First Ban(US:FBP)2022-08-09 14:43PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for First Bancorp as of June 30, 2022, and for the three and six-month periods then ended Consolidated Statements of Financial Condition Total assets, liabilities, and equity decreased due to reduced cash, lower deposits, and increased comprehensive loss Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $19,531,635 | $20,785,275 | ($1,253,640) | | Cash and due from banks | $1,261,590 | $2,540,376 | ($1,278,786) | | Total available-for-sale debt securities | $6,081,120 | $6,453,761 | ($372,641) | | Loans, net of ACL | $10,954,722 | $10,791,628 | $163,094 | | Total Liabilities | $17,973,719 | $18,683,508 | ($709,789) | | Total deposits | $17,140,128 | $17,784,894 | ($644,766) | | Total Stockholders' Equity | $1,557,916 | $2,101,767 | ($543,851) | | Accumulated other comprehensive loss | ($591,756) | ($83,999) | ($507,757) | Consolidated Statements of Income Q2 net income rose to $74.7 million, driven by higher net interest income despite credit loss provisions Quarterly Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $196,186 | $184,783 | +6.2% | | Provision for credit losses | $10,003 | ($26,155) | N/A | | Non-interest Income | $30,941 | $29,884 | +3.5% | | Non-interest Expenses | $108,326 | $130,172 | -16.8% | | Net Income | $74,695 | $70,558 | +5.9% | | Diluted EPS | $0.38 | $0.33 | +15.2% | Six-Month Income Statement Highlights (in thousands, except per share data) | Metric | H1 2022 | H1 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $381,810 | $361,048 | +5.8% | | Provision for credit losses | ($3,799) | ($41,407) | N/A | | Non-interest Income | $63,799 | $60,840 | +4.9% | | Non-interest Expenses | $214,985 | $263,473 | -18.4% | | Net Income | $157,295 | $131,708 | +19.4% | | Diluted EPS | $0.80 | $0.60 | +33.3% | Consolidated Statements of Comprehensive (Loss) Income Q2 2022 total comprehensive loss was $101.2 million, driven by unrealized losses on debt securities from rising rates Comprehensive (Loss) Income (in thousands) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $74,695 | $70,558 | $157,295 | $131,708 | | Net unrealized holding (losses) gains on debt securities | ($175,923) | $28,496 | ($507,757) | ($70,433) | | Total Comprehensive (Loss) Income | ($101,228) | $99,054 | ($350,462) | $61,275 | Consolidated Statements of Cash Flows Net cash decreased by $1.28 billion, driven by cash used in investing and financing activities, despite stable operating cash Six-Month Cash Flow Summary (in thousands) | Cash Flow Category | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $219,608 | $224,526 | | Net cash used in investing activities | ($557,692) | ($1,435,009) | | Net cash (used in) provided by financing activities | ($941,451) | $2,505,419 | | Net (decrease) increase in cash and cash equivalents | ($1,279,535) | $1,294,936 | Notes to Consolidated Financial Statements Detailed disclosures cover debt securities, loan portfolios, credit losses, deposits, equity, segment performance, and regulatory capital Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, condition, and risk management, including Q2 results, income/expense, balance sheet, and various risks Executive Summary Q2 2022 net income increased to $74.7 million, with a new $350 million stock repurchase program and LIBOR transition management - A new stock repurchase program of up to $350 million was approved in April 2022. As of August 3, 2022, the Corporation had repurchased approximately 10.71 million shares for $150 million under this program222 - The Corporation's total LIBOR exposure was approximately $2.4 billion as of June 30, 2022, primarily in commercial loans, debt securities, and subordinated debentures. New originations using LIBOR ceased as of December 31, 2021226227 Results of Operations Q2 2022 net income rose to $74.7 million, driven by higher net interest income and lower non-interest expenses - Net interest income for Q2 2022 increased by $11.4 million YoY to $196.2 million, driven by lower MBS premium amortization, upward repricing of variable-rate loans, and growth in consumer loans233250259 - The provision for credit losses was an expense of $10.0 million in Q2 2022, a reversal from a $26.2 million benefit in Q2 2021, reflecting increased uncertainties in the economic outlook235 - Non-interest expenses fell by $21.9 million YoY to $108.3 million. This was largely due to the absence of $11.0 million in merger/restructuring costs and $1.1 million in COVID-related expenses that were present in Q2 2021238296 Financial Condition Analysis Total assets decreased by $1.3 billion due to reduced cash, while the loan portfolio grew and investment securities declined - Total assets decreased by $1.3 billion since year-end 2021, primarily due to a $1.3 billion decrease in cash and cash equivalents312 Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Residential mortgage | $2,851,685 | $2,978,895 | ($127,210) | | Commercial & Construction | $5,248,340 | $5,193,719 | $54,621 | | Consumer loans & finance leases | $3,106,849 | $2,888,044 | $218,805 | | Total loans held for investment | $11,206,874 | $11,060,658 | $146,216 | - The available-for-sale debt securities portfolio decreased by $372.6 million, mainly driven by a $507.8 million decrease in fair value due to rising interest rates, partially offset by purchases334 Risk Management The Corporation manages liquidity, interest rate, credit, and concentration risks, maintaining strong liquidity and improving credit quality - As of June 30, 2022, the core liquidity reserve was $4.5 billion, or 23.1% of total assets. The Corporation had $1.1 billion in available borrowing capacity from the FHLB351 - The Corporation remains asset-sensitive. A gradual 200 bps increase in interest rates over 12 months is projected to increase net interest income by approximately $26.9 million402404 Non-Performing Assets (in thousands) | Category | June 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Nonaccrual loans | $99,110 | $110,717 | ($11,607) | | OREO & repossessed property | $45,546 | $44,535 | $1,011 | | Total Non-Performing Assets | $147,465 | $158,102 | ($10,637) | - The Corporation has a significant geographic concentration risk, with 79% of its total gross loan portfolio located in Puerto Rico as of June 30, 2022471315 Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk disclosures are detailed in the Risk Management section of the MD&A - Information regarding the Corporation's exposure to market risk is detailed in the Risk Management section of the MD&A505 Item 4. Controls and Procedures Disclosure controls were effective as of June 30, 2022, with no material changes to internal controls - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of June 30, 2022505 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting506 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Corporation is involved in ordinary course legal proceedings not expected to materially affect its financial position - The company is party to various legal proceedings from the ordinary course of business, but management does not expect them to have a material adverse effect on its financial position216507 Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2021 Annual Report on Form 10-K - No material changes have been identified from the risk factors disclosed in the 2021 Annual Report on Form 10-K509 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Corporation repurchased $100 million of common stock in Q2 2022 as part of a $350 million program Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | May 2022 | 5,695,062 | $13.92 | $270,699 | | June 2022 | 1,374,201 | $15.06 | $250,000 | | Total Q2 | 7,069,263 | $14.15 | $250,000 | Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data