First Bancorp. Announces Earnings for the Quarter and Year Ended December 31, 2022

• Net income of $73.2 million, or $0.40 per diluted share, for the fourth quarter of 2022, compared to $74.6 million, or $0.40 per diluted share, for the third quarter of 2022. Income before income taxes of $106.5 million for the fourth quarter of 2022, compared to $106.6 million for the third quarter of 2022.
• Net income of $305.1 million, or $1.59 per diluted share, for the year ended December 31, 2022, compared to $281.0 million, or $1.31 per diluted share, for the year ended December 31, 2021. Income before income taxes of $447.6 million for the year ended December 31, 2022, compared to $427.8 million for the year ended December 31, 2021.
• On a non-GAAP basis, pre-tax, pre-provision income of $122.2 million for the fourth quarter of 2022, compared to pre-tax, pre-provision income of $122.4 million for the third quarter of 2022. Pre-tax, pre-provision income for the year ended December 31, 2022 was $475.3 million, an increase of $83.8 million, or 21%, compared to adjusted pre-tax, pre-provision income of $391.5 million for the year ended December 31, 2021.
• Net interest income decreased to $205.6 million for the fourth quarter of 2022, compared to $207.9 million for the third quarter of 2022, primarily due to an increase in interest expense as a result of higher cost of deposits combined with a higher level of borrowings, partially offset by the upward repricing of variable-rate commercial loans and higher average loan balances.
• Net interest margin increased to 4.37% for the fourth quarter of 2022, compared to 4.31% for the third quarter of 2022, mainly due to the change in asset mix to higher yielding earning assets, partially offset by higher cost of funds.
• Provision for credit losses of $15.7 million for the fourth quarter of 2022, relatively flat compared to $15.8 million for the third quarter of 2022.
• Non-interest income of $29.6 million for the fourth quarter of 2022, relatively flat compared to $29.7 million for the third quarter of 2022.
• Non-interest expenses decreased by $2.3 million to $112.9 million for the fourth quarter of 2022, compared to $115.2 million for the third quarter of 2022, mainly driven by higher net gains on other real estate owned (“OREO”) operations. The efficiency ratio for the fourth quarter of 2022 was 48.02%, compared to 48.48% for the third quarter of 2022.
• Income tax expense of $33.4 million for the fourth quarter of 2022, an increase of $1.4 million, compared to $32.0 million for the third quarter of 2022.
• Credit quality variances:
  • Non-performing assets decreased by $14.1 million to $129.2 million as of December 31, 2022, compared to $143.3 million as of September 30, 2022. The decline was mainly driven by the restoration to accrual status of a $5.2 million commercial and industrial loan and a $7.1 million decrease in the OREO portfolio balance, mainly associated with sales of residential properties.
  • An annualized net charge-offs to average loans ratio of 0.46% for the fourth quarter of 2022, compared to 0.31% for the third quarter of 2022, mainly due to a $3.6 million increase in consumer loans net charge-offs and a $1.2 million increase in commercial and construction net charge-offs during the fourth quarter of 2022.
• Total loans increased $254.3 million from the prior quarter to $11.6 billion as of December 31, 2022. The variance consisted of increases of $130.2 million in commercial and construction loans, $107.7 million in consumer loans, and $16.4 million in residential mortgage loans. Excluding the $11.1 million decrease in the carrying value of the Small Business Administration Paycheck Protection Program (“SBA PPP”) loan portfolio, the growth in the commercial and construction loans portfolio was $141.3 million driven by several large commercial loans in excess of $10 million originated in both the Puerto Rico and Florida regions.
• 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 2022, a net increase of $191.4 million compared to the third quarter of 2022. The net increase in total loan originations consisted of: (i) a $186.7 million increase in commercial and construction loan originations; (ii) an $11.8 million increase in residential mortgage loan originations; and (iii) a $7.1 million decrease in consumer loan originations.
• Total deposits, excluding brokered certificates of deposit (“CDs”) and government deposits, decreased by $314.9 million to $13.3 billion as of December 31, 2022, reflecting reductions in both retail consumer and commercial transactional and savings account balances across all regions, partially offset by an increase in time deposits.
• Government deposits decreased in the fourth quarter by $171.9 million and totaled $2.8 billion as of December 31, 2022, reflecting decreases of $157.4 million in the Puerto Rico region and $16.0 million in the Virgin Islands region, partially offset by an increase of $1.5 million in the Florida region.
• Brokered CDs increased by $60.6 million during the fourth quarter to $105.8 million as of December 31, 2022.
• Borrowings increased by $550.1 million during the fourth quarter to $933.9 million as of December 31, 2022, including a $675.0 million increase in Federal Home Loan Bank (“FHLB”) advances and a $124.9 million reduction in securities sold under agreements to repurchase.
• The cash and liquid securities to total assets ratio increased to 19.02% as of December 31, 2022, compared to 18.57% as of September 30, 2022.
• During the fourth quarter of 2022, First BanCorp. has repurchased approximately 3.5 million shares for a total purchase price of $50.0 million. For the year ended December 31, 2022, First BanCorp. repurchased approximately 19.4 million shares for a total purchase price of $275.0 million.
• 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 were 19.21%, 16.53%, 16.53%, and 10.70%, respectively, as of December 31, 2022. On a non-GAAP basis, the tangible common equity ratio was 6.81% as of December 31, 2022, compared to 6.55% as of September 30, 2022.

SAN JUAN, Puerto Rico–(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 $73.2 million, or $0.40 per diluted share, for the fourth quarter of 2022, compared to $74.6 million, or $0.40 per diluted share, for the third quarter of 2022, and $73.6 million, or $0.35 per diluted share, for the fourth quarter of 2021.

For the year ended December 31, 2022, the Corporation reported net income of $305.1 million or $1.59 per diluted share, compared to $281.0 million, or $1.31 per diluted share, for the year ended December 31, 2021.

Aurelio Alemán, President and Chief Executive Officer of First BanCorp., commented: “We closed the year with another strong quarter of organic growth and notable improvement across franchise metrics. We generated $73.2 million in net income, or $0.40 per diluted share, and reached $122.2 million in pre-tax, pre-provision income, highlighting once again our solid earnings generation capacity and expense management discipline. The loan portfolio grew by $254.3 million during the quarter, driven by strong loan origination activity, particularly in the commercial and consumer business segments. Net interest margin expanded by 6 basis points, asset quality improved, and we reached the lowest efficiency ratio among our peers at 48.02%. In line with industry trends, core deposits, net of brokered and government deposits, decreased by $314.9 million during the quarter as households unwind excess liquidity associated with pandemic-related programs. Our main market continues to be supported by a large amount of disaster relief funds flowing into the economy, strong consumer demand, and positive labor market trends.

“Over the course of 2022, the organization performed exceptionally well reflecting one of its best performing years on record. We registered organic loan growth of $762 million or 10% (excluding SBA PPP loans and strategic reduction of residential mortgages), achieved a record pre-tax pre-provision income of $475.3 million, up 21% when compared to 2021, and reached a decade low non-performing asset ratio of 0.69%. Responsible and value driven capital allocation has allowed us to grow the franchise and invest for the future, while supporting our communities and colleagues and returning approximately $363 million, or 119% of 2022 earnings, to our shareholders through repurchases of common stock and the payment of common stock dividends.

“We remain vigilant to changing global economic conditions and the effect that restrictive monetary policies may continue to have on the overall inflationary environment. We believe that our organization has ample experience navigating uncertainty and is well equipped to manage rising market challenges going into the next cycle. We are highly encouraged by the growth prospects in our main market which should continue to benefit from rebuilding activity over the next few years.”

NON-GAAP DISCLOSURES

This press release includes certain non-GAAP financial measures, including adjusted net income, adjusted earnings per diluted share, and adjusted pre-tax, pre-provision income 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”). Other non-GAAP financial measures include adjusted net interest income and margin, tangible common equity, tangible book value per common share, and certain capital ratios. These measures 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. Management believes that the presentation of these non-GAAP financial measures enhances the ability of analysts and investors to analyze trends in the Corporation’s business and understand the performance of the Corporation. The Corporation may utilize these non-GAAP financial measures as guides in its budgeting and long-term planning process.

SPECIAL ITEMS

The financial results for the fourth and third quarters of 2022 and year ended December 31, 2022 did not include any significant Special Item. The financial results for the fourth quarter of 2021 and year ended December 31, 2021 included the significant Special Items discussed below.

Quarter ended December 31, 2021

– Merger and restructuring costs of $1.9 million ($1.2 million after-tax, calculated based on the statutory rate of 37.5%) in connection with the Banco Santander Puerto Rico (“BSPR”) acquisition integration process and related restructuring initiatives.

– Costs of $4 thousand ($3 thousand after-tax, calculated based on the statutory rate of 37.5%) related to the COVID-19 pandemic response efforts, consisting primarily of costs related to additional cleaning, safety materials, and security measures.

Year ended December 31, 2021

– Merger and restructuring costs of $26.4 million ($16.5 million after-tax, calculated based on the statutory rate of 37.5%) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in 2021 included approximately $6.5 million related to previously announced Employee Voluntary Separation Program (the “VSP”) as well as involuntary separation actions implemented in the Puerto Rico region. In addition, these costs included costs related to system conversions, accelerated depreciation charges related to planned closures and consolidation of branches in accordance with the Corporation’s integration and restructuring plan, and other integration related efforts.

– Costs of $3.0 million ($1.9 million after-tax, calculated based on the statutory rate of 37.5%) related to the COVID-19 pandemic response efforts, consisting primarily of costs related to additional cleaning, safety materials, and security measures.

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

Net income was $73.2 million for the fourth quarter of 2022, or $0.40 per diluted share, compared to $74.6 million for the third quarter of 2022, or $0.40 per diluted share. For the year ended December 31, 2022, net income was $305.1 million or $ 1.59 per diluted share, compared to adjusted net income of $295.7 million or $1.40 per diluted share for the year ended December 31, 2021. The following table shows the net income and earnings per diluted share for the fourth and third quarters of 2022 and for the year ended December 31, 2022, and reconciles, for the fourth quarter of 2021 and for the year ended December 31, 2021 the net income to adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures that exclude the significant Special Items identified above.

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

Income before income taxes was $106.5 million for the fourth and third quarters of 2022. For the year ended December 31, 2022, income before income taxes was $447.6 million, compared to $427.8 million for the same period in 2021. Pre-tax, pre-provision income was $122.2 million for the fourth quarter of 2022, compared to $122.4 million for the third quarter of 2022. For the year ended December 31, 2022, pre-tax, pre-provision income was $475.3 million, compared to adjusted pre-tax, pre-provision income of $391.5 million for the same period in 2021. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters and for the years ended December 31, 2022 and 2021:

NET INTEREST INCOME

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

Net interest income amounted to $205.6 million for the fourth quarter of 2022, a decrease of $2.3 million, compared to $207.9 million for the third quarter of 2022. The decrease in net interest income was mainly due to:

• A $13.1 million increase in interest expense, including:

– a net increase of $11.1 million in interest expense on interest-bearing deposits, primarily associated with higher average rates paid in the fourth quarter, partially offset by the effects of a $407.4 million reduction in the average balance of interest-bearing deposits;

– a $2.0 million increase in interest expense on FHLB advances mainly associated with an increased use of short-term advances taken in the fourth quarter, which increased the average balance by $124.5 million, and higher rates paid on FHLB advances in the fourth quarter; and

– interest expense on other borrowings remained relatively flat as compared to the third quarter, including an increase of $0.7 million due to the repricing of junior subordinated debentures that are tied to LIBOR, which was almost entirely offset by a $0.6 million decrease in the interest expense associated with $200.0 million of securities sold under agreements to repurchase called prior to maturity during the fourth quarter, net of an increase of short-term securities sold under agreements to repurchase in the fourth quarter.

• A $1.2 million decrease in interest income from interest-bearing cash balances, mainly attributable to the effects of the $488.3 million reduction in the average balance of interest-bearing cash, primarily consisting of cash balances held at the FED, partially offset by increased market rates.

• A $0.5 million decrease in interest income on residential mortgage loans, primarily due to lower interest cash collections on nonaccrual loans and the effect of a $16.7 million reduction in the average balance of this portfolio.

Partially offset by:

• An $8.2 million increase in interest income on commercial and construction loans, primarily due to the upward repricing of variable-rate commercial and construction loans, which resulted in an increase of approximately $8.2 million in interest income, and an increase of $72.2 million in the average balance of this portfolio (excluding SBA PPP loans), which resulted in an increase of approximately $1.0 million in interest income. These variances were partially offset by a $1.3 million reduction in interest income from SBA PPP loans.

The interest rate on approximately 56% of the Corporation’s commercial and construction loans is variable, 42% is based upon LIBOR, SOFR and other indexes and 14% is based upon the Prime rate index. For the fourth quarter of 2022, the average one-month LIBOR increased 143 basis points, the average three-month LIBOR increased 151 basis points, the average Prime rate increased 146 basis points, and the average three-month SOFR increased 140 basis points, compared to the average rates for such indexes during the third quarter of 2022.

• A $3.7 million increase in interest income on consumer loans and finance leases, primarily due to an increase of approximately $110.9 million in the average balance of this portfolio, which increased interest income by approximately $2.6 million and, to a lesser extent, the effects of higher yields in the consumer credit card portfolio.

• A $0.7 million increase in interest income from government obligations debt securities, mainly associated with the upward repricing of variable-rate Puerto Rico municipal bonds held as part of the held-to-maturity debt securities portfolio.

Net interest margin for the fourth quarter of 2022 increased to 4.37%, when compared to 4.31% for the third quarter of 2022, mainly due to a change in asset mix to higher yielding earning assets, partially offset by higher cost of funds.

NON-INTEREST INCOME

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

Non-interest income amounted to $29.6 million for the fourth quarter of 2022, relatively flat compared to $29.7 million for the third quarter of 2022. The $0.1 million decrease in non-interest income was mainly due to:

• A $0.8 million decrease in revenues from mortgage banking activities, mainly driven by a $1.2 million increase in mark-to-market losses from to-be-announced (“TBA”) mortgage-backed securities (“MBS”) forward contracts, partially offset by a $0.4 million increase related to the net change in mark-to-market gains on interest rate lock commitments.

• A $0.6 million decrease in service charges and fees on deposit accounts, mainly associated with a $0.7 million adjustment to reverse previously recognized fees on non-sufficient funds as part of changes in the fees structure.

Partially offset by:

• A $0.8 million increase related to seasonally higher transactional fee income from point-of-sale (“POS”) terminals, credit and debit cards, and merchant-related transactions and, to a lesser extent, the effect in the third quarter of disruptions in digital transactions experienced in connection with Hurricane Fiona.

• A $0.3 million increase in insurance commission income.

NON-INTEREST EXPENSES

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

Contacts

First BanCorp.
Ramon Rodriguez

Senior Vice President

Corporate Strategy and Investor Relations

[email protected]
(787) 729-8200 Ext. 82179

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