Q2 2021 OFG Bancorp Earnings Call
The.
Good morning, Thank you for joining O F. G. Bancorp Conference call. My name is Christie and I will be your operator today.
Our speakers are Jose Rafael Fernandez, Chief Executive Officer, and Vice Chair of the board of directors.
And Maritza Arizmendi, Chief Financial Officer.
<unk> of accompanies today's remarks, it can be found on our Investor Relations website on the homepage in the what's new box or on the quarterly results page.
This call May feature of certain forward looking statements about managements goals plans and expectations.
These statements are subject to risks and uncertainties outlined in the risk factors section of the O F. G SEC filings.
Actual results may differ materially from those currently anticipated.
We disclaim any obligation to update information disclosed on this call as a result of developments that occur afterwards.
All lines have been placed on mute to prevent any background noise. After.
After the Speakers' remarks, there will be a question and answer session instead.
Instructions will be given at that time.
I would now like to turn the call over to Mr. Fernandez.
Yeah.
Good morning on thank you for joining US please turn to page 3 of our conference call presentation.
We had an outstanding performance in the second quarter generating 78 per share.
This reflects our larger scale on our focus on digital utilization on customer service differentiation.
From a big picture perspective, you'd also reflects several key factors that are going siting at this time the puts <unk> in an excellent strategic position.
1 Puerto Rico's economy is clearly benefiting from the massive amount of federal reconstruction funds now starting to be received as well as the COVID-19 stimulus funds.
Horton to note that these funds are more meaningful here as compared to mainland states, even how reconstruction funds and the amount of stimulus payments compared to average income levels on the island as well as the size of our economy.
2 Puerto Rico has managed well the COVID-19 pandemic and today vaccination levels are on the top quartile of U S States and territories with 55 per cent of the population of fully vaccinated and 63% with at least 1 dose.
And 3 or of Gs operating in a much different competitive environment than years past with only 3 commercial banks serving the market.
All of this continues to validate the comments I made last quarter regarding our optimism on Puerto Rico's economy on Omg's future, our second quarter results confirm this across all businesses.
Let's take a look at our income statement as compared to the first quarter.
The total core revenues were $133 million, an increase of more than 4 per cent.
We sold were enhanced by a 12% reduction in cost of funds interest income grew more than 2%.
Banking and financial services revenues rose more than 5% due to increased economic activity.
Asset quality trends continue to improve as a result provision for credit losses was a net benefit of $8.3 million.
Earnings also benefited by our recent deployment of excess capital to redeem all 3 of our outstanding series of preferred stock, which eliminated $1.6 million in quarterly preferred dividends.
We will continue to explore ways to deploy these excess liquidity.
Looking at the June 30 balance sheet customer deposits increased $350 million to $9.1 billion, reflecting even greater liquidity on the part of both commercial and consumer customers as a result, both cash and assets group.
Loans declined 1.2% to $6.4 billion, mainly due to paydowns in our residential mortgage portfolio and forgiveness or of our first round of PPP loans.
Most of that decline was offset by growth in commercial and auto loan balances.
New loan origination increased 28% from the first quarter to $674 million, we're starting to see optimism on the part of our commercial clients originations now total more than $1.2 billion as of the.
The first half of the year.
All of this bodes well for the second half of the year.
Please turn to page 4.
At OFC, we believe better banking is built up on fulfilling our purpose, namely helping our customers our people on our communities achieve their financial goals.
During the second quarter for our customers, we quickly process forgiveness for about 75% of our first round of our PPP loans once again, using our proprietary all digital solution.
Our business model is putting us closer to existing and potential commercial clients to help them finance their operations and strategies as part of this effort. We launched a series of online educational videos to help small businesses improve their capabilities and optimize their business potential.
Even though the pandemic is subsiding here did you tell utilization of our banking services has continued at high levels among both our commercial on retail customers.
Online on mobile banking 30 on 90 day utilization continue well above pre pandemic levels.
This validates our long standing digital strategy and its growing acceptance by our customers and the market in general.
For our people, we continue to facilitate coffee vaccinations as of Monday, 81% of our team members are already fully vaccinated, we expect to reach 90% of vaccination levels during the third quarter.
In 2015, we started is college scholarship program for the children of our staff. This year, we're proud to announce that we increased the average scholarship of awarded by 19%.
For our communities, we have been working on several new corporate social responsibility programs..1 program lounge on the second quarter helps high school students in lower income communities to improve their personal and technological development.
We're extremely proud of all of these achievements at the end of the day. There is nothing more rewarding them being part of the team that delivers on its purpose.
This quarter's overall performance energizes us at all of G to work harder and to aspire for more.
Now here's muddied set to go over the financials in more detail.
Thank you Jose Please turn to page 5 to review our financial highlights total.
Telco revenues were $133 million, that's an increase of about 4% from both the first on year ago quarters.
Most of the increase from the first quarter was due to higher income from non PC. The loans. This reflects higher revenues from commission on.
Order of which more than offset lower interest income from paydowns in residential mortgages and for givens PPP loans.
Net interest income also benefited by approximately $7000 due to 1 extra day compared to the first quarter.
In addition, total core revenues also reflected growth in banking services from financial services.
Revenues from banking services grew 11% from the first quarter and 34% year over year.
This was due to expanding economic activity revenue from financial services increased 12% from the first quarter and 30% year over year day was slightly due to increased asset values and higher commercial insurance income.
Non interest expenses for the $83 million that that is an increase of $5 million from the first quarter and a decline of $2.9 million year over year.
The second quarter expenses reflected our previously announced cost savings of 2.2 million dollar take note of your write down and the higher variable expenses related to increase the champions.
Adjusting for the write down our efficiency ratio would have been similar to the first quarter. We continued to see expenses in line with our previously on our plan for the year.
Our goal by the end of 2020.
The continued to improve our efficiency ratio to the mid to lower 50 per cent range.
Return on average assets assets was 158 per cent the was significantly higher than the first of the year and a year ago quarter.
<unk> also exceeded it also exceeded our baseline target of more than 1 per cent.
Gee there on.
Of our study will come on equity was 17, 8%. It was also up significantly from this first year for the first on a year ago quarters, and also exceeded our baseline target of more than 12%.
We continue to build capital and tangible book value per share was $18 on 13 cents.
Based on an increase of 4% from the first quarter and 13% from the from the year ago quarter.
The highest increase sequentially over the last 5 quarters.
Please turn to page 6 to review all of our operational highlights average loan balances total.
$6.6 billion, that's the decline of $37 million from the first quarter.
Due primarily to residential mortgage paydowns on PPP forgiveness.
Mention before the.
It was mostly offset by the information on auto loans the change in mix enabled us to expand the Logan to $6, 69% 80 basis points higher than the first for.
Higher levels of differentiation on mortgage breakdown reflect increased liquidity on the part of the of consumers.
Our residential mortgage portfolio consists of legacy audience of our mortgage loan on mortgage loans from the EMEA and the Scotiabank acquisition.
Almost all of our our new residential mortgage.
Nation are confirming U S agency paper, so we don't typically add new production toilworn of THL loan portfolio.
It will convert most of production in defining Mays on Freddie Mac on sells them.
We converted the FHA loans into Ginnie Mae everything day damning our securities portfolio.
During the second quarter, we added $54 million of these Ginnie Mae securities into our investment portfolio.
Total new loan origination was tick on the $74 million.
That is an increase of 20, 28% from the first quarter net gains in all major categories. This was led by commercial auto followed by consumer and residential mortgage.
Approximately 50% of new formation or elsewhere for new money to expand the business operations building new store.
Warehouses by an inventory or making acquisitions.
Got it.
Deposits totaled $8.96.
Built on borders.
That's an increase of 5% of $427 million from the first quarter income.
Increases in non interest bearing accounts savings accounts on non of accounts were partially offset by the decline in cash.
Customer the Cds core deposits.
Costs continue to fall there were 38 basis points in the second quarter.
How do you sort of reduction of 9 basis points from the first quarter.
This reflects rate reductions on the continuum of TUI of older higher priced television.
As a result of the increase in deposits average cash balances total $2.5 billion that is an increase of 14% the 3.
$350 million from the first quarter.
Our current the strategy is to continue to look for opportunities to deploy this liquidity to the lending capital actions.
Turning to investment once interest rates move up.
Net interest margin was for 22% of decline of only 4 basis points from the first quarter. They.
The increased amount of cash as it is named by 13 basis points. Most of debt was offset by 9 basis point from the lower cost of deposits will.
We believe NIM is the steel in the range of our expectations for remaining of approximately level. This year.
That's the Bay, San and to review, our credit quality on capital the strength.
Asset quality trends continue to improve the construction on the stimulus funds provided significant liquidity to businesses and individuals.
Some of these to pay downs on loans and lines of credit.
Our net charge of Hittite historical low of only 13 basis points.
The early on total delinquency rates at 186% on 390% respectively. We're on.
The lowest level in 5 quarters non performing loan rates at 2.6% was also at its lowest level in 5 quarters. If you exclude the effects of our pandemic related deferral program.
As a result of these provision for credit losses was a net benefit of $8.3 million.
This is based on $2.1 million in net charge offs on.
<unk> for them.
Million-dollar net true self pity.
Allow us forward of spontaneous elevated debt that is there is still concern about the COVID-19 uncertainty for our pulse system robust economic recovery.
Our allowance for what it was 295% on a reported basis and 3 of 6% excluding PPP loans there.
On the CET ratio of continued to climb reaching 13, 95%.
The stockholders' equity was $1.8 billion of decline of $28 million from the first quarter. This was due to the redemption of preferred at the first the C series, a and B and a good portion of which was offset by the increase in within the areas.
The tangible common equity ratio continue to climb to 296% now here's piece of it.
Thank you Marty.
Okay.
Yeah.
Okay.
Okay.
This is on.
Sure.
Sure.
Ladies and gentlemen, please standby.
Yes.
So please turn to page 8 for a conclusion.
Our performance this quarter reflects what we had anticipated to see a year after the Scotia acquisition or larger scale business approach on improved strategic positioning is coming to fruition, adding to our franchise value.
Following the first quarter and now this quarter, we're seeing incremental optimism on the part of the business sector to invest for the future slowly, but surely giving us confirmation of Puerto Rico's economic revival.
We are aware of G are more than ready we have a lot of drought dry powder in the form of cash to deploy for growth on the loan side, but we will also continue to look closely at capital management strategies.
Thanks to all our team members, who have helped our customers achieve their goals.
That ends our formal presentation.
Thank you for listening operator, please open the call for question and answers.
Thank you if you have a question at this time. Please press star 1 on your telephone keypad, if he wished for yourself from the queue press the pound key.
And your first question is from Alex toward all of Piper Sandler.
Thank you.
Hey, good morning.
Good morning, Alex how are you.
Well on your guys.
Good.
First question for me just wanted to hone in on the commercial loan growth that you had this quarter.
Based on some of your commentary I think I know the answer but do you think that we've now reached in our cash the inflection point on commercial loan growth.
So when we look we're definitely we're very happy with the.
For the commercial loan growth that we've seen in this quarter.
I think when we look at our pipelines and the activity that we're seeing on both the small on the on the middle.
The commercial businesses.
We are encouraged with the activity that we're seeing on as I said on my remarks, we're seeing incremental optimism from the business sector getting ready for what we are starting to expect which is a more robust economic revival so.
I think the business optimism.
Certainly supported by the reconstruction funds coming in and the economic Revival.
And last but not least is our business model I think.
The fact that we we kind of focus on doing it fast E C and well done and we have a business model that that gets us a lot closer to our commercial clients.
Is is actually getting good traction and we're benefiting from that too. So this is the inflection point I wish I could give you. The the convincing answer that this is the moment, a who knows we'll probably see it with a rearview mirror, but it certainly starts to.
2 look incrementally.
More positive and.
And hopefully we'll continue for the years to come as the economy continues to move from from rebuilding 2 expansion.
And then for just dig into the commercial growth a little bit more can you breakout what was construction versus C&I or CRE.
I would say most of it is CNI when we when we look on our business model. We there are some.
Loans commercial loans on our construction mostly.
Businesses, constructing new warehouses or building new stores.
As demand has grown in and they need the the capacity those are the larger kind of our clients the smaller clients R.
Are mostly a C&I lines to them operate their businesses and the and do some small or medium size acquisitions. So when we look at it I would say 50% of our originations are for what we call new money, meaning new money buy businesses to be deployed at <unk>.
To their own businesses the other.
50% is more a RIF.
The refinancing and.
And just.
Just going through sort of their cycle of their business cycle. So.
Again, that's how we break out and break it down and when we look at the at.
The large commercial.
Apart from what I just mentioned on construction on most of it is C&I lending.
Businesses that are that are expanding their operations as of.
The economy rules.
Got it and then just switching gears for the NIM.
So maybe you could just quickly break out the contribution from PPP.
NII this quarter going on Smith.
Well, yes.
On the MTV.
We belong beryllium.
It is.
Going down as we continue to.
The forgive loans.
For this quarter, there were only on incremental and effects of 2 basis point of we have from forgiveness.
The fees there.
$400000 only.
Sorry, if not the significant during this quarter.
On the 2 way at this point as you get the answer.
Okay.
Are you there.
Okay.
Operator can you help us out.
1 moment.
And Alex your line is open.
Can you hear me.
Yes, we can yes.
Yes, I did get the answer merits of thank you.
And then you guys are now sitting on 27 per cent of your balance sheet is just cash is there any update to the strategy with respect to activating some of that huge cash position.
Yes, I mean, the update is where we're going to take a look at it now and at the end of the month of July we were going to review R. R.
Capital deployment options.
Options and and we'll certainly communicate any decision made to.
For the street Accordingly, so yes, we're clear Alex we have.
Significant.
The significant cash position, we have a strong earnings.
And the strong earnings momentum. So we're building a lot of capital also so.
We get it and we'll we'll convey the message to our for board and the well will come back with with the with the decision on how to.
The continued to move forward on our capital deployment strategies in a more consequential way than probably earlier anticipated.
Okay. So when you talk about capital and just continuing on that theme I think earlier. This year, you had sort of alluded to reassessing the dividend for a second time this year as well as I mean are.
You are now, saying, there's maybe some other possibilities on the table.
Michael of buyback for example, yes.
Well, we always have everything on the table, we when I when I when we look at this so we'll look at everything again and on as I said, we will we know how of how things are moving along in terms of our performance on the in terms of our capital growth.
So so we will be more.
Yes.
Focus if you want to call it to look at all options.
At this time.
Okay understood.
And then back on to the margin just when I look at the cash position sort of capital deployment of side.
Is there any updates of the strategy of of maybe activating some of the cash with additional securities purchases I know the loan growth is kind of what we're all hoping for.
Or repaying some.
Being more aggressive on reducing the cost of funds.
Some of that cash or anything like that.
So.
So the way we look at deploying cash to the investment portfolio, we were going to be very patient.
Even where levels of interest rates are today.
We mentioned on the call out where.
Okay.
The FHA loans that we originate we are converting them to <unk> and we keep them.
On our books on the investment portfolio. So we just knock on I'll just go out there on and deploy cash into lung.
Duration low yielding.
Mortgage backed securities. So so we'll be patient there.
Well, we are definitely looking into deploying our cash into lending activities, we see momentum certainly on the commercial side as I mentioned, we also see good momentum on the consumer and we've seen for the for a while now higher levels of originations on the auto side. So so we will continue to deploy there.
And then we'll we'll look on the mortgage origination business also and see if we can with with home prices not only stabilizing but starting to.
Increasing price across all areas.
We might start looking more of them more seriously into nonconforming lending strategies for us to keep in the books. So those those are all in play from the lending side and I mentioned on the capital the capital management strategies that we're going to take a look at it now.
Cost of funds, yes, we will continue to look at it. The you saw the the effect this quarter, we will see.
Additionally, the effects in the in the next quarter and it's something that we continue to look I think you guys need to understand that we're also operating in a in the 3 bank market and that's the new for US in Puerto Rico is new for for everybody out there looking at the islands banking.
Market and I think.
We have we have great opportunities here to to generate the above.
The above average returns across the board.
Alright, and then just as I think about cash on the balance sheet with the child tax credit starting to hit People's Bank accounts I think in the last week.
At least here is that the same in Puerto Rico and would that suggest the cash balances should actually just continued to grow until the earliest over the next couple of months.
So it has significant benefits for Puerto Rico, but it's not necessarily immediate the way it's going to be processed remember, we don't pay federal taxes. So the way it's going to be process is probably going to have any effect later in 2022.
But the.
But it definitely has an impact in Puerto Rico because of.
The limitations in terms of the caps in dollar amounts and the amount of kits that will qualify.
It was eliminated for Puerto Rico on the was paired to the U S states. So so from that perspective the.
On the dollar amount that will benefit the island will be higher than in years past because more of kids qualify and and certainly of the income levels in Puerto Rico make it the pretty widespread in terms of all of the impact in terms of the families is just that the process is not going to be.
Equal in terms of of the cash deposits is not going to be equal to the 1 in the states. So there's a little bit of a.
The change there, but otherwise it will have an eventual.
Portland impact.
Understood and then just switching gears for the ACF.
I was just going to say, Alex I think that.
We're also looking for for the consumer to start deploying the cash also and the and I think we.
We this quarter the benefits from the.
The second third or fourth wave of Covid stimulus right for the individuals and and we're also seeing on the commercial side, how they're paying their lines of credit and on and bringing them down to zero balance is because of the excess liquidity. They have our expectation is on the second half of the year, we will see some of that excess liquidity.
On the consumer and commercial to be deployed incrementally.
Into the into consumers or you know going to consumption or.
Or in the in the businesses that they that they operating so.
Our expectation is not for continued deposit growth from the consumer on commercial as we've seen in the several quarters of glass.
Got it.
<unk>.
In terms of sort of on the macro.
The commentary is the expectation for the.
Expanded unemployment benefits to expire in September has there been any.
Talked down there of about that deadline changing either bring it forward or anything we should be think I haven't I.
I haven't heard anything a suspect has gone away and now at the other day.
Headline and I have I have not heard of any any anything specific on that I am really try to stay away from listening to the too many politicians.
Yeah.
Okay, and then just switching gears for the ACL of little bit Youre still over 3%, excluding PPP charge offs look a lot like.
Any other bank quite frankly, very low historical low for you guys.
How are you thinking about the ACL right now are there still some quantitative or are rather qualitative factors that you guys are incorporating.
Still anything you're sort of waiting to see before releasing reserves.
That's just kind of sort of gradually grind lower.
Let me give you my Big picture on a limited so I gave you the details, but I agree with you and we've said in the past the now the Puerto Rico is kind of turned the corner from 2 decades of economic contraction on we're seeing the the.
Part of the revival.
Our our bank's financial performance also out of the last 2 decades has been pretty pretty good in spite of that.
Economic contraction now, though we have the revival of I think credit trends are going to trend towards the peers in the states and the and I and I and I agree with your assessment that the.
Our numbers for this quarter, certainly are equal or better than some of the state of the banks in the state.
We look forward to continuing to confirm that that's the trend in the quarters to come given what we're seeing on the economy.
Regarding the ACL of eliminates I'll give you the details well.
As you may have.
I think the level.
All of those.
I still elevated.
As we continue seeing great trends.
And the economics.
I'll continue.
The tangible.
Body.
That 1 of.
David.
From the level of day 1.
The better than debt.
Day, 1 accounting.
Need to continue.
<unk> seen per system.
And these mandates the sustainable for the time.
Releasing any any potential well in the defect.
Got it.
And then.
It doesn't mean that we do you have within the allowed.
Sure.
Okay.
And then when I look at fee income and I look, especially at <unk>.
The level of the.
Banking service revenues.
Me as high this quarter, but then it also realize we've never really seen of clean quarter Post Scotia. So it was 18.2 is that kind of the right run rate to start out as that of normalized level.
So again, you're right on point on your.
The comment Alex.
The COVID-19 pandemic kind of delayed the full kind of.
Momentum that we brought in with the Scotia acquisitions of so this is the first quarter, what we're seeing.
Oh, all systems go with the Scotia acquisition.
When we look at banking service revenues that is also the case and that's what encourages us because he has a lot to do with business activity, but it also has to do with the larger scale.
We also need to get accustomed to those levels I don't want to go out on a lame on say this is the going rate but.
But it certainly starts to look like it is.
Great and then just last question for me when you when you think about the the efficiency ratio target of kind of mid to low $50 by the end of 2022.
Does that.
Do we need to see some rate hikes to kind of help that out or is that something that can be sort of achieved in the current environment.
We certainly need the the rate hikes.
In a growing environment.
And growing business environment is very very.
The difficult to just reach the low 50% efficiency ratio by by just the.
Bringing down expenses.
And we're as I said in quarters past, we're making some investments in technology and digital and that will certainly.
We have on impact there. So so yes, we do need we need some help from from interest rates going up and.
And that's why I mentioned earlier on the.
On the question regarding deployment of liquidity.
We expect even though we've been wrong, so far and we expect interest rates to.
2 inch up on and be more compelling for us to.
So investing in the investment portfolio and also get a little bit.
The better returns on our variable rate commercial loans that are that we have on the books and that should impact on help improve our efficiency ratio to the mid to low <unk>, that's our expectation.
Perfect. Thank you for taking my questions.
Have a great day.
You too.
Thank you and once again, if you would like to ask a question Press Star then the number 1 on your telephone keypad.
And your next question is from John Kraus of Rubric.
1 of the yes.
Hi, good morning.
You mentioned.
There's only 3 commercial banks on the island.
How would you characterize the competition for deposits and what does that mean in your opinion for interest rate sensitivities.
For us in the future.
The competition for deposits is strong.
We were particularly on the commercial side. So so when I when we look at the consumer side.
It's the the.
The expected competitive landscape of making sure that we serve our customers on the.
Individuals' side, but on the commercial side is scheme and the and there is some some of them.
Okay.
I would say above above the level.
The aggressive levels of pricing on the commercial side.
What does that mean for sensitivities into the future I think.
We will have.
Lower for longer when interest rates go up that's how I see it.
And.
Switching to the commercial loan growth there was some discussion there with Alex around some of the inputs there, but with respect to construction, which has tended to be.
Some of the biggest multipliers in terms of economic activity of construction is.
When do you do you think we see larger scale construction projects really start to take shape on the island.
It's all dependent on how the <unk> funds are deployed in the items are starting to be deployed there. There are some federal contracts that are being are.
Being approved and signed so my expectation is in the second half of the year, we will start seeing those.
And on on incrementally growing going forward.
But hard hard too.
Specific to your question.
The third question is on on loan loss provisions, obviously, we saw some progress there.
Was there can you help us out in just understanding.
Some of the the macroeconomic.
The changes if those were incorporated into the model that helped drive some of the relief there in reserves and.
Yeah. Thanks, we continue where we are right now should we should we expect that to continue with with reversals in the back half.
There are no changes on macroeconomic assumptions the.
The changes that you're seeing on the.
Provision is basically.
Based on the credit performance of our loan portfolios and sees the improved we our model just spits out a release would take care of the charge offs and then we when we run the model and the and I think the spits out the.
The provision number which is in this case was a negative provision because of us as Alex mentioned, we are having a low level of of.
Credit losses, and we see our.
Delinquency levels on a very.
The low levels also historically as well as npls. So that's how it works out, but we do not we do not the tinker with the economic assumptions.
That is something that.
The.
We do that when we when we have a shock to the system on that shock happened last year.
So is it fair to say then if third parties like Moody's economics were to upgrade the island, the economic forecasts, whether it's because of the debt deal resolution or for other macroeconomic.
Areas that are improving on the island that that would.
The incorporated into our into our model the debt.
That would potentially accelerate loan loss provision reversal.
I I think you're looking too much into it honestly I think.
The third parties in this case.
Moody's or whoever the.
They just run the microeconomics for the island and the and we discuss it with them and we include those those assumptions into our into our model and we run the the allowance calculation, but the.
The don't make too much about all of these modeling on all of these economic assumptions on all of that stuff because you know.
There has to be a complete shift in those in the in the economic reality for those of assumptions to change dramatically 1 quarter to other so so at the end of the day is about primarily how your loan portfolio from a credit perspective is performing and.
And that's how we that's what moves the needle.
Got it okay.
And then.
Bigger picture question with some of the efforts are on the G 20, and the global minimum corporate tax rate.
If that were to proceed and there seems to be some barriers within various countries within the <unk> 20th blessing something like that but if that were to proceed and we were to see a minimum of corporate tax rate.
How does that affect.
The investment on the island does that does that impact.
Prospective.
The investment from <unk> Pharmaceuticals.
Talking about reinvesting in the island.
That's the save for our higher IQ I am a <unk>.
Normal level of IQ Guy I don't have the answer for that sorry.
Got it Okay and then just last question.
Again bigger picture on the island.
What are you sort of see in the out of the.
The the local the Puerto Rican legislature and the Governor's office.
The efforts to promote.
Climate, that's conducive for from mainland and foreign investment in Puerto Rico.
Yes, I said earlier I don't I try to stay away from the political landscape as far away as possible, but the.
The short answer to it is nothing.
Okay. Thank you yeah.
Thank you for your questions.
Thank you again, if you would like to ask a question Press Star then the number 1 on your telephone keypad.
And your next question is from Ann Wickman of Easter Lee of investment.
Good morning.
Hi, good morning, how are you.
I'm good.
Wanted to circle back to the CET ratio. So last quarter, you gave us the target of 11% to 12% and you're currently sitting at about 14%. So first can you quantify how much excess capital we will have on sort of a timing on that.
Garnering a lot of excess capital and then second.
And Alex kind of touched on the question, but I wanted to ask other possibility if Lisa you talked about loan growth on non conforming loan growth.
Non conforming loans is M&A on the table at all or maybe a small financial technology.
<unk> helped.
The build out your customer service offering.
And then another thing you haven't talked about in a while.
Investments in the syndicated planet.
Can you kind of provide color on that yes.
Yes sure.
So you asked me 3 questions I hope I can remember all 3 if I don't please remind me of the question. So I'll start with the CET question first.
As I said earlier, we know we're building a copy of bell quite fast given our results and so far in the first half of the year. So so yes, we do recognize that we have excess capability. It's around 253 hundred basis points of excess capital that we can manage on so we know what we need to do.
And in terms of deploying that capital and the.
I don't want to go into the specifics here, but.
What I can tell you that the board, where we're going to be looking at this very closely from a copy of the management perspective, and that's dropping used to deploy that capital.
So the second question was.
Regarding M&A and if there's any any opportunity for us to do M&A.
I don't see any M&A opportunity here in Puerto Rico.
Opportunities in the states, it's something that the.
We're not right now focused on in terms of M&A. So so that's not something that we have all of our cards.
And then I think the third question you asked me was regarding the the U S.
Loan program that we that we had loan launched on 2017.
And.
And kind of give you an update.
So we continue to build that book as part of our.
<unk>.
The for diversification geographic diversification I think it's the right thing to do we have.
I would say right now 50% of the book is middle market loans. The other 50% of our small commercial loans that are that we.
We are we on the partnership with <unk> Bank in the states. So so that's kind of how we're going at it we're slowly but surely building debt.
Certainly the the numbers in this quarter from the bucket.
Not.
Do any dent on the did not affect significantly the balance of all of our loan book or the commercial book most of the originations of our small commercial loans debt.
Mostly lines of credits.
And really did not affect the.
The the loan balances in the in this quarter, but that's how we see that and and we continue to methodically build the business.
Part of our.
Longer term strategies the.
I missed any of your questions now.
No that was great. Thank you and great quarter.
Thank you. Thank you Youre welcome.
Thank you once again, if you would like to ask a question Press Star then the number 1 on your telephone keypad.
Okay.
Okay.
And at this time there are no further questions I will now turn the call back over to Jose for closing remarks.
Thank you operator, thanks again for all of our team members, who have helped our customers through the pandemic and done a great job in the first half of the year and thanks for all our stakeholders level have listening so have a great day and looking for for the next quarter call.
Thank you. This does conclude today's conference call you may now disconnect.