Understanding the $31 Million Standing Between First Bancorp and Profitability

This is part two of a three-part series analyzing First Bancorp (NYSE: FBP  ) . For part 1, click here.

What should an investor think when a bank's stock is down 36% during the past 12 months, it doesn't have profits, and it has a higher leverage ratio than its peers?

Run away? Not a bad idea.

Dig deeper and figure out why? A much better idea.

In the video below, Motley Fool contributor Jay Jenkins tries to it figure it out in part two of his analysis of First Bancorp, the $13 billion regional bank headquartered in Puerto Rico.

In the analysis, Jay breaks down the bank's revenues and profits (or lack thereof), and distills down to the single reason why the bank isn't producing more profits.

On the surface, First Bancorp seems pretty easy to understand. Over 90% of the bank's revenue comes from the interest the bank charges on loans. It's an age old business model; when done right, it works very very well for investors.

The bank simply needs to charge a decent spread on its loans, keep expenses in line, and then sit back and watch the profits roll in. That is, unless the money doesn't roll in. That's the problem today at First Bancorp.

The bank has an acceptable net interest margin and it's efficiency ratio is right on the money. But there's a $31 million barrier that's keeping the bank from profitability, and it's directly related to loans not being repaid on time.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3033313, ~/Articles/ArticleHandler.aspx, 9/3/2015 5:05:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Jay Jenkins

Anticipating opportunity, filtering out the noise, and figuring out what it all has to do with the price of rice in China. Like me on Facebook here!

Today's Market

updated 7 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:03 PM
FBP $4.03 Up +0.36 +9.81%
First BanCorp. CAPS Rating: *****