Safe and Sound

FirstBank Puerto Rico

Santurce, PR
4
Star Rating
Santurce, PR-based FirstBank Puerto Rico is an FDIC-insured bank started in 1949. As of June 30, 2017, the bank had equity of $2.02 billion on $11,897,839,000 in assets.

Thanks to the work of 2,579 full-time employees in 12 offices in multiple states, the bank currently holds loans and leases worth $8.72 billion, $6.01 billion of which are for real estate. The bank currently holds $8.58 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of June 30, 2017, FirstBank Puerto Rico exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three important criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for accountholders when a bank is experiencing economic instability. It follows then that when it comes to measuring an an institution's financial fortitude, capital is essential. When it comes to safety and soundness, more capital is preferred.
FirstBank Puerto Rico beat out the national average of 13.38 points on our test to measure the adequacy of a bank's capital, achieving a score of 24 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. FirstBank Puerto Rico's Tier 1 capital ratio was 17.37 percent, exceeding the 6 percent level regulators consider adequate, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic difficulties.

Overall, FirstBank Puerto Rico held equity amounting to 16.98 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these types of assets may eventually require a bank to use capital to cover losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

FirstBank Puerto Rico scored 24 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, 6.09 percent of FirstBank Puerto Rico's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on FirstBank Puerto Rico's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability affects its safety and soundness. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

FirstBank Puerto Rico scored 12 out of a possible 30 on Bankrate's earnings test, failing to reach the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for FirstBank Puerto Rico was 5.63 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank reported net income of $55.8 million on total equity of $2.02 billion. The bank reported an annualized return on average assets, or ROA, of 0.94 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.