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First BanCorp. Announces Earnings for the Quarter Ended March 31, 2024
Q1 Q1 Q1 Q4 Q4 Q1 Q1
Aurelio Aleman, President and Chief Executive Officer of First BanCorp., commented: "We continue to successfully navigate the challenging interest rate cycle delivering another quarter of strong operating results. Consistent with our guidance, we grew the loan portfolio for the ninth consecutive quarter, prudently managed our expense base, sustained our profitability profile, and returned over 100% of earnings in the form of buybacks and dividends during the first quarter.
Core deposit balances stabilized during the quarter although we continue to see internal migration of customers seeking higher yields in time deposits, as expected. That said, we remain well positioned to redeploy investment portfolio cash flows into higher-yielding assets under a higher-for-longer interest rate environment which should be margin accretive for the year. Early delinquency metrics improved and we took advantage of market opportunities to sell a portfolio of previously charged-off consumer loans which positively impacted the provision expense for the quarter.
Multiple technological investments are planned throughout the year to continue strengthening our competitive position in the markets we serve, including the recently announced strategic partnership with nCino which we believe will simplify our commercial lending operations and allow for a more seamless and agile interaction with our clients. We have ample balance sheet flexibility to execute on our business plans while navigating the current operating environment and look forward to sharing our progress with all stakeholders over the course of the year."
2024 2023 2023 2023 2023
(in thousands, except per share and financial ratios) (in thousands, except per share and financial ratios) Financial Highlights
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Net interest income Net interest income $196,520 $196,682 $196,682 $200,885 $200,885
Provision for credit losses Provision for credit losses $12,167 $18,812 $18,812 $15,502 $15,502
Non-interest income Non-interest income $33,983 $33,609 $33,609 $32,518 $32,518
Non-interest expenses Non-interest expenses $120,923 $126,605 $126,605 $115,268 $115,268
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Income before income taxes Income before income taxes $97,413 $84,874 $84,874 $102,633 $102,633
Income tax expense Income tax expense $23,955 $5,385 $5,385 $31,935 $31,935
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Net Income Net Income $73,458 $79,489 $79,489 $70,698 $70,698
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Selected Financial Data
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Net Interest Margin Net Interest Margin 4.16% 4.14% 4.14% 4.34% 4.34%
Efficiency Ratio Efficiency Ratio 52.46% 54.98% 54.98% 49.39% 49.39%
Earnings per share - diluted Earnings per share - diluted $0.44 $0.46 $0.46 $0.39 $0.39
Book Value per Share Book Value per Share $8.88 $8.85 $8.85 $7.82 $7.82
Tangible Book Value per Share (1) Tangible Book Value per Share (1) $8.58 $8.54 $8.54 $7.50 $7.50
Return on Average Common Equity Return on Average Common Equity 19.56% 23.69% 23.69% 21.00% 21.00%
Return on Average Assets Return on Average Assets 1.56% 1.70% 1.70% 1.55% 1.55%
Results for First Quarter of 2024 compared to Fourth Quarter 2023
Profitability Net Income - $73.5 million, or $0.44 per diluted share compared to $79.5 million, or $0.46 per diluted share. Net income for the respective periods included $0.9 million ($0.6 million after-tax) and $6.3 million ($3.9 million after-tax, or a decrease of $0.03 per diluted share), respectively, related to the estimated Federal Deposit Insurance Corporation ("FDIC") special assessment expense. Net Income - $73.5 million, or $0.44 per diluted share compared to $79.5 million, or $0.46 per diluted share. Net income for the respective periods included $0.9 million ($0.6 million after-tax) and $6.3 million ($3.9 million after-tax, or a decrease of $0.03 per diluted share), respectively, related to the estimated Federal Deposit Insurance Corporation ("FDIC") special assessment expense.
Income before income taxes - $97.4 million compared to $84.9 million. Income before income taxes - $97.4 million compared to $84.9 million.
Adjusted pre-tax, pre-provision income (Non-GAAP)(1) - $110.5 million, compared to $110.0 million. Adjusted pre-tax, pre-provision income (Non-GAAP)(1) - $110.5 million, compared to $110.0 million.
Net interest income - $196.5 million compared to $196.7 million. The decrease includes a net reduction of $1.1 million associated with the effect of one less day in the first quarter of 2024. Net interest margin increased to 4.16%, compared to 4.14%. Net interest income - $196.5 million compared to $196.7 million. The decrease includes a net reduction of $1.1 million associated with the effect of one less day in the first quarter of 2024. Net interest margin increased to 4.16%, compared to 4.14%.
Provision for credit losses - $12.2 million compared to $18.8 million. First quarter of 2024 includes a $9.5 million recovery associated with a bulk sale of fully charged-off consumer loans, a $5.0 million recovery of a commercial and industrial loan and higher volume of loans. Provision for credit losses - $12.2 million compared to $18.8 million. First quarter of 2024 includes a $9.5 million recovery associated with a bulk sale of fully charged-off consumer loans, a $5.0 million recovery of a commercial and industrial loan and higher volume of loans.
Non-interest expenses - $120.9 million compared to $126.6 million, mainly driven by the aforementioned $6.3 million FDIC special assessment recognized in the fourth quarter of 2023. The efficiency ratio was 52.46%, compared to 54.98%. On a non-GAAP basis, excluding the FDIC special assessment, the adjusted efficiency ratio(1) was 52.05% and 52.24%, respectively. Non-interest expenses - $120.9 million compared to $126.6 million, mainly driven by the aforementioned $6.3 million FDIC special assessment recognized in the fourth quarter of 2023. The efficiency ratio was 52.46%, compared to 54.98%. On a non-GAAP basis, excluding the FDIC special assessment, the adjusted efficiency ratio(1) was 52.05% and 52.24%, respectively.
Balance Sheet Total loans - grew by $130.7 million, primarily attributed to growth in the commercial and construction loan portfolios in the Puerto Rico and Florida regions. Total loan originations, other than credit card utilization activity, of $1.1 billion, down $214.9 million. Total loans - grew by $130.7 million, primarily attributed to growth in the commercial and construction loan portfolios in the Puerto Rico and Florida regions. Total loan originations, other than credit card utilization activity, of $1.1 billion, down $214.9 million.
Core deposits (other than brokered and government deposits) - $12.6 billion, decreased by $25.8 million, reflecting a decline of $28.3 million in the Florida region, partially offset by increases of $1.3 million in the Virgin Islands region and $1.2 million in the Puerto Rico region. This decrease is net of a $93.9 million increase in time deposits. Core deposits (other than brokered and government deposits) - $12.6 billion, decreased by $25.8 million, reflecting a decline of $28.3 million in the Florida region, partially offset by increases of $1.3 million in the Virgin Islands region and $1.2 million in the Puerto Rico region. This decrease is net of a $93.9 million increase in time deposits.
Government deposits (fully collateralized) - increased by $73.0 million and totaled $3.2 billion. Variance reflects growth of $56.8 million in the Puerto Rico region, $14.2 million in the Virgin Islands region, and $2.0 million in the Florida region. Government deposits (fully collateralized) - increased by $73.0 million and totaled $3.2 billion. Variance reflects growth of $56.8 million in the Puerto Rico region, $14.2 million in the Virgin Islands region, and $2.0 million in the Florida region.
Asset Allowance for credit losses ("ACL") coverage ratio - 2.14%, compared to 2.15%. Annualized net charge-offs to average loans ratio decreased to 0.37% (31 basis points decrease due to aforementioned bulk sale), compared to 0.69%. Allowance for credit losses ("ACL") coverage ratio - 2.14%, compared to 2.15%. Annualized net charge-offs to average loans ratio decreased to 0.37% (31 basis points decrease due to aforementioned bulk sale), compared to 0.69%.
Quality Non-performing assets - Increased by $3.7 million to $129.6 million, mainly driven by inflow of a $10.5 million commercial and industrial loan in the Florida region, partially offset by lower other real estate owned ("OREO"). Non-performing assets - Increased by $3.7 million to $129.6 million, mainly driven by inflow of a $10.5 million commercial and industrial loan in the Florida region, partially offset by lower other real estate owned ("OREO").
NON-GAAP DISCLOSURES
This press release contains GAAP financial measures and non-GAAP financial measures. Non-GAAP financial measures are used when 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. Where non-GAAP financial measures are used, the most comparable GAAP financial measure, as well as the reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure, can be found in the text or in the tables in or attached to this press release. Any analysis of these non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.
Certain non-GAAP financial measures, such as adjusted net income and adjusted earnings per diluted share, adjusted pre-tax, pre-provision income, adjusted non-interest expenses, and adjusted efficiency ratio exclude the effect of items that management believes are not reflective of core operating performance (the "Special Items"). Other non-GAAP financial measures include adjusted net interest income and adjusted net interest income margin, tangible common equity, tangible book value per common share, and certain capital ratios. These measures should be read in conjunction with 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.
Special Items
The financial results for the first quarter of 2024 and fourth quarter of 2023 included the following Special Item:
FDIC Special Assessment Expense
On November 16, 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the Deposit Insurance Fund associated with protecting uninsured deposits following certain financial institution failures during the first half of 2023. Under the final rule, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points to be applied to the special assessment base during an eight-quarter collection period. The base for the special assessment is equal to the estimated uninsured deposits reported for the December 31, 2022 reporting period, adjusted to exclude the first $5 billion of such amount. As such, during the fourth quarter of 2023, the Corporation recorded a charge of $6.3 million ($3.9 million after-tax, calculated based on the statutory tax rate of 37.5%).
Under the final rule, the FDIC retains the ability to cease collection early, extend the special assessment collection period, or impose an additional shortfall special assessment on a one-time basis after the receiverships of the two failed institutions are terminated. During the first quarter of 2024, the FDIC informed that the estimated loss attributable to the protection of uninsured depositors of the financial institution failures increased, when compared with the estimate described in the final rule. As such, the Corporation recorded a $0.9 million ($0.6 million after-tax, calculated based on the statutory tax rate of 37.5%) additional expense to increase the estimated FDIC special assessment to $7.3 million.
The FDIC special assessment is reflected in the condensed consolidated statements of income as part of "FDIC deposit insurance" expenses.
Non-GAAP Financial Measures
Adjusted Pre-Tax, Pre-Provision Income
Adjusted 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, including as a result of natural catastrophes or health epidemics. Adjusted pre-tax, pre-provision income, as defined by management, represents income before income taxes adjusted to exclude the provisions for credit losses on loans, unfunded loan commitments and debt securities and any gains or losses on sales of investment securities. In addition, from time to time, earnings are also adjusted for certain items that management believes are not reflective of core operating performance, which are regarded as Special Items.
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 that management believes are generally used by the financial community to evaluate capital adequacy. Tangible common equity is total common equity less goodwill and other intangible assets. Tangible assets are total assets less goodwill and other intangible assets. Tangible common equity ratio is tangible common equity divided by tangible assets. Tangible book value per common share is tangible assets divided by common shares outstanding. Refer to the Tangible Common Equity section for a reconciliation of the Corporation's tangible common equity and tangible assets to the most comparable GAAP items. Management uses and believes that many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with other 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 disclosure of these financial measures may be useful 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 manner in which 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.
Net Interest Income Excluding Valuations, and on a Tax-Equivalent Basis
Net interest income, interest rate spread, and net interest margin are reported excluding the changes in the fair value of derivative instruments and on a tax-equivalent basis in order to provide to investors additional information about the Corporation's net interest income that management uses and believes should facilitate comparability and analysis of the periods presented. The changes in the fair value of derivative instruments have no effect on interest due or interest earned on interest-bearing liabilities or interest-earning assets, respectively. The tax-equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a marginal income tax rate. Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. Refer to Exhibit A hereto for a reconciliation of the Corporation's net interest income to adjusted net interest income excluding valuations, and on a tax-equivalent basis. Management believes that it is a standard practice in the banking industry to present net interest income, interest rate spread, and net interest margin on a fully tax-equivalent basis. This adjustment puts all earning assets, most notably tax-exempt securities and tax-exempt loans, on a common basis that management believes facilitates comparison of results to the results of peers.
NET INCOME AND RECONCILIATION TO ADJUSTED NET INCOME (NON-GAAP)
Net income was $73.5 million for the first quarter of 2024, or $0.44 per diluted share, compared to $79.5 million, or $0.46 per diluted share, for the fourth quarter of 2023. The following table reconciles, for the first quarter of 2024 and fourth quarter of 2023, net income to adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures that exclude the significant Special Item identified above, and shows, for the first quarter of 2023, net income and earnings per diluted share.
Quarter Ended
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March 31, 2024 December 31, 2023 March 31, 2023
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(In thousands, except per share information)
Net income, as reported (GAAP) $ 73,458 $ 79,489 $ 70,698
Adjustments:
947 6,311 -
FDIC special assessment expense
(355 ) (2,367 ) -
Income tax impact of adjustments (1)
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Adjusted net income attributable to common stockholders (non-GAAP) $ 74,050 $ 83,433 $ 70,698
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Weighted-average diluted shares outstanding 167,798 171,351 181,236
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Earnings Per Share - diluted (GAAP) $ 0.44 $ 0.46 $ 0.39
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Adjusted Earnings Per Share - diluted (non-GAAP) $ 0.44 $ 0.49 $ 0.39
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INCOME BEFORE INCOME TAXES AND RECONCILIATION TO ADJUSTED PRE-TAX, PRE-PROVISION INCOME (NON-GAAP)
Income before income taxes was $97.4 million for the first quarter of 2024, compared to $84.9 million for the fourth quarter of 2023. Adjusted pre-tax, pre-provision income was $110.5 million for the first quarter of 2024, compared to $110.0 million for the fourth quarter of 2023. The following table reconciles income before income taxes to adjusted pre-tax, pre-provision income for the last five quarters:
Quarter Ended
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March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023
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(Dollars in thousands)
Income before income taxes $ 97,413 $ 84,874 $ 108,990 $ 100,939 $ 102,633
Add: Provision for credit losses expense 12,167 18,812 4,396 22,230 15,502
Add: FDIC special assessment expense 947 6,311 - - -
Less: Gain recognized from legal settlement - - - (3,600 ) -
Less: Gain on early extinguishment of debt - - - (1,605 ) -
-------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- --------------------
$ 110,527 $ 109,997 $ 113,386 $ 117,964 $ 118,135
Adjusted pre-tax, pre-provision income (1)
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Change from most recent prior period (amount) $ 530 $ (3,389 ) $ (4,578 ) $ (171 ) $ (4,107 )
Change from most recent prior period (percentage) 0.5 % -3.0 % -3.9 % -0.1 % -3.4 %
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NET INTEREST INCOME
The following table sets forth information concerning net interest income for the last five quarters:
Quarter Ended
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(Dollars in thousands) March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023
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Net Interest Income
Interest income $ 268,505 $ 265,481 $ 263,405 $ 252,204 $ 242,396
Interest expense 71,985 68,799 63,677 52,389 41,511
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Net interest income $ 196,520 $ 196,682 $ 199,728 $ 199,815 $ 200,885
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Average Balances
Loans and leases $ 12,207,840 $ 12,004,881 $ 11,783,456 $ 11,591,516 $ 11,519,399
Total securities, other short-term investments and interest-bearing cash balances 6,720,395 6,835,407 7,325,226 7,333,989 7,232,347
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Average interest-earning assets $ 18,928,235 $ 18,840,288 $ 19,108,682 $ 18,925,505 $ 18,751,746
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Average interest-bearing liabilities $ 11,838,159 $ 11,665,459 $ 11,671,938 $ 11,176,385 $ 10,957,892
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Average Yield/Rate
Average yield on interest-earning assets - GAAP 5.69 % 5.59 % 5.47 % 5.35 % 5.24 %
Average rate on interest-bearing liabilities - GAAP 2.44 % 2.34 % 2.16 % 1.88 % 1.54 %
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Net interest spread - GAAP 3.25 % 3.25 % 3.31 % 3.47 % 3.70 %
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Net interest income amounted to $196.5 million for the first quarter of 2024, a decrease of $0.2 million, compared to $196.7 million for the fourth quarter of 2023, which includes a net reduction of approximately $1.1 million associated with the effect of one less day in the first quarter of 2024. The decrease in net interest income reflects the following:
A $3.3 million net increase in interest expense on interest-bearing deposits, consisting of:
- - A $2.2 million increase in interest expense on brokered CDs, primarily related to a $177.7 million increase in the average balance of this portfolio.
- - A $2.1 million increase in interest expense on time deposits, excluding brokered CDs, mainly due to approximately $1.6 million associated with higher rates paid in the first quarter of 2024 on new issuances and renewals, and $0.8 million of additional interest expense associated with a $99.5 million increase in the average balance, partially offset by $0.3 million associated with the effect of one less day in the first quarter of 2024. The average cost of non-brokered time deposits in the first quarter of 2024 increased 22 basis points to 3.39% when compared to the previous quarter.
Partially offset by: Partially offset by:
- - A $1.0 million decrease in interest expense on interest-bearing checking and saving accounts, of which approximately $0.4 million was driven by a decrease in average rates paid in the first quarter of 2024, primarily on public sector deposits; $0.3 million was due to a $100.9 million decrease in the average balance; and $0.3 million was associated with the effect of one less day in the first quarter of 2024. The average cost of interest-bearing checking and saving accounts, excluding public sector deposits, remained stable at 0.75% in the first quarter of 2024, when compared to the previous quarter.
A $0.5 million net decrease in investment securities, driven by a $0.3 million decrease in interest income on debt securities mainly associated with a $146.4 million decrease in the average balance and a $0.2 million decrease in interest income associated with dividends received on other equity securities during the fourth quarter of 2023.
Partially offset by:
A $3.2 million net increase in interest income on loans, consisting of:
- - A $2.5 million increase in interest income on commercial and construction loans, due to a $3.6 million increase in interest income associated with a $156.9 million increase in the average balance of this portfolio, which includes the full effect of the $150.0 million commercial and industrial participated loan funded late in the fourth quarter of 2023 in connection with the financial closing of a public-private partnership (P3) for improvement of infrastructure for toll roads, and higher market interest rates. This variance was partially offset by $1.1 million associated with the effect of one less day in the first quarter of 2024.
- - A $0.9 million increase in interest income on consumer loans and finance leases, due to a $1.6 million increase in interest income related to an increase of $48.2 million in the average balance of this portfolio, mainly in the auto loans and finance leases portfolios, and higher yields, partially offset by $0.7 million associated with the effect of one less day in the first quarter of 2024.
Partially offset by: Partially offset by:
- - A $0.2 million decrease in interest income on residential mortgage loans, mainly driven by higher collections on nonaccrual loans during the fourth quarter of 2023, including $0.5 million recognized on the payoff of a nonaccrual loan in the Puerto Rico region.
Net interest margin for the first quarter of 2024 was 4.16%, a 2 basis points increase when compared to the fourth quarter of 2023, mostly reflecting a change in asset mix from lower-yielding interest-earning assets to higher-yielding interest-earning assets, partially offset by an increase in the cost of interest-bearing deposits.
NON-INTEREST INCOME
The following table sets forth information concerning non-interest income for the last five quarters:
Quarter Ended
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March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023
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(In thousands)
Service charges and fees on deposit accounts $ 9,662 $ 9,662 $ 9,552 $ 9,287 $ 9,541
Mortgage banking activities 2,882 2,094 2,821 2,860 2,812
Gain on early extinguishment of debt - - - 1,605 -
Insurance commission income 5,507 2,379 2,790 2,747 4,847
Card and processing income 11,312 11,015 10,841 11,135 10,918
Other non-interest income 4,620 8,459 4,292 8,637 4,400
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Non-interest income increased by $0.4 million to $34.0 million for the first quarter of 2024, compared to $33.6 million for the fourth quarter of 2023, mainly due to:
A $3.1 million increase in insurance commission income mainly driven by $3.2 million in seasonal contingent commissions recorded in the first quarter of 2024 based on the prior year's production of insurance policies.
A $0.8 million increase in revenues from mortgage banking activities, mainly driven by an increase in the net realized gain on sales of residential mortgage loans in the secondary market due to a higher volume of sales and higher margins. During the first quarter of 2024 and fourth quarter of 2023, net realized gains of $1.1 million and $0.4 million, respectively, were recognized as a result of Government National Mortgage Association ("GNMA") securitization transactions and whole loan sales to U.S. government-sponsored enterprises amounting to $31.5 million and $23.7 million respectively.
A $0.3 million increase in card and processing income, mainly in merchant-related fees, due to higher transactional volumes.
Partially offset by:
NON-INTEREST EXPENSES
The following table sets forth information concerning non-interest expenses for the last five quarters:
Quarter Ended
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March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023
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(In thousands)
Employees' compensation and benefits $ 59,506 $ 55,584 $ 56,535 $ 54,314 $ 56,422
Occupancy and equipment 21,381 21,847 21,781 21,097 21,186
Business promotion 3,842 6,725 4,759 4,167 3,975
Professional service fees:
1,366 952 930 1,231 848
Collections, appraisals and other credit-related fees
7,469 7,003 7,261 7,278 8,141
Outsourcing technology services
3,841 3,295 2,831 3,087 2,984
Other professional fees
Taxes, other than income taxes 5,129 5,535 5,465 5,124 5,112
FDIC deposit insurance 3,102 8,454 2,143 2,143 2,133
Other insurance and supervisory fees 2,293 2,308 2,356 2,352 2,368
Net gain on OREO operations (1,452 ) (1,005 ) (2,153 ) (1,984 ) (1,996 )
Credit and debit card processing expenses 5,751 7,360 6,779 6,540 5,318
Communications 2,097 2,134 2,219 1,992 2,216
Other non-interest expenses 6,598 6,413 5,732 5,576 6,561
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Non-interest expenses amounted to $120.9 million in the first quarter of 2024, a decrease of $5.7 million, from $126.6 million in the fourth quarter of 2023. Non-interest expenses for the first quarter of 2024 and fourth quarter of 2023 include the aforementioned FDIC special assessment expense of $0.9 million and $6.3 million, respectively. On a non-GAAP basis, excluding the effect of this Special Item, adjusted non-interest expenses decreased by $0.3 million mainly due to:
A $2.9 million decrease in business promotion expenses, mainly as a result of decreases in advertising and public relations activities. A $1.6 million decrease in credit and debit card processing expenses, mainly due to $1.3 million in certain credit card expense reimbursements recognized during the first quarter of 2024. A $0.4 million decrease in occupancy and equipment expenses, in part due to a decrease in depreciation charges. A $0.4 million increase in net gain on OREO operations, mainly driven by an increase in net realized gains on sales of OREO properties, primarily residential properties in Puerto Rico. A $0.4 million decrease in taxes, other than income taxes, mainly in the municipal tax accrual. Partially offset by: A $3.9 million increase in employees' compensation and benefits expense, mainly driven by a seasonal increase in payroll taxes and bonuses, and stock-based compensation expense of retirement-eligible employees.
INCOME TAXES
The Corporation recorded an income tax expense of $23.9 million for the first quarter of 2024, compared to $5.4 million for the fourth quarter of 2023. The fourth quarter of 2023 included a reduction in the effective tax rate for the year related to higher than previously forecasted business activities during the fourth quarter with preferential tax treatment under the Puerto Rico tax code, coupled with a lower pre-tax income.
The Corporation's estimated annual effective tax rate, excluding entities with pre-tax losses from which a tax benefit cannot be recognized and discrete items, was 24.3% for the first quarter of 2024, compared to 23.5% for the fourth quarter of 2023. As of March 31, 2024, the Corporation had a deferred tax asset of $147.7 million, net of a valuation allowance of $140.1 million against the deferred tax assets.
CREDIT QUALITY
Non-Performing Assets
The following table sets forth information concerning non-performing assets for the last five quarters:
(Dollars in thousands) March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023
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Nonaccrual loans held for investment:
$ 32,685 $ 32,239 $ 31,946 $ 33,252 $ 36,410
Residential mortgage
1,498 1,569 1,640 1,677 1,794
Construction
11,976 12,205 21,632 21,536 21,598
Commercial mortgage
25,067 15,250 18,809 9,194 13,404
Commercial and Industrial
21,739 22,444 19,137 16,362 15,936
Consumer and finance leases
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