First Bancorp 8-K, filed Nov 10, 2021
First Bancorp (FBP)
8-K
2021-11-10
For: 2021-11-10
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Added on
April 07, 2026
About this 8-K
First Bancorp filed this 8-K on November 10, 2021.
Items reported
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 10, 2021
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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(Address of Principal Executive Offices)
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(Zip Code)
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(787 ) 729-8200
(Registrant’s Telephone Number, including Area Code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 8.01 |
Other Events.
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The executive officers of First BanCorp are using the materials filed as Exhibit 99.1 hereto, in whole or in part, in meetings with investors and
analysts. A copy of the investor presentation is attached hereto as Exhibit 99.1
| Item 9.01 |
Financial Statements and Exhibits
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(d) Exhibits
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Exhibit
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Description of Exhibit
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99.1
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First BanCorp Investor Presentation dated November 2021.
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document).
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Exhibit 99.1 referenced therein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall Exhibit 99.1 be deemed incorporated by reference in any
filings under the Securities Act of 1933, as amended.
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Exhibit Index
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Exhibit
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Description of Exhibit
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First BanCorp Investor Presentation dated November 2021.
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document).
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Exhibit 99.1 referenced therein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall Exhibit 99.1 be deemed incorporated by reference in any
filings under the Securities Act of 1933, as amended.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Date: November 10, 2021
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First BanCorp
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By:
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/s/ Orlando Berges
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Name:
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Orlando Berges
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Title:
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EVP and Chief Financial Officer
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4
Exhibit 99.1
First BanCorpInvestor PresentationNovember 2021
Forward Looking Statements This presentation contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to the Corporation’s future economic, operational and financial performance and can be identified by the words or phrases “expect,” “anticipate,”
“intend,” “should,” “would,” “believe” and similar expressions. First BanCorp (the “Corporation”) cautions readers not to place undue reliance on such statements, which speak only as of the date made, and advises readers that various factors,
including, but not limited to, the following could cause actual results to differ materially from those expressed in, or implied by, such statements: the severity, magnitude and duration of the COVID-19 pandemic, actions taken by governmental
authorities in response thereto, and the impact of the pandemic on the Corporation’s business, operations, employees, credit quality, financial condition and net income; the Corporation’s ability to identify and prevent cyber-security
incidents; risks associated with the Corporation’s recent acquisition of BSPR; uncertainty as to the ultimate outcomes of actions taken, or those that may be taken, by the Puerto Rico government, or the oversight board established by the
Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) to address the Commonwealth of Puerto Rico’s financial problems; changes in economic and business conditions, including those caused by the COVID-19 pandemic or other
global or regional health crises as well as past or future natural disasters, that directly or indirectly affect the financial health of the Corporation’s customer base; the impact of a slowing economy, increased unemployment or
underemployment and the continued economic recession in Puerto Rico; uncertainty as to the availability of certain funding sources; the deteriorating weakness of the real estate markets and of the consumer and commercial sectors and their
impact on the credit quality of the Corporation’s loans and other assets; the impact of changes in accounting standards or assumptions in applying those standards; the ability of FirstBank to realize the benefits of its net deferred tax
assets; the ability of FirstBank to generate sufficient cash flow to make dividend payments to the Corporation; adverse changes in general economic conditions in Puerto Rico, the U.S., the U.S. Virgin Islands, and the British Virgin Islands,
and disruptions in the U.S. capital markets; uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate at the end of 2021; an adverse change in the Corporation’s ability to attract new clients and retain
existing ones; the risk that additional portions of the unrealized losses in the Corporation’s investment portfolio are determined to be credit-related; uncertainty about legislative, tax or regulatory changes that affect financial services
companies in Puerto Rico, the U.S., and the U.S. and British Virgin Islands; changes in the fiscal and monetary policies and regulations of the U.S. federal government and the Puerto Rico and other governments; the risk of possible failure or
circumvention of the Corporation’s internal controls and procedures and the risk that the Corporation’s risk management policies may not be adequate; increased costs and losses or an adverse effect to our reputation; the risk that the FDIC
may increase the deposit insurance premium and/or require special assessments to replenish its insurance fund, causing an additional increase in the Corporation’s non-interest expenses; the impact of business acquisitions and dispositions;
the impact of any of these uncertainties on the Corporation’s capital and declaration of dividends by the Corporation’s Board of Directors; uncertainty as to whether FirstBank will be able to continue to satisfy its regulators regarding,
among other things, its asset quality, liquidity plans, maintenance of capital levels and compliance with applicable laws, regulations, and related requirements; and general competitive factors and industry consolidation. For a discussion of
such uncertainties and risks to which the Corporation is subject, please refer to the Corporation’s annual report on Form 10-K for the year ended December 31, 2020, as well as its other filings with the Securities and Exchange Commission (the
“SEC”). The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements after the date of such statements, except as required by law.Non-GAAP Financial MeasuresIn addition to the
Corporation’s financial information presented in accordance with GAAP, management uses certain “non-GAAP” financial measures” within the meaning of Regulation G promulgated by the SEC, to clarify and enhance understanding of past performance
and prospects for the future. Please refer to pages 19-22 for a reconciliation of GAAP to non-GAAP measures and calculations for the quarter ended September 30, 2021.
Investment Merits Strong Market Position & Scalable Platform Fully integrated and expanded
franchise with a strong market position in a consolidated market with opportunities for enhanced market penetration while serving over 675,000 customers Fortress Balance Sheet Liquidity, reserve coverage, and capital levels remain among the
highest in the banking industry with ample coverage to weather the impact of disruptions caused by the pandemic Economic Recovery Underway Puerto Rico will continue to benefit from both pandemic relief and disaster recovery funding; over $48
billion in obligated funds are still pending to be disbursed over the next years Value Driving Capital Allocator Capital ratios remain among the highest in the banking industry; increased common dividend to $0.10/share and completed $150
million in share repurchases as of Q3 2021 Strong Core Performance Pre-tax, pre-provision income for the nine-month period ended Q3 2021 increased 35% to $286.6 million when compared to the nine-month period ended Q3 2020 1 2 3 4 5
Franchise Overview Founded in Puerto Rico in 1948 Headquartered in San Juan, Puerto Rico (PR) with
operations in PR, Eastern Caribbean (Virgin Islands) and Florida3,260 FTE employeesSecond largest financial holding company in Puerto Rico with attractive business mix and substantial loan market share in retail and commercial lending
segmentsFlorida presence with focus on serving southeast Florida region (Miami-Dade and Broward counties)One of the largest depository institution in the US Virgin Islands with over 30% deposit market share Full-Service Banking Franchise
Across Three Operating Regions Southeast Florida18% of Loan Portfolio10% of Total Deposits Eastern Caribbean Region4% of Loan Portfolio12% of Total Deposits
Franchise Highlights and Operating Environment Completed all remaining system conversions and
integration of acquired operations; on track to meet efficiencies and synergies planned as part of the transaction including post-integration branch rationalization during Q4 2021Fully integrated organization with expanded sales capacity
better positioned to grow market shareNow our full dedication of resources will be geared towards growing the franchise and servicing our clients Integration Progress 1 Franchise Highlights 2 Economic Activity 3 Second largest market
share among banks across all products and channels to better serve our clients and communities with ample opportunities for organic growthMore clients adopting our digital experience; online banking users registered an organic increase of 12%
during the quarter and approximately 40% of deposits were captured through digital and self-service channels Expanded digital functionalities include the ability to process mortgage, credit cards, and personal loan applications through our
corporate portal and, on the commercial front, loan forgiveness requests by commercial PPP clients are also being processed through a self-service digital platform Improvements in the economic backdrop within our operating markets continue
to drive core performance metricsFully vaccinated rate in Puerto Rico of 81% among 12 years and older (highest vaccination rate in the US); overall business environment improving with payroll employment 12% higher than April 2020 and improved
consumer confidence evidenced by rise in most indicatorsEconomic activity in South Florida continues to trend in a positive direction with passenger movement at MIA/FLL airports sequentially improving since February 2021 and unemployment
levels trending down Both pandemic and disaster relief funding continue to support economic activity in the USVICommercial credit demand expected to gradually pick up during 2022 as the economy recovers and large–scale disaster relief-related
projects begin to emerge
Fortress Balance Sheet Ample liquidity to drive loan demand as economy continues reopening
effortsStrong reserve coverage on a well-diversified loan portfolioCapital ratios remain among the highest in the banking sector; capital ratios remain well above regulatory “Well-Capitalized” guidelinesCapital deployment opportunities remain
a priority 1) Peer group consists of U.S. banks with assets between $15 billion and $30 billion. Top quartile as of 2Q 2021 as per S&P Capital IQ. 2Q20 1Q20 3Q20 Top Quartile
Peer 36.6% 4Q20 1Q21 2Q21 3Q21 24.0% 29.5% 31.9% 33.7% 43.9% 44.9% 35.9% 3.2% 3Q21 4Q20 3Q20 1Q20 1Q21 2Q20 Top Quartile Peer 2Q21 3.6% 3.3% 3.3% 1.3% 3.1% 2.9% 2.6% 1Q20 3Q20 2Q21 4Q20 2Q20 Top Quartile
Peer 1Q21 21.6% 13.7% 21.5% 17.2% 17.3% 17.7% 17.3% 3Q21 17.6% Cash & Investments to Assets 1 ACL to Total Loans HFI 2 Common Equity Tier-1 Ratio 3
Puerto Rico Market Share TOTAL LOANS 2ND CORE DEPOSITS 1% COMMERCIAL
LENDING AUTO & LEASING 2% ATM TERMINALS (#) 2ND 2ND 2ND 2ND BRANCHES 1% PERSONAL LOANS CREDIT CARDS ($) 1% MONEY EXPRESS (<$5k) ACH TRANSACTIONS (#) POS TRANSACTIONS ($) MORTGAGE
ORIGINATIONS (QTD) 2ND 2ND 2ND 2ND 2ND 2ND 2ND Peers Target FirstBank Remaining Gap to Achieve 30% Market Share Goal Strategic Goal is to Achieve a Minimum of 30% Market Share Across all Business Segments and Products
in Puerto Rico Including Third Party Alliance
Third Quarter 2021 Performance Highlights Profitability Net income of $75.7 million ($0.36 per
diluted share) compared to $70.6 million ($0.33 per diluted share) in Q2 2021On a non-GAAP basis, adjusted pre-tax, pre-provision income of $103.6 million, compared to $96.6 million in Q2 2021Net interest income remained relatively flat at
$184.7 million, compared to $184.8 million in Q2 2021Provision for credit losses was a net benefit of $12.1 million ($7.6 million after-tax, or an increase of $0.04 per diluted share reflecting, among other things, improvements in the outlook
of certain macroeconomic variables and lower residential and commercial mortgage loans outstanding Non-performing assets decreased by $83.2 million to $172.4 million as of Q3 2021, compared to $255.6 million as of Q2 2021 primarily driven by
a bulk sale of $52.5 million of nonaccrual residential mortgage loans; NPAs stand at 0.81% of total assetsThe ratio of the ACL for loans and finance leases to total loans held for investment was 2.59% as of Q3 2021 (2.64% ex. PPP), compared
to 2.85% as of Q2 2021; decrease was driven by the bulk sale of residential non-performing loans, as well as releases associated with improvements in macroeconomic factors Asset Quality Continue to return capital to shareholders
demonstrating the strength of our balance sheet and our commitment to increasing shareholder valueRepurchased 4.2 million shares amounting to $50 million during Q3 2021Announced the redemption of $36.1 million of all outstanding preferred
stock to be completed during Q4 2021Increased common stock dividend by 43% to $0.10 per share Ample capital position with Common Equity Tier-1 ratio of 17.6% as of Q3 2021 Capital
Balance Sheet MetricsLoans|Deposits Total loans decreased by $249.0 million to $11.2 billion as of
Q3 2021; decrease consisted of reductions of $176.4 million in commercial and construction loans and $160.9 million in residential mortgage loans, partially offset by an $88.2 million increase in consumer loansDecrease in commercial and
construction loans reflects, among other things, the effect of the reduction of approximately $130.9 million in the carrying amount of Small Business Administration Paycheck Protection Program (“SBA PPP”) loansDecrease in residential mortgage
loans included the effect of the $52.5 million bulk sale of nonaccrual loansDeposits (net of brokered) decreased by $58 million in 3Q 2021 to $17.63 billion, mainly driven by a $346 million reduction in public fundsExcluding brokered and
government deposits, core deposits increased by $288.5 million to $14.1 billion as of Q3 2021 Loan Originations include refinancing and renewals, as well as credit card utilization activityCore Deposits exclude brokered deposits Loan
Portfolio ($ in millions) Loan Originations ($ in millions)1 PPP $31 $178 $213 Residential $56 2Q 2020 $453 $50 Consumer $191 3Q 2020 4Q 2020 $191 1Q 2021 $430 $33 $49 2Q 2021 $170 3Q 2021 Loans
HFS Construction Commercial (Ex. PPP) $9,405 $39 $11,896 $11,828 $11,698 $11,421 $11,171 $360 $406 $349 $218 $177 $1,278 2Q 2020 Consumer 1Q 2021 4Q 2020 $28 $1,603 3Q 2020 $26 Construction 2Q 2021 3Q
2021 Residential $23 Commercial $963 $1,054 $1,339 $1,201 $24 $157 $147 Core Deposits ($ in Millions)2 Key Highlights 4Q 2020 3Q 2021 2Q 2020 3Q 2020 1Q 2021 2Q 2021 Public Funds CDs &
IRAs Commercial Retail $10,086 $14,648 $14,876 $15,600 $17,685 $17,627
Results of Operations
Third Quarter HighlightsIncome Statement
Third Quarter HighlightsProfitability Dynamics Net Interest Income ($ in millions) Non-Interest
Income ($ in millions) 4.22% 2Q20 3.93% 3Q20 3.81% 3.95% 3.91% 4Q20 1Q21 2Q21 3.60% 3Q21 Net Interest Income ($) Net Interest Margin (GAAP %) Net interest income remained relatively flat at $184.7 million for Q3 2021,
compared to $184.8 million for Q2 2021; variance reflects:A $2.1 million increase in interest income on investment securities, mostly lower premium amortizationA $2.6 million increase in consumer loans interest income driven by increases in
loan balancesA $4.8 million lower interest income on commercial loans resulting from reduced discount accretion on loans paid off and deferred interest recognized in the second quarterA $1.2 million decrease in interest expense as a result of
reductions in the average cost of depositsNet interest margin was 3.60% for Q3 2021, compared to 3.81% for Q2 2021; reduction driven by the increase in low-yielding interest-bearing cash balances and investment
securities 1Q21 -$0.2 2Q20 3Q20 4Q20 2Q21 3Q21 $20.9 $29.9 $30.2 $31.0 $29.9 $29.9 Service Charges on Deposits Mortgage Banking Gain (Loss) on Investments Other Non-interest income of $29.9 million for Q3 2021
remained relatively unchanged compared to Q2 2021 as the increase in fee income from credit and debit cards, ATMs, and point-of-sale (“POS”) transactions was offset by decreases in revenues from mortgage banking activities and service charges
on deposits
Third Quarter HighlightsProfitability Dynamics Non-Interest Expenses ($ in
millions) 104 0 136 118 88 122 126 -2 116 82 124 84 100 92 86 112 90 108 96 110 98 102 94 114 132 128 130 106 120 134 1Q21 $1.1 $0.9 3Q20 2Q21 -$0.8 $2.3 $112.0 3Q21 $89.8 $134.8 $133.3 $130.1 $114.0 $117.6 $93.8 $0.6 $2.2 $107.5 2Q20 $3.0 $81.7 $1.0 $2.3 $1.1 $1.8 $119.6 4Q20 $1.2 $3.2 $117.1 Merger
Related Natural Disaster/Pandemic Related Operating Expenses Credit Related Non-interest expenses decreased by $16.2 million to $114.0 million during Q3 2021, compared to $130.2 million in Q2 2021Total non-interest expenses in Q3 2021
included $2.3 million of merger costs, compared to $11.0 million in Q2 2021, as well as $0.6 million of COVID-19 pandemic-related expenses, compared to $1.1 million in Q2 2021Excluding merger and restructuring costs and covid related
expenses, reduction was $6.9 million largely due to:A $2.1 million increase in net gains on sales of OREO properties, $0.8 million resulting from the sale of a $20.8 million commercial REO propertyA $2.3 million decrease in technology
processing costs of the BSPR operations upon completion of system conversions A $1.2 million decrease in debit and credit card processing costs related to incentives and costs reimbursements associated with a processing agreement
Third Quarter Highlightsasset Quality The decrease in NPAs was primarily driven by:$61.1 million
decrease in nonaccrual residential mortgage loans, driven by the bulk sale of $52.5 million of non-performing loans, as well as the repayment of two large residential mortgage loans totaling $3.9 million$22.8 million decrease in the OREO
portfolio balance, attributed to sales of $28.1 million, including a $20.7 million commercial OREO property in the Puerto Rico regionInflows to nonaccrual loans held for investment were $16.9 million, a $0.1 million increase compared to
inflows of $16.8 million in Q2 2021 Non-Performing Assets ($ in
Millions) $316 6.2% $490 2016 $183 1Q21 $8 5.3% 2017 $285 3.8% 2018 1.5% $16 $211 $256 2.5% 3Q21 $0 2019 $205 $8 1.6% 2020 $201 1.2% 2Q21 $122 0.8% $735 $651 $467 $318 $293 $172 NPLs
HFS NPAs/Assets Repossessed Assets and Other Loans HFI 4Q 2020 3Q 2020 $9 $15 $18 $16 $10 $13 2Q 2020 $13 $256 $15 $6 1Q 2021 $6 2Q 2021 $10 $6 3Q
2021 $304 $294 $292 $285 $172 Commercial OREO Residential Construction Consumer Total non-performing assets decreased by $83.2 million to $172.4 million as of Q3 2021, or 0.81% of total assets compared to $255.6 million
as of Q2 2021 3Q 2020 $1 2Q 2021 $5 2Q 2020 $18 $5 $11 $9 4Q 2020 1Q 2021 $17 $6 $3 $6 3Q 2021 Migration Trend ($ in Millions) Total Residential Comm. & Const. Consumer
Third Quarter HighlightsACL Levels and Capital Position Total stockholders’ equity amounted to
$2.2 billion as of Q3 2021, a decrease of $7.0 million from Q2 2021; decrease was driven by: (1) the repurchase of 4.16 million of shares of common stock for a total purchase price of approximately $50 million, (2) common and preferred stock
dividends declared in the third quarter totaling $15.2 million, and (3) an $18.7 million decrease in the fair value of available-for-sale investment securities recorded as part of Other comprehensive income (loss) in the consolidated
statements of financial conditionThese variances were partially offset by earnings generated in the third quarter Evolution of ACL ($ in Millions) and ACL on Loans to Total Loans (%) Capital Ratios 3.2% 2.6% 2.6% 1Q 20 $403 2.9% 2Q
20 3.4% $4 3.4% $337 $0 3Q 20 4Q 20 Day-1 CECL $0 $373 3.2% 1.7% 2019 3.6% 2Q 21 $155 $248 1Q 21 $401 $340 $300 $8 3Q 21 $309 Off-BS Credit Exposure Debt Securities Loans ACL on Loans/Loans (Excl.
PPP) 4Q 2020 25.1% 3Q 2020 15.2% 21.9% 21.5% 18.0% 2Q 2020 15.3% 20.7% 11.4% 17.7% 10.9% 1Q 2021 20.4% 17.6% 10.5% 17.3% 9.8% 2Q 2021 10.2% 3Q 2021 20.7% 17.9% 17.6% 9.9% Total Risk-Based Capital Tier-1
Capital Leverage Tangible Common Tier-1 Common The allowance for credit losses (ACL) on loans decreased by $36.6 million during 3Q 2021 to $288 millionThe ratio of the ACL for loans and finance leases to total loans held for investment
was 2.59% as of 3Q 2021, compared to 2.85% as of 2Q 2021; excluding PPP loans the ACL to loans was 2.64%
Exhibits
Third Quarter 2021 HighlightsPuerto Rico Government Exposure ($ in millions) As of September 30,
2021, the Corporation had $362.6 million of direct exposure to the Puerto Rico Government, its municipalities and public corporations, compared to $388.8 million as of June 30, 202186% of direct government exposure is to municipalities, which
are supported by assigned property tax revenuesAs of September 30, 2021, the Corporation had $2.8 billion of public sector deposits in Puerto Rico, compared to $2.9 billion as of June 30, 2021Approximately 19% is from municipalities in Puerto
Rico and 81% is from public corporations and the central government and agencies in Puerto Rico
Third Quarter HighlightsNPL Migration
Third Quarter HighlightsUse of Non-GAAP Financial Measures Basis of PresentationUse of Non-GAAP
Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial
position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached
tables to this earnings release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Tangible Common Equity Ratio and Tangible Book Value per Common Share The
tangible common equity ratio and tangible book value per common share are non-GAAP financial measures generally used by the financial community to evaluate capital adequacy. Tangible common equity is total equity less preferred equity,
goodwill, core deposit intangibles, and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Tangible assets are total assets less goodwill, core deposit intangibles,
and other intangibles, such as the purchased credit card relationship intangible and the insurance customer relationship intangible. Management and many stock analysts use the tangible common equity ratio and tangible book value per common
share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase method of
accounting for mergers and acquisitions. Accordingly, the Corporation believes that disclosures of these financial measures may be useful also to investors. Neither tangible common equity nor tangible assets, or the related measures should be
considered in isolation or as a substitute for stockholders’ equity, total assets, or any other measure calculated in accordance with GAAP. Moreover, the way the Corporation calculates its tangible common equity, tangible assets, and any
other related measures may differ from that of other companies reporting measures with similar names.
Third Quarter HighlightsUse of Non-GAAP Financial Measures Basis of PresentationUse of Non-GAAP
Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial
position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached
tables to this earnings release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. Adjusted Pre-Tax, Pre-Provision IncomeAdjusted pre-tax, pre-provision income
is a non-GAAP performance metric that management uses and believes that investors may find useful in analyzing underlying performance trends, particularly in times of economic stress. Adjusted pre-tax, pre-provision income, as defined by
management, represents net income (loss) excluding income tax expense (benefit), the provision for loan and lease losses, as well as certain items that management believes are not reflective of core operating performance or that are not
expected to reoccur with any regularity or reoccur at uncertain times and amounts. This metric is income before income taxes adjusted to exclude the provision for loan and lease losses, gains or losses on sales of investment securities and
impairment, and fair value adjustments on derivatives. In addition, from time to time, earnings are adjusted also for items that management believes are not reflective of core operating performance or that are not expected to reoccur with any
regularity or reoccur at uncertain times and amounts.
Third Quarter HighlightsUse of Non-GAAP Financial Measures Basis of PresentationUse of Non-GAAP
Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial
position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached
tables to this earnings release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. The financial results include the following significant 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”): Quarter ended September 30, 2021Merger
and restructuring costs of $2.3 million ($1.4 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger and restructuring costs in the third quarter were primarily related to
system conversions completed early in the third quarter and other integration related efforts.Costs of $0.6 million ($0.4 million after-tax) related to COVID-19 pandemic response efforts, primarily costs related to additional cleaning, safety
materials, and security measures. Quarter ended June 30, 2021Merger and restructuring costs of $11.0 million ($6.9 million after-tax) in connection with the BSPR acquisition integration process and related restructuring initiatives. Merger
and restructuring costs in the second quarter included approximately $1.7 million related to the previously announced Employee Voluntary Separation Program (the “VSP”) offered to eligible employees in the Puerto Rico region and approximately
$2.1 million related to service contracts cancellation penalties. In addition, merger and restructuring costs in the second quarter of 2021 included expenses related to system conversions and other integration related efforts, as well as
accelerated depreciation charges related to planned closures and consolidation of branches in accordance with the Corporation’s integration and restructuring planCosts of $1.1 million ($0.7 million after-tax) related to COVID-19 pandemic
response efforts, primarily costs related to additional cleaning, safety materials, and security measures.Quarter ended September 30, 2020Merger and restructuring costs of $10.4 million ($6.5 million after-tax) in connection with the
acquisition of Banc Santander and related restructuring initiatives. Merger and restructuring costs in the third quarter of 2020 primarily included consulting, legal, system conversions and other integration related efforts.An $8.0 million
tax benefit related to a partial reversal of the deferred tax asset valuation allowance.A $5.3 million aggregate gain on sales of approximately $116.6 million of U.S. agencies MBS and $803.3 million of U.S. Treasury Notes executed in the
latter part of September. The gain on tax-exempt securities or realized at the tax-exempt international banking entity subsidiary level had no effect in the income tax expense recorded in the third quarter of 2020.
Third Quarter HighlightsUse of Non-GAAP Financial Measures Basis of PresentationUse of Non-GAAP
Financial Measures This presentation contains non-GAAP financial measures. Non-GAAP financial measures are used when management believes they will be helpful to an understanding of the Corporation’s results of operations or financial
position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the comparable GAAP financial measure, can be found in the text or in the attached
tables to this earnings release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP. The following table the reported net income to adjusted net income, a
non-GAAP financial measure that excludes the Special Items identified on prior pages as well as gains or losses on sales of investment securities and impairments: