a net benefit of $12.1 million ($7.6 million after-tax, or an increase of $0.04 per diluted share).

    • Merger and restructuring costs of $1.9 million for the fourth quarter of 2021 ($1.2 million after-tax, or a decrease of $0.01 per diluted share) associated with the acquisition of Banco Santander Puerto Rico ("BSPR"), compared to $2.3 million for the third quarter of 2021 ($1.4 million after-tax, or a decrease of $0.01 per diluted share). Early in the third quarter of 2021, First BanCorp completed the conversion of the remaining BSPR’s core systems into FirstBank’s systems with the conversion of the deposit, debit card, online banking, automated teller machine ("ATM"), and cash management platforms.

  • Net interest income decreased slightly to $184.1 million for the fourth quarter of 2021, compared to $184.7 million for the third quarter of 2021.

  • Net interest margin remained relatively flat at 3.61% for the fourth quarter of 2021, compared to 3.60% for the third quarter of 2021. The mix of interest-earning assets also remained constant when compared to the third quarter, where the total average loans portfolio represented 55% of total average interest-earning assets and cash balances and investments securities comprised approximately 45% of total average interest-earnings assets.

  • Non-interest income increased by $0.5 million to $30.4 million for the fourth quarter of 2021 compared to $29.9 million for the third quarter of 2021.

  • Non-interest expenses decreased by $2.5 million to $111.5 million for the fourth quarter of 2021, compared to $114.0 million for the third quarter of 2021. Total non-interest expenses for the fourth quarter of 2021 included $1.9 million of merger and restructuring costs, compared to $2.3 million in the third quarter of 2021.

  • Income tax expense was $41.6 million for the fourth quarter of 2021, compared to $37.1 million for the third quarter of 2021. The variance was primarily related to a higher effective tax rate for the year resulting from a higher proportion of taxable to exempt income than previously estimated for the year.

  • Credit quality variances:

    • Non-performing assets ("NPAs") decreased by $14.3 million to $158.1 million as of December 31, 2021, compared to $172.4 million as of September 30, 2021. The decrease was driven primarily by the sale of a $3.1 million non-performing construction loan, as well as reductions of $5.5 million in nonaccrual residential mortgage loans and a decrease of $3.0 million in other real estate owned ("OREO").

    • An annualized net charge-offs to average loans ratio of 0.26 % for the fourth quarter of 2021, compared to 0.99% for the third quarter of 2021. A bulk sale of nonaccrual residential mortgage loans and related servicing advances added $23.1 million in net charge-offs in the third quarter of 2021. Excluding the effect of net charge-offs related to the bulk sale, the annualized net charge-offs to average loans ratio was 0.17% in the third quarter of 2021.

  • Total deposits, excluding brokered deposits and government deposits, increased by $64.2 million to $14.2 billion as of December 31, 2021. The increase was primarily related to higher balances in savings and demand deposit accounts mainly in the Puerto Rico region, partially offset by a decrease in retail certificates of deposit ("CDs").

  • Government deposits decreased in the fourth quarter by $254.6 million and totaled $3.3 billion as of December 31, 2021, consisting of decreases of $141.3 million and $114.0 million in the Puerto Rico and Virgin Islands regions, respectively, partially offset by a slight increase of $0.7 million in the Florida region.

  • Brokered CDs decreased by $8.1 million during the fourth quarter to $100.4 million as of December 31, 2021 and non-maturity brokered deposits decreased in the fourth quarter by $1.2 million to $247.5 million as of December 31, 2021.

  • Total loans decreased in the fourth quarter by $75.5 million to $11.1 billion as of December 31, 2021. The decrease consisted of reductions of $45.7 million in commercial and construction loans and $111.6 million in residential mortgage loans, partially offset by an $81.9 million increase in consumer loans. The decrease in commercial and construction loans reflects, among other things, a $73.3 million reduction in Small Business Administration Paycheck Protection Program ("SBA PPP") loans.

  • Total loan originations, including refinancings, renewals and draws from existing commitments (other than credit card utilization activity), amounted to $1.3 billion in the fourth quarter of 2021, up $223.2 million compared to the third quarter of 2021.

  • Liquidity levels have remained high with the ratio of cash and liquid securities to total assets at 27.0% as of December 31, 2021, compared to 27.3% as of September 30, 2021.

  • During the fourth quarter, First BanCorp. repurchased 4.6 million shares of its common stock through private and open market transactions for a total purchase price of approximately $63.9 million. In addition, First BanCorp. executed the previously announced redemption of the $36.1 million outstanding preferred stock.

  • Capital ratios remained higher than required regulatory levels for bank holding companies and well-capitalized banks. Estimated total capital, common equity tier 1 capital ("CET1"), tier 1 capital, and leverage ratios of 20.50%, 17.80%, 17.80%, and 10.14%, respectively, as of December 31, 2021. The tangible common equity ratio was 9.81% as of December 31, 2021.

SAN JUAN, Puerto Rico, January 26, 2022--(BUSINESS WIRE)--First BanCorp. (the "Corporation" or "First BanCorp.") (NYSE: FBP), the bank holding company for FirstBank Puerto Rico ("FirstBank" or "the Bank"), today reported net income of $73.6 million, or $0.35 per diluted share, for the fourth quarter of 2021, compared to $75.7 million, or $0.36 per diluted share, for the third quarter of 2021, and $50.1 million, or $0.23 per diluted share, for the fourth quarter of 2020. Financial results for the fourth quarter of 2021 include a net benefit of $12.2 million ($7.6 million after-tax, or an increase of $0.06 per diluted share) recorded to the provision for credit losses, compared to a net benefit of $12.1 million ($7.6 million after-tax, or an increase of $0.04 per diluted share) for the third quarter of 2021. In addition, during the fourth quarter of 2021, the Corporation recorded merger and restructuring costs of $1.9 million ($1.2 million after-tax, or a decrease of $0.01 per diluted share) related to the BSPR integration process and related restructuring initiatives, compared to $2.3 million ($1.4 million after-tax, or a decrease of $0.01 per diluted share) for the third quarter of 2021. In the fourth quarter the Corporation repurchased 4,619,014 shares of its common stock and redeemed the $36.1 million of outstanding preferred stock. Since the inception of the $300 million repurchase program through December 31, 2021, the Corporation has repurchased 16,740,467 shares of common stock at a cost of approximately $213.9 million or $12.78 per share, which includes transaction costs, and redeemed all of the $36.1 million in outstanding preferred stock. As of December 31, 2021, the Corporation has approximately $50 million of share repurchase authorization remaining under the current program.

For the year ended December 31, 2021, the Corporation reported net income of $281.0 million or $1.31 per diluted share, compared to $102.3 million, or $0.46 per diluted share, for the year ended December 31, 2020. Adjusted pre-tax, pre-provision income increased by 30.6% to $391.5 million in 2021 as compared to $299.8 million in the prior year. The results reflect the acquisition of Banco Santander on September 1, 2020. In addition, total NPAs decreased by $135.4 million, or 46.13%, to $158.1 million as of December 31, 2021, as compared to total NPAs as of December 31, 2020.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: "We are extremely encouraged by another record quarter for our franchise as we report strong core performance across all business metrics. We generated $73.6 million in net income for the fourth quarter, representing $0.35 per diluted share, and reached $104.9 million in pre-tax, pre-provision income. Loan originations for the fourth quarter were $1.3 billion, the best quarter we have had this year, with strong originations in the Puerto Rico and Florida regions. However, total loans decreased in the quarter by $75.5 million largely driven by a $73.3 million reduction in SBA PPP loans, the repayment of four large commercial relationships in the Florida and Virgin Islands regions that amounted to $124.6 million and a $111.6 million reduction in residential mortgage loans, partially offset by strong auto and commercial originations. Asset quality continued to benefit from an improving economic outlook, with non-performing assets at 0.76% of total assets. Core deposits, net of brokered and government deposits, grew by $64.2 million during the quarter primarily in savings and demand deposit accounts in Puerto Rico.

Core results for the year reflect transformational progress on multiple fronts. We generated $281.0 million of net income, or $1.31 per diluted share, compared to $102.3 million or $0.46 per diluted share in 2020. We registered a 30.6% increase in adjusted pre-tax pre-provision income and grew total loan originations and renewals (excluding PPP and credit card utilization activity) by 20% when compared to 2020. We completed the timely integration of the acquired operations during the year, executing on all the operational efficiencies planned as part of the transaction and achieving the established financial targets. The transaction allowed us to expand our footprint, while strengthening our leadership position in the Puerto Rico market. Improved economic backdrop and strong tailwinds in our main market should continue to drive core performance in the near future. Moreover, the pandemic triggered an accelerated adoption of digital channels which continue to grow significantly, with digital engagement improving across all our digital functionalities. We are well positioned to compete in an increasingly digital banking system.

Finally, we delivered on our commitment to increase shareholder value. During the year, we returned 112% of 2021 earnings through the repurchase of $213.9 million in common shares, the redemption of $36.1 million in preferred stock, and the payment of $65.4 million in common stock dividends. Our ample capital position will allow us to continue growing the franchise, while delivering value to our shareholders."

NON-GAAP DISCLOSURES

This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted pre-tax, pre-provision income, adjusted net interest income and margin, adjusted non-interest expenses, tangible common equity, tangible book value per common share, certain capital ratios, and certain other financial measures that exclude the effect of items that management believes 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 (the "Special Items"), and should be read in conjunction with the discussion below in Basis of Presentation – Use of Non-GAAP Financial Measures, the accompanying tables (Exhibit A), which are an integral part of this press release, and the Corporation’s other financial information that is presented in accordance with GAAP.

SPECIAL ITEMS

The financial results for the fourth and third quarters of 2021 and fourth quarter of 2020 included the following significant Special Items:

Quarter ended December 31, 2021

- Merger and restructuring costs of $1.9 million ($1.2 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the fourth quarter were primarily related to additional branch consolidations that are expected to be completed during the first half of 2022.

Quarter ended September 30, 2021

- Merger and restructuring costs of $2.3 million ($1.4 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the third quarter were primarily related to system conversions completed early in the third quarter and other integration related efforts.

- Costs of $0.6 million ($0.4 million after-tax) related to COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security measures.

Quarter ended December 31, 2020

- Merger and restructuring costs of $12.3 million ($7.7 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the fourth quarter of 2020 included a $4.3 million charge associated with an Employee Voluntary Separation Program ("VSP") offered to eligible employees in the Puerto Rico region. In addition to the charge associated with the VSP, merger and restructuring costs in the fourth quarter of 2020 primarily included bonuses, consulting fees, and expenses related to system conversions and other integration related efforts.

- Costs of $1.1 million ($0.7 million after-tax) related to the COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety materials, and security matters.

- Loss of $0.2 million realized on sales of available-for-sale investment securities. The loss realized at the tax-exempt international banking entity subsidiary level had no effect on the income tax expense recorded in the fourth quarter of 2020.

NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)

Net income was $73.6 million for the fourth quarter of 2021, or $0.35 per diluted share, compared to $75.7 million for the third quarter of 2021, or $0.36 per diluted share. Adjusted net income was $74.8 million, or $0.36 per diluted share, for the fourth quarter of 2021, compared to $77.5 million, or $0.37 per diluted share, for the third quarter of 2021. The following table reconciles for the fourth and third quarters of 2021 and the fourth quarter of 2020 the net income to adjusted net income and adjusted earnings per share, which are non-GAAP financial measures that exclude the significant Special Items identified above.

Quarter Ended

Quarter Ended

Quarter Ended

(In thousands, except per share information)

December 31, 2021

September 30, 2021

December 31, 2020

Net income, as reported (GAAP)

$

73,639

$

75,678

$

50,138

Adjustments:

Merger and restructuring costs

1,853

2,268

12,321

Loss on sales of investment securities

-

-

182

COVID-19 pandemic-related expenses

4

640

1,125

Income tax impact of adjustments (1)

(696

)

(1,091

)

(5,042

)

Adjusted net income (Non-GAAP)

$

74,800

$

77,495

$

58,724

Preferred stock dividends

(446

)

(669

)

(669

)

Excess of redemption value over carrying value of Series A through E Preferred

Stock redeemed

(1,234

)

-

-

Adjusted net income attributable to common stockholders (Non-GAAP)

$

73,120

$

76,826

$

58,055

Weighted-average diluted shares outstanding

204,705

207,796

$

218,071

Earnings Per Share - diluted (GAAP)

$

0.35

$

0.36

$

0.23

Adjusted Earnings Per Share - diluted (Non-GAAP)

$

0.36

$

0.37

$

0.27

(1) See Basis of Presentation for the individual tax impact related to reconciling items.

INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)

Income before income taxes was $115.3 million for the fourth quarter of 2021, compared to $112.7 million for the third quarter of 2021. Adjusted pre-tax, pre-provision income was $104.9 million for the fourth quarter of 2021, up $1.3 million from the third quarter of 2021. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:

(Dollars in thousands)

Quarter Ended

December 31,

September 30,

June 30,

March 31,

December 31,

2021

2021

2021

2021

2020

Income before income taxes

$

115,260

$

112,735

$

110,650

$

89,172

$

65,514

Less/Add: Provision for credit losses (benefit) expense

(12,209

)

(12,082

)

(26,155

)

(15,252

)

7,691

Add: Net loss on sales of investment securities

-

-

-

-

182

Add: COVID-19 pandemic-related expenses

4

640

1,105

1,209

1,125

Add: Merger and restructuring costs

1,853

2,268

11,047

11,267

12,321

Adjusted pre-tax, pre-provision income (1)

$

104,908

$

103,561

$

96,647

$

86,396

$

86,833

Change from most recent prior quarter (in dollars)

$

1,347

$

6,914

$

10,251

$

(437

)

$

9,690

Change from most recent prior quarter (in percentage)

1.3

%

7.2

%

11.9

%

-0.5

%

12.6

%

(1) Non-GAAP financial measure. See Basis of Presentation below for definition and additional information about this non-GAAP financial measure.

NET INTEREST INCOME

The following table sets forth information concerning net interest income for the last five quarters:

(Dollars in thousands)

Quarter Ended

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Net Interest Income

Interest income

$

198,435

$

200,172

$

201,459

$

194,642

$

198,700

Interest expense

14,297

15,429

16,676

18,377

20,933

Net interest income

$

184,138

$

184,743

$

184,783

$

176,265

$

177,767

Average Balances

Loans and leases

$

11,108,997

$

11,223,926

$

11,560,731

$

11,768,266

$

11,843,157

Total securities, other short-term investments and interest-bearing cash balances

9,140,313

9,134,121

7,898,975

6,510,960

6,057,360

Average interest-earning assets

$

20,249,310

$

20,358,047

$

19,459,706

$

18,279,226

$

17,900,517

Average interest-bearing liabilities

$

11,467,480

$

11,718,557

$

12,118,631

$

11,815,179

$

11,704,166

Average Yield/Rate

Average yield on interest-earning assets - GAAP

3.89

%

3.90

%

4.15

%

4.32

%

4.42

%

Average rate on interest-bearing liabilities - GAAP

0.49

%

0.52

%

0.55

%

0.63

%

0.71

%

Net interest spread - GAAP

3.40

%

3.38

%

3.60

%

3.69

%

3.71

%

Net interest margin - GAAP

3.61

%

3.60

%

3.81

%

3.91

%

3.95

%

Net interest income amounted to $184.1 million for the fourth quarter of 2021, a decrease of $0.6 million, compared to $184.7 million for the third quarter of 2021. The slight decrease in net interest income was mainly due to:

  • A $1.5 million decrease in interest income on commercial and construction loans, primarily due to a decrease of approximately $1.2 million in earned fees on SBA PPP loans attributable to lower early cancellation of SBA PPP loans when compared to prior quarter.

  • A $1.3 million decrease in interest income on residential mortgage loans, primarily due to the reduction in the average balance of this portfolio.

This decrease was partially offset by:

  • A $1.3 million increase in interest income on consumer loans and finance leases, primarily due to an increase of approximately $91.5 million in the average balance of this portfolio, largely related to auto loans portfolio, which resulted in an increase in interest income of approximately $1.1 million.

  • A $1.1 million decrease in interest expense, including, a decrease in the average balances of brokered CDs and retail certificate of deposits and a reduction in rates for time deposits, which resulted in a decrease in interest expense of approximately $1.0 million. In addition, during December 2021 approximately $120.0 million of FHLB advances matured and were repaid, resulting in a decrease of approximately $0.1 million of interest expense.

Net interest margin for the fourth quarter of 2021 increased slightly to 3.61%, when compared to 3.60% for the third quarter of 2021. The improvement on the net interest margin reflects a decrease on the average cost of interest-bearing deposits which showed a 3 basis points reduction as time deposits continue to reset at lower interest rates. Consistent with the third quarter, the average balance of interest-bearing cash deposited at the FED and investment securities continued to represent approximately 45% of total average interest-earning assets and the average balance of the loan portfolio represented 55% of total average interest-earning assets in the fourth quarter.

The fourth quarter results continue to reflect the effect of SBA PPP loans. Interest and earned deferred fees on SBA PPP loans in the fourth quarter of 2021 amounted to $5.0 million, compared to $6.5 million in the third quarter of 2021.

NON-INTEREST INCOME

The following table sets forth information concerning non-interest income for the last five quarters:

Quarter Ended

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands)

2021

2021

2021

2021

2020

Service charges on deposit accounts

$

9,502

$

8,690

$

8,788

$

8,304

$

8,332

Mortgage banking activities

5,223

6,098

6,404

7,273

7,551

Net loss on investments

-

-

-

-

(182

)

Other operating income

15,653

15,158

14,692

15,379

14,499

Non-interest income

$

30,378

$

29,946

$

29,884

$

30,956

$

30,200

Non-interest income amounted to $30.4 million for the fourth quarter of 2021, compared to $29.9 million for the third quarter of 2021. The main variances within the components of non-interest income include:

  • A $0.8 million increase in service charges on deposit accounts mostly due to higher account fees recognized for checking and savings accounts associated with a higher volume of transactions processed during the quarter.

  • A $0.6 million gain, included as part of Other operating income in the table above, related to the settlement and collection of an insurance claim associated with a damaged property.

This increase was partially offset by:

  • A $0.9 million decrease in revenues from mortgage banking activities, driven by a $0.3 million decrease in realized gains on sales of residential mortgage loans in the secondary market associated with a lower volume of sales and a decrease of $0.4 million related to the net change in mark-to-market gains and losses from both interest rate lock commitments and To-Be-Announced ("TBA") mortgage-backed securities ("MBS") forward contracts.

NON-INTEREST EXPENSES

The following table sets forth information concerning non-interest expenses for the last five quarters:

Quarter Ended

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands)

2021

2021

2021

2021

2020

Employees' compensation and benefits

$

49,681

$

50,220

$

49,714

$

50,842

$

51,618

Occupancy and equipment

21,589

23,306

24,116

24,242

24,066

Deposit insurance premium

1,253

1,381

1,922

1,988

1,900

Other insurance and supervisory fees

2,127

2,249

2,360

2,362

2,720

Taxes, other than income taxes

5,138

5,238

5,576

6,199

5,795

Professional fees:

Collections, appraisals and other credit-related fees

874

1,451

1,080

1,310

1,218

Outsourcing technology services

7,909

8,878

11,946

12,373

12,524

Other professional fees

3,154

3,225

3,738

4,018

3,567

Credit and debit card processing expenses

5,523

5,573

6,795

4,278

6,397

Business promotion

5,794

3,370

3,225

2,970

3,163

Communications

2,268

2,250

2,407

2,462

2,462

Net (gain) loss on OREO operations

(1,631

)

(2,288

)

(139

)

1,898

580

Merger and restructuring costs

1,853

2,268

11,047

11,267

12,321

Other

5,933

6,915

6,385

7,092

6,431

Total

$

111,465

$

114,036

$

130,172

$

133,301

$

134,762

Non-interest expenses amounted to $111.5 million in the fourth quarter of 2021, a decrease of $2.5 million from $114.0 million in the third quarter of 2021. Included in non-interest expenses are the following Special Items:

  • Merger and restructuring costs associated with the acquisition of BSPR of $1.9 million for the fourth quarter of 2021, compared to $2.3 million for the third quarter of 2021. Fourth quarter expenses are mostly related to four additional branch consolidations to be completed in the first half of 2022.

  • COVID-19 pandemic-related expenses of $4 thousand for the fourth quarter of 2021, compared to $0.6 million for the third quarter of 2021. COVID-19 p...