Q3 2020 OFG Bancorp Earnings Call
Good morning, Thank you for joining LSG Bancorp's Conference call. My name is Maria and I'll be your operator today.
Our speakers are also definitely definitely does president Chief Executive Officer, and Vice Chairman and muddy.
Somebody thought of Miss Mandy.
Executive Vice President and Chief Financial Officer.
A presentation accompanying todays remarks can be found on our redesigned investor Relations web site on the home page and then the what's new box or on the quarterly results page.
This call May feature certain forward looking statements about management schools plans and expectations.
These statements are subject to risks and uncertainties outlined in the risk factor section of a less cheese FCC filings.
Actual results may differ materially from those currently anticipated we.
We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards all.
All lines have been placed on mute to prevent background noise.
After the speakers remarks, there will be a question and answer session I would.
I would now like to turn the call over to Mr. Fernandez.
[noise] good morning to all and thank you for joining us before I begin I want to thank all our team members for their dedication and commitment. During these very challenging times you have done an excellent job are we sold Charlotte.
I like to spend a moment on the big picture.
Once we go through the earthquakes and generate the economy on Oh Gee performed well.
Immediately started to see the benefits of the Scotiabank acquisition then.
Then the call we'd maintain pandemic it.
And by mid March the Puerto Rico government had shut down the island.
These tough measures, however, and they will still be called the big into relaxed restrictions on economic activity by the end of the second quarter beginning of the third we then noticeable rebound in the economy.
At the same time, we began to see an increased flow.
For studios under construction related to Hurricane Maria the earthquakes on the covered Gabi 19 pandemic yeah.
In addition to the benefits provided by the bank loan do fairly well.
All this added to the third quarter's economic rebound Ami sold to increase liquidity on the part of businesses and consumers all together the impact has been much more beneficial on a relative basis than what's happened on the mainland.
As it relates to a local banking industry consolidation the natural rebound in economic activity and the growing amount of stimulus combined with the Federal Reserve Bank significant rate cuts in March created a number of banking crosscurrents in the third quarter.
By acting with agility and speed or GE has been able to take advantage of them to the benefit of our customers communities and people.
The increased liquidity resulted in continued growth in deposits and cash.
This cost virtually all our net interest margin dilution compared to the second quarter.
I also encourage consumers and business customers to step up their loan repayments.
Taking advantage of the situation, we continued to expand our customer base and digital migration.
The large increase in new auto sales, which would translate into a noticeable increase in our own auto loan generation.
Hi, good production quadrupled fee income grew across the board and be Federals dropped to 2% of loans from 30% in the second quarter.
Our commitment under preparation enable us to manage these changes fasi dropped below it's true as we say Oh Gee Brian.
Branches continue to operate safely enhanced by our technology.
Full service ATM and our teams our mobile app.
Online bill paying tools continued to facilitate looping transactions in a contactless manner.
Online and mobile appointment scheduling continued to make called we'd save customer meetings possible branches now.
In addition, the Scotiabank integration continues on track and we're starting to see improved operating leverage.
In the end.
We generated strong momentum in our core businesses as we continue to help our customers communities and people build better and stronger financial futures for themselves.
[noise], let's turn to page four.
We have continued to see strong digital migration trends.
Among both our retail and business customers.
More customers are becoming online or mobile users, but they're also using an increasing number of digital features.
There are some new highlights comparing September to January of this year.
P to P volume is up 40% digital money transfers have increased 55%.
Online loan payments are up 87% retail and commercial for Tobey Boston have doubled and we.
We schedule more than 34000 colleagues save appointment with customers through our online mobile to almost all of them in the second and third quarters.
Gili customers are using these features to avoid contact drink coffee what are they experience the ease and convenience of banking like this the habits will surely stick.
More and more customers importantly, glass are asking themselves why would you drive to the branch to deposit a check when you can take a photograph why would you even write a paycheck. These days. These are positive trends that have accelerated due to the pandemic I'm play nicely to our retail banking strategy.
We continue to look for new and innovative ways to help our customers interact with us in an agile and easy way.
Earlier. This week, we became the first financial institution in Puerto Rico, and the U.S. Virgin Islands Lounge, and digital border portal to make it fast and easy for our commercial clients to apply for PPP loan forgiveness.
Let's start on page five to talk about our financial results.
Earnings increased significantly.
We reported earnings per share of 50 cents, a 28% increase from the second quarter I'm more than four times the year ago quarter.
The effective tax rate was 19% compared to 25% in the second quarter.
Total core revenues were $127 million, excluding one time interest recoveries from acquired loans Scotia Bank loans net interest income of $99 million was level with the second quarter, well fee income rose, 19% to $27 million.
Net interest margin was 4.3% when you exclude interest recoveries in both quarters net interest margin was four point 28 versus 4.5% in the second quarter virtually all the difference was attributable to the increase in cash balances.
Noninterest expenses of $83 million fell more than $2 million compared to the second quarter and that number includes merger and conversion related costs. Excluding those in both periods. The efficiency ratio improved 369 basis points compared to the second quarter as increased operating leverage.
From the Scotiabank acquisition began to kick in.
Customer's deposits grew more than 200 on $12 million from June $30 billion to $8.5 billion due.
Due to the increased deposits as well as repayments of loans and securities cash increased $383 million to $2.3 billion.
As a result total assets grew $84 million to $10 billion, we do not anticipate exceeding these total asset level come December 30, Onest 2020.
Loan production was strong total.
Totaling $458 million, excluding Patric protection program loans in the second quarter and third quarter production increased $228 million.
The allowance coverage increased to three point, 64%, excluding PPP loans.
Capital continued to build shareholders equity increased to $1.06 billion, all regulatory capital ratios remain significantly above requirements for a well capitalized institution. The C.D. One ratio was 12 point, 55% on September 30 2020.
Please turn to page six.
The effects of all this.
We are building tangible book value per share.
These increased 50 cents in the third quarter to $16.51. In addition, all three of the key performance ratio. We track improved sequentially efficiency ratio improved to 65 point, 69% on a reported basis on an adjusted basis. It was 62 point, 17% we turn on.
On average assets was one point, 11% and return on average tangible common stockholders equity was 12 point, 23% and 12 point, 10% on an adjusted basis.
Return on average tangible common equity is now exceeding our performance as compared to the year ago second quarter before all the transactions related to the Scotia Bank acquisition and increased provisioning affected the business.
Please turn to page seven for operational highlights.
I've, which loan balances declined $55 million to $54 million from the second quarter, reflecting net loan repayment the mortgage commercial and consumer auto increased average core deposits, excluding brokered grew $524 million from the second quarter.
End of period core deposits are now up more than $1 billion from the end of last year.
That is on top of the $2.8 billion that came with the Scotia Bank acquisition.
Loan generation, excluding PPP loans by order of magnitude was driven by $174 million in commercial lending $156 million in auto $94 million in residential mortgage and $24 million in consumer.
Loan yield at 657 declined 40 basis points from the second quarter. This was mainly driven by B C. D loans did.
A little lower interest recoveries non PCB loan yield declined only 16 basis points the cost of core deposits declined five basis points to 56 basis points.
Please turn to page eight to review credit quality.
Credit quality continued to be under control the net charge off rate declined 30 basis points from the second quarter, mainly due to declines in auto for.
Provision declined $4 million largely due to the declining covered related provisioning otherwise provision was approximately level.
The nonperforming loan rate increased 52 basis points quarter over quarter, mainly mortgage and auto.
We believe this is more about getting customers back in the payment cycle now that most deferrals are over but we.
But we surely are keeping a close watch on it.
As for our customer relief program. If you recall as of June Thirtyth, we had process, we need for more than 44000 retail customers for $1.4 billion or 32% of our retail loans for our core.
For our commercial customers, we have processed relief on $685 million in loans or about 27% of our commercial portfolio as I mentioned earlier, our deferrals are now down to 2% of total loans most of that relates to about $112 million of commercial loans, mostly loans.
Ending solid customer relationships in the hospitality industry.
Please turn to page nine.
The allowance for loan and lease losses increased $2.6 million from the second quarter and he is now equal to three point, 48% of total loans, excluding as big on deep PPP loans. The allowance was 16 basis points higher than in the second quarter.
Please turn to page 10, we're in a very strong capital position RCD capital ratio is now up 164 basis points since last year after the Scotia Bank acquisition.
Please turn to page 11.
To conclude we.
We believe our history culture team an approach to business as well as our most recent results demonstrate our ability to quickly respond and adapt to changing economic environments. During.
During the second and third quarters, we have built momentum in our core businesses and developed a strong pipeline of new loans.
Looking at our liquidity capital and balance sheet, we are well positioned financially and strategically we have $8.5 billion of sticky core deposits with an excess of more than $1 billion, giving us significant amount of drought dried powder.
Our agenda remains the same finish integrating the former Scotia bank operations by year end achieved the full benefits of the acquisition by the end of next year.
We need to invest for the future to further simplify our operations and enhance our ability to serve customers.
And the continued to play a significant role in the economic rebound of the legal and the U.S Virgin Islands.
From a macro perspective, the increased liquidity from ongoing stimulus should continue to benefit the economy.
This favorable environment should be further enhanced by the fiscal board finally, working towards a resolution with Puerto Rico creditors and by pharmaceutical companies as they onshore more production back to put somebody.
We are now incrementally more confident that the economy will improve further let's be clear, we still face tremendous challenges with from probably 19, the elections in Puerto Rico on the USA and completing our Scotia bank conversion and integration.
But we believe the economy, starting to moving the right direction and the future is beginning to move brighter.
By staying close to our customers and communities, we should be able to continue to deepen our relationships and grow the financial services, we provide to them as we enter what appears to be a nascent on potentially expanding recovery.
Again I want to thank all our team members for excellence, we sold them for their dedication and commitment this year crisis bring out the best in people to help others. Our team demonstrates that every single day.
With this we end our formal presentation. Thank you all for listening operator, let's start the acuity.
Thank you the floor is now open for questions to ask a question at this time simply press Star then the number one on your telephone keypad again that is star one if any.
If at any point you wish to withdraw your question press the pound key.
Our first question comes from the line of Alex Twerdahl of Piper Sandler.
Hi, good morning.
Good morning, Alex.
First off just want to.
Ask a couple of questions on on the margin specifically you guys are now sitting on around $2.3 billion of cash, earning 30 basis points and I look at your CD book at almost the same amount.
Paying 154, just seems like a tremendous opportunity to really get aggressive on deposit costs over the next couple of quarters is that the case and how quickly could we see.
The cost of deposits continue to come down just based on maturities that are coming on and what new new product is coming on the books that.
Thank you for your question, Alex I think Thats does that's a good point and the way we look at this is.
First we need to make sure we we extract the full benefits of the acquisition from Scotia Bank and US as you know weve been added for the whole year. So far in terms of the integration and now the conversion coming in later in this quarter. So we are being very.
Hey, it's strategic in terms of how we address the cost of funds from our from our customers because we want to make sure that.
We extract also the efficiencies from from the operations first.
Customers come first for us and we try to focus first on how do we make our operations more efficient and certainly with the acquisition of Scotia Bank, we had to delay it even call. It 19, we're starting to get back on track and.
We should see the full effects of.
Of the operating efficiencies by the end of next year and what else.
You know we keep it close.
A close look at that.
The market and how the boxes are being priced and we act accordingly.
It is not our intention to.
To be tactical about this and we want to know.
Not only retain our our customers, but we want to also expand relationship with our customers, we feel that our our retail strategy and our commercial strategy are playing wonderfully given the the new normal that we will have to operate in the foreseeable future and probably under longer term. So.
Looking long term, we think that that.
And we are in very good shape and we're.
We're not in any Harry too.
To plate plays it tactical game here.
Okay understood and then.
And then just switching over looking at the reserves increase this quarter. It seems like it was mostly driven by the auto portfolio can you talk a little bit about what drove higher.
Reserve level for autos this quarter, specifically using sort of collection trends or is there something else in some of the macro data that got adjusted.
What what drove the increase and what factors you look forward to eventually drive that to go lower yes.
Yes, I led me to give you some color.
Okay, Hi, Alex.
Ill.
Well I think it's always a viable volume and an auto loan was.
Further to that during this quarter increased significantly due to the higher level of production is one of the factor for the increase.
No there was.
Temporary increase in the Mpls as we see it. So we we provided as the methodology required to do so I think that is the main two drivers for the increase during this quarter.
Okay, and then just talking a little bit about the Ngls and you sort of alluded to in your prepared remarks Jose but.
Do you attribute the increase in Npls to just returning on.
Collection efforts that maybe been off for a couple of months and can you just remind us sort of what you saw after hurricane Maria with the same sort of thing and how that eventually played out.
So I think the script is playing out similar to to Maria and what we're seeing with the.
With the pickup in Npls a.
We feel it's a little bit of two things one is.
Deferrals were over and people need to get back into the.
Into the payment cycle, but also the fact that we're in COVID-19. This does has a different.
A dynamic than than heroic in marine and that is a go.
Going out there and into the streets and doing the.
The canvassing that requires particularly on the consumer side.
It's harder so so again, we we use all methods and.
And I think probably 19 kind of similar curve everyone with some of the tools that we utilize to.
Two.
Kind of get people into the payment cycle and Thats, how we see it today, we are keeping a close eye to it and we'll give you an update in the next next quarter's results call, but we're not at this.
At this point any seeing any.
Deteriorating trends or any anything that tells us that.
No, we're having incremental npls.
Great. Thanks for taking my questions.
Welcome. Thank you for your questions.
Our next question comes from the line of Joe Gladue of Albion Securities.
Hi, good morning.
Good morning, Joe.
I guess first wanted to ask about the loan originations very very impressed with the growth there and wondering if you could give us a little color on some of the drivers, but particularly with the.
The mortgage portfolio.
Looks like production in the third quarter was more than you did in all of.
2019, and just wondering if there is some thats market share gains as the.
The market growing that much credit here the first ones to report here in Puerto Rico just.
A little color on on the drivers.
So.
I would say Joel on the origination side.
Mortgage was.
Was a great performer in the quarter.
You recall before the acquisition of Scotia, we were originating $20 million to $30 million.
I would say 15 15 to 20 a month, so it's like more closer to like 50 AE.
And this quarter, we almost reached $100 million in mortgage origination and that is part of the benefit that we're getting from the Scotiabank acquisition, where we have a a large.
Larger platform to originate certainly lower interest rates and re Fi and we're seeing also pent up demand to buy homes and starting to see good.
Good pricing bids for homes also and so.
All about us.
Put into play the increasing originations on the mortgage side in terms of market share I suspect we have increased our market share, but we don't have enough data at this point in time to to confirm but it seems to me that.
With that origination level in the quarter. It looks like we've gained some market share there on the.
On the auto side also we saw in the quarter and as I mentioned in my.
Initial remarks, the the third quarter really benefited from the.
The pent up demand that was created from the shutdown on the reopening so auto sales new auto sales and.
And.
A used car sales also went up and we we have great relationship with the dealers that we serve and.
We moved fast and.
And served than us.
As fast and agile as we could to gain that that origination levels. So I think those two are the.
They are a key contributors to the origination.
Greece, and I would just like to add on the commercial side.
Well, we're seeing steady strong production from the.
Small commercial.
Side of the business, we're also seeing steady and strong a production the larger commercial type loans and were seeing good pipelines on both a and I again a.
You guys know me I am really.
Reluctant to.
To be overly optimistic about Puerto Rico, and the world, a but I can't.
I can't deny the facts and we're seeing.
It's certainly a benefit so of all the stimulus annie's translating into into greater opportunities for us to originate loans and.
We're out there we got we got we got to be out there for our customers and make sure that we serve them and provide them with the ability to.
To grow their relationships with us.
Thanks.
And just in regards to how that.
Production is affecting the margins.
Just where average yields on new production versus what the averages are.
For the for the quarter.
Yes, so on the on the consumer side I'll, just give you some color on the.
On the auto and consumer because on the mortgage most of it we originate and sale if it's if you.
Feeds conforming most of it is conforming, but on the auto and consumer average yield between the two portfolios is probably close to the 9.5% to 10% among both.
On the commercial side with lower interest rates.
By the Federal Reserve Bank, we're seeing certainly.
Certainly low.
Lower lower yields there.
But.
We're also seeing a.
As much discipline on providing floors to the variable commercial loans, we are originating on the on the small commercial fleets.
A more fixed and variable and we're seeing six five and a half eye on three quarter, 6% I believe.
Okay, Alright, thank you Thats all I had.
Thank you Joe have a great weekend.
[music].
Again, ladies and gentlemen in order to ask a question simply press Star then the number one on your telephone keypad.
Our next question comes from the line of Glenn Manav of Keefe, Bruyette <unk> Woods.
Hi, Good morning, Jose good morning mortgage.
Hi, Glenn.
I just wanted to dig into the fee income a little bit on the banking service fees and I think you know given the merger happened just before Covance, we really probably never got a really good run rate on what that would be on the combined company, but the current quarter's a 16.3 and in the current quarter does that have any lingering effects of.
Customer activity or is that kind of the run rate that we would have expected after the merger.
So on the on the fee income we have several several factors there as you know we have a a long standing legacy financial services business that business did incrementally better this quarter.
We also have a larger mortgage business from servicing on on and and we're starting to see the.
The full benefits of that business as we start to stabilize and normalize.
On the call with environment, and then on the banking services.
What we're seeing is again, a reflection of the economy and a reflection of the business activity coming back and.
Customers going out on doing their own.
Their own.
Ladies business activities and personal purchasing activity so.
When when you look at the results this quarter broadly, we're starting to see the full effects of the.
Of the acquisition in terms of fee income and.
There were very much.
Hey on the look out now that we want to do the conversion and we're going to do the systems integration, we'll have better visibility because remember, we're we're running consistent right now and.
Life is a little bit more complicated than what you would imagine on a daily basis given.
Given the.
The two systems plus given the COVID-19 endemic scenario so.
That's why I keep on going back to our team and I keep on saying that what we have done and what we have accomplished.
Is this year he just.
You feel need fills me with pride and I can stop repeating it because it is not normal standard operating conditions and add to that that were in the process of integrating two banks. So.
Again really proud of our team.
Okay, and then to that point and kind of on the expenses. If you take out the merger charges in corporate expenses in the second quarter and the third quarter. It looks like ex <unk> expenses decreased 1.8 million annualized that would suggest about 20% of the 35 million in cost saves that you.
Had guided to win.
When your NAV to Scotia Bank deal is that right internally and are those really cost saves from the deal and are we at the 20% range.
So I'll, let merits I gave you the the then the color.
But I just want to make sure that.
A.
Everybody understands that we are working hard toward extracting all the benefits of these Scotia Bank acquisition.
But very much.
Being cognizant of the COVID-19 environment, we're operating in so many to loan to give Glenn some color on that.
As Jose was maintaining a the consolidation process is started later than we planned it and during the third quarter. We started to see didn't show a step that we have taken so far.
Just take a full advantage of the consolidation. However, if you think I'm very sorry, it's a big deal for us to continue realizing the expected savings. So well we completed discloses that is scheduled to be completed by the end of this year, we will have a better visibility on what could be the run rate.
In the long term, we are very keen.
We're moving forward for the operating leverage is that the.
The Scotia Bank acquisitions.
Thanks out of that operating leverage we are expecting for so so I think at the end and last quarter will be key for us.
To have the flexibility of the long term savings and I will be in a better shape to show, we you any loans and run rate.
Having said that Glenn the trends are positive as you can appreciate so so where we're at we're happy with the lower expense trend, we just want to make sure that.
We go by and goes through the fourth quarter to have a better idea of how how we faster.
We extract the benefits.
Okay.
And then.
You had you had touched on it Jose the.
Non acquired book yields were down 16 basis points quarter over quarter. They were down 59 basis points a quarter before that given where LIBOR is now how much of that back book repricing would you expect or are you.
Given that a lot more slack now where we we kinda all laying on the on some of that back book repricing.
Yes, I would say as we as we mentioned throughout this call today.
Okay.
The lower rate environment is here to stay and here to stay for longer so I think theres still some remnants of.
The lower yields on our loan portfolio, but.
A what I.
But I think we have pretty much.
All all of it already baked in a given the.
The lower rate environment, we operate in so I.
I would suspect that we still have a couple more.
Hey quarters, where we still see loan yields trending downwards, but nothing.
Not even a significantly.
Okay, and then just a question on the.
A question on the tax rate when we kind of go through all of the adjustments to get to an operating number it looks like.
The effective tax rate was an 18% the operating number probably about 22% versus the 25% where you ran where can we expect the tax rate to go to get in.
21, 22 going forward.
Well it does help but that said with grace.
Dan I'm I'm glad that you asked it.
Yeah, we did have a higher proportion of.
Stemming from.
That I cannot anticipate will be.
Be repeated in the next two years. So we're looking at a range of 30% to 32% as a normalized stifle easier for the next two years.
Okay and then just the last question on reserving you you guys you know with PPP ex PPP, you're in that mid to high 3% range could you maybe talk about your economic outlook in and if there is no change in kind of the.
The basis of the.
The outlooks that you are using from outside services are are you well reserved here do you expect at some point, we could start to see you know match charge offs or maybe even a little reserve release.
So so to answer your first question are we well we serve the answer is yes.
To talk about the macro.
For sure we see the beginnings of over.
We have an economic rebound and we are encouraged when we see a brighter future for Puerto Rico.
But as I said, we have there are tremendous uncertainties and there's tremendous challenges and they are still.
Several things that need to settle in the near future and beyond for for the Puerto Rico economy too.
To have safe sailings into the future.
So.
So when we look at our.
Credit.
Allowance and and how we look at credit risk and the macro.
The outlook is improving but we really have to live with the present and the person still poses tremendous challenges that we want to make sure. They play out one way or the other so that we can.
Okay.
Bring the ship to shore safely.
But again I feel that this is the beginning of a.
On a brighter future for for the macro in Puerto Rico in the next several years.
Yes, as we benefit from from this.
From the stimulus and the.
The reconstruction funds that are starting to flow and particularly longer term with the.
Pharmaceuticals that we have in Puerto Rico, we have around 30% to 35% of our.
Gross domestic product a.
Onshore or more.
Medical devices and more pharmaceutical production to Puerto Rico I think.
I mean, we're at a point, where it's too early to tell but it certainly.
A a good position to be in and.
And then you add to that the.
The the credit I think.
You can get the answer to it.
Okay. Thank you I just wanted to bring up one point on the on the taxes Murray said, thank you for that for that guidance I just wanted to confirm if there's a change in administration is on the mainland here and we see an increasing corporate tax rate Oh, FG would be relatively not impacted at all by an increase in mainland corporate tax rates am I correct that still assuming that.
Yes, yes, because at the end.
The.
L.A.U.S. income that we have.
A question a little worse than anybody saw reasonable.
Small so we won't be significantly.
Most of our business is Puerto Rico settlements on that basis, we're typically.
Thank you for confirming that and thank you for taking my questions.
Youre welcome have a great weekend.
You too.
Our next question comes from the line of Alex Twerdahl of Piper Sandler.
Hi, Thanks for taking my follow up so Jose a couple of times. During this call you've kind of seen a little bit more positive constructive on some of the economic and banking trends that you're seeing on the island, you've sort of alluded to housing market is showing some signs of recovery in some bidding wars and things like that but maybe you could just talk a little bit more about what you're seeing.
You kind of talk about the cash flow following Maria I'm actually starting to make some impact on the island, maybe you can give us some sort of a little bit more color.
From on the ground there in terms of is there been increase hiring is increased spending what is it really that you're looking at when you made those comments.
No what we're seeing we're seeing the flow of funds starting to put to put into play and we're seeing reconstruction efforts across the entire island in roads and bridges and we're starting to see.
Maybe.
The the deployment of.
All the.
Benefits from the Cures Act also.
In play the last couple of quarters and.
And we also expect additional let's call. It cares act four or five or however, number you want to call it a before or after the elections in the next year and Puerto Rico will be benefiting from those also so I'm seeing what we're seeing on the ground is constructive well.
We're seeing into the future is moral of those stimulus funds coming in on reconstruction funds flowing in not additional you just simply there standing therefore for for them to be utilized and having a.
Having a change in government it coming January will certainly help because.
They will have a vested interest on getting the economy moving so I think.
Thats kind of where we come from and what the statistics in specific in terms of.
Of the federal funds flowing into the island has remained the same.
It's just a matter of them starting to put them to play.
Great and then in terms of the pharmaceutical thesis, which you've alluded to as well as there been any updates there.
Anything we've all seen.
We've all seen the bills in Congress and the executive order from Trump in August and anything on that.
Anything on the ground there that shows you know increase activity in terms of that repatriation thesis no.
No nothing nothing on the ground wood.
Well confirmed the actual onshoring, but very few times, you'll see bipartisan agreement a.
And next time, so you see.
Less times, you see bipartisan agreement on Puerto Rico. So here, you do and that's encouraging and that's certainly encouraging and I think it's a matter of also the federal government starting to realize that the the end game in Puerto Rico, it's not about sending federal funds all the time, it's also too.
Just in creating economic development longer term I mean every carry weight and and again. This is the hasn't been played out yet, but it looks like it's moving in that direction and certainly that is a lot.
A lot better than than just.
Waiting for a hearing to receive federal funds.
Have you been seeing any additional I mean, we've seen the federal money flowing into the Alan what about private equity or other money looking for opportunities in Puerto Rico as a result of some of the increased economic activity.
Several several of.
A private equity firms are are.
In play in Puerto Rico, and also looking into Puerto Rico too.
Looking at opportunities because there.
Because they are seeing the same thing that we're seeing.
Interesting and then final question for me I know, we're going to get it's not just the new administration or potentially new administration. The mainland, but there's also going to be a change a governor in Puerto Rico I believe next year are there any proposals or.
Things that are kind of circulating around a change in administration down there that we use in the investor investment community should be aware of.
So.
Not really fully.
Politics in Puerto Rico are a really.
I will use I will use a word that you guys using the states politicians on politics in Puerto Rico, our old now lame ducks, because everything has to go through the fiscal board. So it's just a a political event that we go through but in reality.
The day, they are going to have to realize that if they want to get reelected theyre going to have to sit down and play with the fiscal board in a more constructive way than they have done in the past and I expect that will happen wherever wins because.
Because it's in their own best interest also but but there are no no no specific proposals here needs. All the same same old Paul A., but on the other day, the budget and the and the and the strategies are are pretty much.
Design and.
Instructed by the fiscal board, a and I think thats kind of what.
What's going all going to play out.
Great and then actually I just had one other follow up and then I think.
Sort of got to ask a question on on additional capital returns and capital actions, obviously, you're still digesting a pretty major acquisition, but sitting with a 12.5% common equity tier one.
A lot of liquidity on the balance sheet in a huge reserves I mean, this is a share buyback something or dividend increase something that could be potentially on the table in the next call. It six to 12 months.
Well I mean, what how are you how how you describe it is.
It's all reality, we do are sitting in a very strong solid a balance sheet and that gives us options for capital management.
And we look at all the options and we put them on the table, we keep it continues dialog with.
Regulators B b being cognizant that now we're closer to a $10 billion bank and that requires us to make some investments in.
A achieving.
Cheating the or at least be able to manage a larger bank and thats. Another benefit that we get from the Scotia Bank acquisition and some of the team members that joined US a so all those things are.
Our.
I said in the in the in the.
Prepared remarks, we are sitting in a good financial and strategic position and we look at capital and we will see.
Make the capital decisions that are rational and construct before for us to grow our bank and moving the.
In the strategic path that we have defined.
Perfect. Thank you for taking my follow ups.
Oh, Thank you have a great great we can.
You too.
Again, if you would like to ask a question simply press Star then the number one on your telephone keypad again that is star one.
I'm showing no further questions at this time I would like to turn the floor back over to Mr. Fernandez for any additional or closing remarks.
Thank you operator, and thank you all to all our stakeholders, who have listened and I wish you a great weekend are concerned goes out to those less suffer from this pandemic. Our hope is that he then soon and as possible and that.
Everybody stay safe unhealthy so thank you and have a great day.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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