First BanCorp (the “Corporation”) (NYSE: FBP), the bank holding company for FirstBank Puerto Rico (“FirstBank” or “the Bank”), today reported a net loss for the second quarter of 2011 of $14.9 million, or $1.04 per diluted share, compared to a net loss of $28.4 million, or $1.66 per diluted share for the first quarter of 2011 and a net loss of $90.6 million, or $15.70 per diluted share for the second quarter of 2010. The provision for loan and lease losses for the second quarter of 2011 was $59.2 million, down from $88.7 million for the first quarter of 2011 and from $146.8 million for the second quarter of 2010. The lower provision, compared to the first quarter of 2011, was mainly a result of lower charges to specific reserves for impaired loans, as well as lower charges to general reserves. Net loss for the six-month period ended June 30, 2011 was $43.3 million, or $2.71 per diluted share, compared to a net loss of $197.6 million, or $34.04 per diluted share for the same period in 2010.
2011 Second Quarter Highlights Compared with First Quarter:
Improved Credit Quality metrics:
- Provision for loan and lease losses decreased $29.5 million to $59.2 million from $88.7 million.
- The level of non-performing loans decreased for the fifth consecutive quarter, the decline from the first quarter of 2011 was $25.0 million to $1.21 billion.
- The construction loans portfolio decreased $166.3 million, or 24%.
- Gain of $20.2 million realized on the sale of $303 million of U.S. agency mortgage-backed securities (“MBS”), compared to a gain of $18.7 million on the sale of $330 million of MBS in the first quarter.
- Gain of $6.8 million on the bulk sale of $282 million of performing residential mortgage loans, compared to a gain of $5.3 million on the sale of $236 million of performing residential mortgage loans in the first quarter.
- Non-cash charges of $1.5 million related to FirstBank’s investment in an unconsolidated joint venture.
- Fee income from broker-dealer activities rose $0.7 million.
- Net interest margin decreased 19 basis points to 2.64% and net interest income dec reased $11.8 million, mainly reflecting a decline in average earning assets and the continued maintenance of high levels of liquidity.
- Deposit mix improved with the planned reduction in brokered certificates of deposit (“CDs”) resulting in interest-bearing deposit funding costs of 1.85%, or 10 basis point lower than in the first quarter of 2011.
Capital Plan execution:
- The Corporation entered into agreements to raise a total of $525 million in new capital from institutional investors and private equity firms, subject to stockholders’ and regulatory approvals. The transaction is expected to close during the third quarter of 2011.
Balance sheet deleveraging strategies:
- Total assets decreased $990.1 million, or 6%, to $14.1 billion primarily related to the sale of investment securities and residential mortgage loans which proceeds were used in part to pay down brokered CDs and borrowings.
- Brokered CDs decreased by $514.2 million, or 8%.
- Total borrowings decreased $328.2 million, through, among other things, repayments of repurchase agreements and advances from FHLB prior to maturity.
- Total capital, Tier 1 capital and Leverage ratios were 12.40%, 11.08% and 8.04%, respectively, up from 11.97%, 10.65% and 7.78%, respectively.
- Regulatory Total capital, Tier 1 capital and Leverage ratios for FirstBank were 12.15%, 10.83% and 7.87%, respectively, up from 11.71%, 10.40%, and 7.60%, respectively.
- 4.93% Tier 1 common risk-based capital ratio, up from 4.82%.
- 3.84% tangible common equity ratio, up from 3.71%.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp, commented, “The commitment of $525 million in new capital represents a major milestone in our capital plan and one that will substantially strengthen our capital ratios and provide a solid base for rebuilding our long-term franchise value. This also reflects a vote of confidence in the strength of the Bank’s franchise and the great progress we have made in rebuilding and strengthening our balance sheet. In addition to accomplishing this objective in the second quarter of 2011, we also demonstrated progress in key operating strategies. Non-performing, early delinquencies, historical loss trends and our exposure to riskier loan categories declined during the second quarter. As a result, our provision for loan losses decreased. Nevertheless, our allowance for loan losses relative to the level of loans remained strong. While this quarter results reflected improvements in credit quality, economy and market conditions continue to pose challenges to our industry.”
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