Hello, everyone. Good morning, and welcome to the First Bangkok 3Q 2021 Financial Results Call. My name is Emily, and I'll be coordinating the call today. All participants are currently in a listen only state. However, during the presentation, you will have the opportunity to ask a question I now have the pleasure of handing the call over to today's host, Ramon Rodriguez.
Ramon, please go ahead.
Thank you, Emily. Good morning, everyone. Thank you for joining First Bancorp's conference call and webcast to discuss the company's financial results for the Q3 of 2021. Joining you today from First Bancorp are Aurelio Aleman, President and Chief Executive Officer and Orlando Verres, Executive Vice President and Chief Financial Officer. Before we begin today's call, it is my responsibility to inform you that this call may involve certain forward looking statements such as projections of revenue, earnings and capital structure, as well as statements on the plans and objectives of the company's business.
The company's actual results could differ materially from the forward looking statements made due to the important factors described in the company's latest SEC filings. The company assumes no obligation to update any forward looking statements made during the call. If anyone does not already have a copy of the webcast presentation or press release, you can access them at our website at 1firstbank.com. At this time, I'd like to turn the call over to our CEO, Aurelio Alejandro.
Thank you, Ramon. Good morning, everyone, and thanks for joining us today. Please let's move to Slide 4 of the presentation for covering some highlights. It was a very strong quarter for First BanCorp, I would say both in terms of financial performance and operational progress. I would like to cover the operational highlights before discussing our financial results.
As planned, during the quarter, we completed the integration of the acquired operations and all remaining systems conversions. I have to say that lots of resources and management time was required to achieve this important milestone on time and on budget, which is also important. I would like to thank all my colleagues involved in the integration for completing this very complex process, actually in less than a year after closing the transaction. Now the fully integrated organization with expanded sales resources and origination capacity will allow us to continue growing market share across basically all products and services. Now going forward, our full dedication of resources will be geared towards growing the franchise and servicing the clients.
In terms of our Puerto Rico franchise, we have now the 2nd largest market share among banks across all products and channels. This will allow us to definitely better serve our clients and communities with additional opportunity for organic growth. Our focus on digital solutions have proven effective. More clients continue to adopt our digital experience as online banking users grew by 12% during the quarter and approximately 40% of all deposits were captured through digital and self-service channels. Our expanded digital functionalities includes not only transactions, but the ability to process mortgages, credit cards, personal loans applications through our corporate portal and on the commercial front, the loan forgiveness request for the PPP loans that are still pending.
As we look ahead over the next years, definitely increased efforts and capabilities will be added towards enhancing the existing digital offerings and also developing new functionalities, focus on the ease of use and best in class customer experience, but also we will continue to optimize our branch network across the island. On the macro front, we're pleased to see improvements in economic backdrop within our 3 operating regions. We see it in Portland in Puerto Rico, including the obviously all the stimulus. In the Virgin Islands, similar investments also made in reconstruction. And obviously, Florida economy continues to be very, very solid.
Both pandemic and this accelerated funding continue to support the economic activity. And it's important to also highlight that Puerto Rico reached one of the highest vaccination rates of any state in the U. S. Jurisdiction. This has led to an accelerated reopening of the economy, material improvement in the tourism and an overall improvement in the business environment and consumer confidence.
This should result in increased loan demand. We're also optimistic, I have to say, about the resolution of the Puerto Rico bankruptcy attempt settlement in the near future, which has been going on for quite some years now. So let's move now to Slide 5 to review some of the financials. During the quarter, we generated $75,700,000 in net income, dollars 0.36 per share, And I think importantly, a record $103,000,000 to be exact in pretax pre provision income, clearly reflecting the benefit of our expanded franchise. The efficiency ratio continued to trend down to 53% during the quarter compared to 60% registered during the Q2.
Very important, asset quality metrics continued to improve during the quarter. Non performing assets reached a decade load of 0.81 percent of total assets. Reduction in NPAs was primarily driven by the risk in sale of $52,000,000 in Novakrocessential mortgages. Also there was the sale of REOs which were important during the quarter. NPL sales drove the ACL ratio down also a bit to 2.59 for the quarter, but also there were releases associated with the improvement in the macroeconomic factors.
Finally, on the capital front, I think we continue to make significant progress in our capital plans and continue to return capital to our shareholders. During the quarter, we completed the repurchase of 4,200,000 shares amounting to $50,000,000 Year to date, that amount has reached $150,000,000 in repurchases. Also, we announced a redemption of the $36,100,000 of the preferred stock, which will happen in this Q4. And as we announced on Friday, we increased the common dividend by 43% to $0.10 per share. All these capital actions are in parallel with the strength of our balance sheet and our commitment to increase shareholder value.
Please let's move to Slide 6. I would like to cover some details on the loan and deposits. Loan originations, they we consider they're healthy at $1,200,000,000 but they're definitely still short of our goals and that's really the focus of the management team. The loan portfolio decreased largely driven by the effect of the reduction of $130,000,000 in SBA PPP loans and the mortgage de risking sale of $52,000,000 Also, as we have mentioned before, our mortgage portfolio strategy is focused on the conforming paper, which will continue to see some decrease in the loans in the mortgage loans. Consumer loans grew nicely and commercial excluding PDP are finally stabilizing.
Our focus will continue to be centered on consumer and commercial growth and that's the key objective of the management team. We have to say that credit demand is picking up as government stimulus subsides and we expect that actually to continue improving during this quarter and 2022 as economy fully reopen and large scale disaster relief related projects begin to emerge. Core deposits continue to grow nicely. Excluding broker and government, core deposit raised an increase of $288,000,000 during the quarter. So liquidity is still out there.
We're all trying to define how much is coming. Well, now with those comments, I will turn the call to Orlando to provide you more details on the financial. Thanks, Guido.
Good morning, everyone. Rodrigo did provide some details, but I'll cover some other items here. Again, not to be repetitive, but as he mentioned, net income for the quarter was $75,700,000 which is $0.36 a share compared to $0.33 a share last quarter, Q1 of 2021, dollars 70,000,000 Credit quality components continue to behave extremely well for the quarter. And as Aurelio also mentioned, the projected macroeconomic variables have also continued to show improvement. As a result, you saw that we had a net benefit of $12,100,000 in the provision for credit losses, which is lower than the $26,200,000 we had last quarter, but still a benefit.
The after tax benefit on the provision, it's approximately $0.04 per share. Last quarter was about $0.08 per share. Another significant component of results for the quarter was also, as Aurelio mentioned, the completion in July of the last pending system conversion. This resulted in a reduction in merger and restructuring cost to $2,300,000 from what we had last quarter, which was $11,000,000 If we look at our net interest income, it was basically similar to last quarter, dollars 184,700,000 However, margin was down to $360,000,000 from $381,000,000 Most of it has to do with the mix of interest earning assets that has led to this reduction. If we look at the components on a GAAP basis, the combined yield on the loan portfolio was 6.33% for the quarter, which is very similar to the 6.34% we had last quarter.
Our loans are now 55% of average earning assets compared to 59% last quarter. Money market and investment securities, on the other hand, now represent 45% of average earning assets versus 41% last quarter. The yield on this instrument is slightly down from 96 basis points in the Q2 to 92 basis points now. Money market and short term investments make up a large chunk of this component, and we have kept the portfolios more on the shorter term based on where the market yields are now and also, obviously, the expectations that there could be some increases in the near term. We've continued to work on the cost of deposits.
Cost of interest bearing deposit is down 3 basis points to 33 basis points. And we have also continued to grow on the non interest bearing side, which obviously helps the margins, but not to compensate for the mix for the change
in mix in the assets.
If we look at our non interest income, remained relatively flat. We had improvements in credit and debit card fees, AT and Ps and POS transactions, but had some reductions on revenues from mortgage banking and service charges on deposits. This one mostly related to the process of the conversion. So we're back to normalized levels now. On the expense side, which is a large chip component that we had, we had expenses were $114,000,000 which is $16,000,000 lower than last quarter.
Merger and COVID related expenses were $2,900,000 this quarter versus $12,900,000 last quarter and make up $9,200,000 of this reduction. If we exclude all these items, expenses were $111,000,000 compared to $118,000,000 last quarter. But we did have a couple of things we don't have typically every quarter. On one side on one hand, we had $1,400,000 in expense reimbursements and incentives we received from a debit and credit card processing agreement. And we had a $2,300,000 in profits on OREO properties.
What we've seen in the market is that sales prices have improved significantly, resulting in gains on the disposition of other real estate owned properties that exceed the operating costs we had on managing all those properties. These gains do include, however, an $800,000 profit we had on the disposition of a $20,700,000 commercial OREO property that we had on the books for quite some time. If we normalize for some of these items, expenses, we're talking about approximately $115,000,000 for this quarter. What we have seen is that we're running a much higher level of vacant positions than what we normally would have. Similar to what's happening in the U.
S, we have experienced difficulties in hiring several positions. Although I can say that the trends in the last few weeks are encouraging, but we're still working on reaching normalized vacancy levels. Once we reach those normal vacancy levels and complete some of the technology projects that are underway, I would have to say that we still believe that expenses will be on that range that we had mentioned before, the $117,000,000 to $119,000,000 But obviously, it's not going to happen immediately. It's going to take a little bit of time to fill out those positions. On the asset quality Aurelio made reference to, we continue to achieve significant improvements.
Nonperforming assets decreased by $83,000,000 in the quarter are now at $172,000,000 from the $255,000,000 we had last quarter. NPA now expanded 81 basis points of total assets, again, first time under 1% for a very in a very long time. The decrease was primarily the bulk sale of the $52,000,000 in residential mortgage loans and the repayment of 2 large residential mortgage loans that are at $3,900,000 dollars The result for the mortgage side was pretty good in the quarter. We also had the disposition of the commercial OREO property I just mentioned for the $21,000,000 leading to some lag reduction. That obviously is compensated also by the fact that we the inflows to nonperforming continue to be low.
We remain basically unchanged from the Q2 at $17,000,000 The allowance for credit losses, as Aurelio mentioned, was $300,000,000 It's $40,000,000 lower than last quarter. Just on loans and finance leases was $288,000,000 which is $37,000,000 lower than what we had last quarter. The reduction in the allowance reflect the charge offs that were taken on the nonperforming residential mortgage loans that were sold as well as the improvement trends that we continue to project on macroeconomic variables, all the variables that are used for to calculate the allowance for credit loss. For them to point out that the charge offs that were taken on the residential mortgage loan had been substantially reserved in prior quarters. So it was a minimal impact on this quarter results.
The ratio of the allowance is now at 2.59 versus 2.85 we had last quarter. And if we exclude PPP loans, what's left of the PPP, it's approximately 2.64. Still the healthy coverage we have on the loans. On the capital front, just to summarize again, we continue with the execution of our plan. As Aurelio mentioned, we repurchased $50,000,000 in shares this quarter, dollars 50,000,000 in shares, which is almost 4,200,000 shares.
So far, we have repurchased $150,000,000 since we started the stock repurchase program last quarter. What's left, we will continue with the repurchase, but also he made reference to, we will be redeeming the $36,000,000 that remain outstanding in preferred shares during the Q4. And we have already announced the increase in the common dividend to $0.10 per share per quarter, also starting in the Q4. The dividends on the preferred represent approximately $2,700,000 per year, which would be around $0.0103 based on current number of shares, which would improve the earnings per share for common holder. Ratios are continue to be capital ratios continue to be high even with the execution of the capital strategies, but strong earnings are maintaining these capital ratios significantly above the well capitalized levels.
With that, I would like to open the call for questions.
Our first question today comes from Alex Twerdahl from Piper Sandler. Alex, your line is now open.
Thank you. Good morning, guys.
Good morning, Alex.
First off, I wanted to hone in a little bit on the comment you made earlier in your prepared remarks that credit demand is picking up and you expect that to continue. If you can give us a little bit more specifics. I guess, I'm assuming you're talking mostly about commercial and maybe also construction, but maybe if you can give us some sort of just a little bit more to go on in terms of what you mean by that commentary.
But when you obviously, the liquidity on the consumer also started to subside a bit and when you look at personal consumer loans and credit cards, we're seeing over recent months, including September, better activity. Also when you look at the pipeline of small loans, that actually is improving and have to say that the pipeline on the commercial side, including construction, it's also continued to show improvement. As you know, it takes time from pipeline to closing, But if I have to say compare the pipeline to where we were in the Q1, we are overall in a better place in all the commercial products itself. Auto continue very strong, and I think that's obviously even with the challenges on the inventory, obviously we have a very focused strategy like we had before and we have been achieving portfolio growth and market share growth in that business for a couple of years now that we expect that to continue to be the case based on how we're running the business and how we're executing our strategy. And then when you look at mortgages, that obviously it's 2 important components, rates which drive the refinancing volume, which are still high and should start to come down as long term rates move up.
But on the other hand, it's really our strategy to continue to focus on the origination side, on the conforming. I have to say that the prepayment of mortgages, it's higher than we estimated when you look at the year numbers, which also contributed to some of the contraction of our loan portfolio. But in general, a lot going on, a lot of new investments, new investors coming into the market. So we feel very optimistic that that will translate into loan demand.
That's great. I guess 2 more questions kind of related. 1, in terms of line utilizations, I think last time we spoke, they were running well below normalized levels. Have you seen started to see those pick up or any indication that those be picking up anytime soon?
Some of it happened late in the quarter, but not a lot, but it started to pick up. I think the The white card is the liquidity. We're really monitoring how the liquidity is moving. Our focus is not in government deposits. It's really in the core businesses.
So we're doing dedicating a lot of time to make sure that we monitor individual clients, different type of products on the deposit front, so we get a better forecast of when liquidity overall will subside or not. And then there's also a lot of funds coming into the construction sector, which will capture some of those too.
Right. And then the other piece is the pay downs, which are still elevated and I know you had some large pay downs that worked against your origination volume this quarter. Do you have any line of sight on to any larger pay downs that are coming in the next couple of months?
No, we monitor refinance that obviously some of that also is part of the corporate portfolio that we have in Florida participation. So the REFI activity is linked to a REFI activity and the rates. I think the more the rates continue to move up, the less pay downs and the less refinancing activity we will see in the commercial market, that's definitely it's a reduction versus what we had in the 1st 2 quarters when you look at the pay downs that we had in this quarter. And we don't have anything on the horizon that we say is coming this quarter, to be honest with you. But sometimes they come as a surprise too, so to be realistic.
Okay, perfect. And then switching gears a little bit to the bankruptcy and sort of the macro, we've seen some headlines. I think the Senate has postponed their vote on the new debt until tomorrow. I was wondering if you just had any line of sight or any more information on to how close the Senate vote was? Anything else you can kind of give us in terms of what to go off of other than the headlines on expectations for the bankruptcy?
Well, there was a lot of local articles over the weekend. Obviously, there's no perfect deal when you're dealing with bankruptcy. But I think this is a balanced deal. This is a balanced deal that everybody have time to negotiate, put their views. We know there's an important hearing today with all members of executive and also legislative and the fiscal board with the judge.
So I have to say that we're optimistic that this should move forward. We think it's a balanced deal for and it's a great milestone if Puerto Rico could achieve this in the short term. And we'd probably be it's the closest we've been with all the parties dedicating their time, focus and effort in making efforts to get it done. So I think everyone here is trying to get it done. It's just obviously different views on how much goes where and how much it costs to the different entities involved in this very complex negotiation.
So I have to say that we haven't seen it closer to where it is today and that's why we feel optimistic about it.
Okay, thanks. Just a final question for me just on capital as I think about the amount or the sort of pace of capital deployment via the buyback. We saw $100,000,000 in the 2nd quarter, dollars 50,000,000 in the 3rd. Going into the 4th quarter, I guess, two questions. One is, how should we think about the pace of capital deployment by the buyback?
And as part of that, is the preferred redemption, does that count towards the overall capital deployment plan such that we could see a much lower level of buyback in the 4th quarter as a result of that $36,000,000 being used towards the preferred redemption?
Yes, the first I'm going to answer first. Yes, when we announced the buyback, we did include the $36,000,000 as part of the $300,000,000 That's answer that question. Our goal this quarter is to try to reach 250 of the overall 300, that's our goal. And then obviously, we'll move from there, but that's our goal this quarter. So it will include the $36,000,000 plus another $60,000,000 something, yes.
That's our goal.