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 third quarter of 2011 of $24.0 million, or $1.46 per diluted share, compared to a net loss of $14.9 million for the second quarter of 2011 and a net loss of $75.2 million for the third quarter of 2010. The results for the third quarter of 2011 included a provision for loan and lease losses of $46.4 million, down from $59.2 million for the second quarter of 2011 and from $120.5 million for the third quarter of 2010. While results show an increase in net interest income and a decrease in non-interest expenses, they were offset by lower gains on sales of investment securities and mortgage loans and by a $4.4 million loss from the Bank’s investment in an unconsolidated entity for the third quarter of 2011. The net loss for the nine-month period ended September 30, 2011 was $67.4 million, or $4.17 per diluted share, compared to a net loss of $272.9 million for the same period in 2010. Except for ratios identified as pro-forma, all per share data included in this press release has been computed without giving effect to the issuance of 150 million shares of the Corporation’s common stock in connection with the recently completed capital raise.
Completion of Capital Raise:
- On October 7, 2011, the Corporation completed the previously announced private placement of $525 million of common stock to institutional investors and converted the 424,174 shares of its Fixed Rate Cumulative Mandatorily Convertible Series G Preferred Stock (“Series G Preferred Stock”) held by the U.S. Treasury into 32.9 million shares of common stock. Following the issuance of common stock in the capital raise and the conversion of the Series G Preferred Stock, the Corporation has 204.2 million common shares outstanding.
- Pro-forma regulatory Total capital, Tier 1 capital and Leverage ratios as of September 30, 2011 for the Corporation of 16.84%, 15.51% and 11.41%, respectively, reflecting the $525 million capital raise (net of offering costs and the payment of cumulative dividends on the Series G Preferred Stock).
- Pro-forma Tangible Common Equity and Tier 1 common equity to risk-weighted assets ratios as of September 30, 2011 for the Corporation of 9.69% and 12.76%, respectively, reflecting the $525 million capital raise (net of offering costs and the payment of cumulative dividends on the Series G Preferred Stock) and the conversion of the Series G Preferred Stock.
- Pro-forma regulatory Total capital, Tier 1 capital and Leverage ratios as of September 30, 2011 for the Corporation’s wholly owned banking subsidiary, FirstBank, of 16.33%, 15.01% and 11.06%, respectively, reflecting $435 million of the capital raise contributed to the Bank. All ratios substantially in excess of the minimum requirements under the Consent Order with the FDIC.
2011 Third Quarter Highlights Compared with 2011 Second Quarter:
- Credit quality trends continued to improve:
- Provision for loan and lease losses decreased $12.7 million to $46.4 million.
- The level of non-performing loans decreased for the sixth consecutive quarter, the decline from the second quarter of 2011 was $24.7 million to $1.19 billion.
- Net charge-offs declined $12.4 million to $67.6 million, or 2.50% of average loans.
- Net interest income, excluding fair value adjustments, increased $1.2 million and net interest margin increased 18 basis points to 2.82%, mainly reflecting the use of proceeds from sales, calls and maturities of low-yielding investment securities and liquidity obtained from the growth in core deposits to pay down borrowings at higher interest rates. By selling low-yielding investments and increasing the proportion of loans to total earning assets, the Corporation enhanced the overall yield of its interest-earnings assets.
- Non-interest expenses decreased $3.5 million to $82.9 million, reflecting decreases in almost all major categories including marketing, losses related to real estate owned (REO) operations and a decline in the provision for unfunded loan commitments.
- Non-interest income decreased $24.9 million to $14.0 million:
- Previous quarter included a gain of $20.2 million realized on the sale of $290 million of U.S. agency mortgage-backed securities (“MBS”) and a $6.8 million gain on the bulk sale of $282 million of performing residential mortgage loans, both in connection with deleveraging strategies contemplated in the Corporation’s capital plan.
- Sale of $500 million of low-yielding U.S. Treasury notes as part of the Corporation’s balance sheet restructuring strategies, realizing a gain of $9.0 million, which was offset by a $9.0 million loss on the early termination of $200 million high-cost repurchase agreements.
- Gain of $3.5 million recorded in connection with a tender offer of the Puerto Rico Housing Finance Authority.
- Non-cash charges in the third quarter of $4.4 million related to FirstBank’s investment in the unconsolidated entity to which FirstBank sold loans in February 2011, or $2.8 million higher than the loss recorded in the second quarter.
- Balance sheet and capital position:
- Decrease in total assets by $638.4 million, or 4%, to $13.5 billion primarily related to sales, calls and maturities of investment securities resulting in proceeds used in part to pay down brokered CDs and for the early termination of repurchase agreements.
- Increase in core deposits of $259.5 million, or 4%, while brokered CDs decreased by $713.7 million, or 14%.
- Total capital, Tier 1 capital and Leverage ratios of the Corporation were 12.39%, 11.07% and 8.41%, respectively, compared to 12.40%, 11.08% and 8.04%, respectively, for the previous quarter.
- Regulatory Total capital, Tier 1 capital and Leverage ratios of the Corporation’s wholly owned banking subsidiary, FirstBank were 12.15%, 10.84% and 8.24%, respectively, compared to 12.15%, 10.83%, and 7.87%, respectively, for the previous quarter. All of the capital ratios as of September 30, 2011 are above the minimum required under the Consent Order with the FDIC.
- 4.79% Tier 1 common risk-based capital ratio, down from 4.93%.
- 3.84% tangible common equity ratio, same as previous quarter.
Aurelio Alemán, President and Chief Executive Officer of First BanCorp, commented “We are pleased with the successful completion of the capital raise efforts and the achievement of very strong capital levels. For the past several quarters we have focused our strategies and efforts on improving our capital position, reducing risk in the loan portfolio and positioning ourselves to return to a path of sustained profitability. Now that we have completed the capital raise, our priorities will focus on rebuilding top line revenues while continuing to improve asset quality by achieving targeted reductions in non-performing loans. However, economy and market conditions continue to pose challenges to our industry”.
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