First Bank’s Alemán: ‘2015 seemed like two years in one’
“With a strong capital base and a focused management team, we are prepared to continue weathering the Puerto Rico storm while growing our presence in our other markets,” said First BanCorp. CEO Aurelio Alemán.
First BanCorp. wrapped up what top executives called a “very busy year” with net income of $21.3 million, or $0.10 per diluted share for 2015, compared to $392.3 million, or $1.87 per diluted share, for the year ended Dec. 31, 2014.
The results for the previous year include a $302.9 million, or $1.44 per diluted share, income tax benefit associated with the partial reversal of the valuation allowance recorded against the deferred tax assets of the corporation’s banking subsidiary, FirstBank.
For the last quarter of 2014, the bank reported net income of $15 million for the, or $0.07 per diluted share, compared to $14.8 million, or $0.07 per diluted share, for the third quarter of 2015 and $330.8 million, or $1.56 per diluted share, for the fourth quarter of 2014.
“Honestly, 2015 seemed like two years in one,” First BanCorp. CEO Aurelio Alemán said during a call with analysts to review the year’s events.
During the first half of 2014, the Federal Deposit Insurance Corp.’s took First BanCorp. off its watch list by lifting a Consent Order after five years in response to the bank’s improved performance; the bank acquired a portion of the former Doral Bank’s branches and loans and deposits; and released its DFAST results, which showed the bank’s “capital strength despite the severely adverse economic environment,” Alemán said.
“Despite those headwinds that came elevated during the second half of 2015, there were significant progress in franchise metrics,” he noted.
Non-performing assets declined by $107 million, bank inflows declined by $133 million and deposits increased by $472 million. However, brokered deposits decreased by $790 million over the year, which Alemán described as a “significant enlarged number.”
“Despite the political and fiscal headwinds we continue to face in Puerto Rico, asset quality continues to gradually improve and our loan originations and core deposit base remain stable. We grew non-interest income and continue to control our expense base,” he said.
Still, Alemán admitted that the government’s fiscal problems have influenced the bank’s performance, specifically on its stock price performance. Furthermore, the bank has had to take impairment charges related to government bonds of $15.9 million so far this year, based on its assessment of the default liabilities and the loss severities that are implied from the current valuations of the bonds, mostly held by the Government Development Bank.
“We continue to be vigilant regarding potential short-term government liquidity events that definitely could impact the exposure. We’re vigilant to government suppliers that depend on payments,” he said.
Government deposits decreased by $169.6 million to $573.2 million as of Dec. 31, 2015. As previously reported, in September 2015, FirstBank — the corporation’s banking subsidiary — received $183.5 million in temporary deposits related to property tax collections.
As expected, the deposits were reduced by $137.2 million during the fourth quarter of 2015. As of December 31, 2015, the corporation had government deposits of $386.3 million in Puerto Rico and $186.9 million in the U.S. and British Virgin Islands.
During the last quarter of 2014, First BanCorp. increased its general allowance for loan losses on government exposure by $19.2 million, based on a number of factors: Puerto Rico economic indicators, changes and trends in property values, changes in early delinquency on the bank, and loan concentrations, among others, said Orlando Berges-González, First BanCorp.’s CFO.
