Q3 2023 First BanCorp Earnings Call

Okay.

Hello, everyone and welcome to the first Bancorp third quarter 2023 financial results. My name is Bruno and it'll be operating your call today.

Speaker 1: Hello, everyone, and welcome to the first Bancorp third quarter 2023 financial results. My name is Bruno and I'll be operating your call today.

Speaker 1: During this presentation you can register to ask a question by pressing star followed by 1 on your telephone keypad. I will now hand over to your host, Ramon Rodriguez, Investor Relations Officer. Please go ahead.

During this presentation you can register to ask a question by pressing star followed by one on your telephone keypad.

I will now hand over to your host how long could righetti Investor Relations Officer. Please go ahead.

Okay.

Speaker 2: Thank you Bruno. Good morning everyone and thank you for joining First Bank Orbs Conference call and webcast to discuss the company's financial results for the third quarter of 2020.

Thank you Bruno.

Everyone and thank you for joining first Bancorp's conference call and webcast to discuss the Companys financial results for the third quarter of 2019 joining.

Speaker 2: Joining you today from First Bank Corp are Aurelio Aleman, President and Chief Executive Officer, Lando Verguez, Executive Vice President and Chief Financial Officer.

Joining you today from first bank or bar breath.

President and Chief Executive Officer, Randall way to his executive Vice President and Chief Financial Officer.

Speaker 2: 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.

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 Companys business.

Speaker 2: 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 filing.

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.

Speaker 2: The company assumes no obligation to update any forward-looking statements made during the call.

The company assumes no obligation to update any forward looking statements made during the call.

Speaker 2: If anyone does not already have a copy of the webcast presentation for a press release, you can access them at our website at fbbinvestor.com.

If anyone does not already have a copy of the webcast presentation or press release, you can access them at our website at SBB investor Dot Com at.

Speaker 2: And this time, I'd like to turn the call over to our CEO , Aurelio Aleman.

At this time I'd like to turn the call over to our CEO Aurelio <unk>.

Speaker 3: Thank you Ramon. Good morning to everyone and thanks for joining the call.

Thank you Ramon and good morning, everyone and thanks for joining the call today.

Speaker 3: Please let's turn to page 4 to go over the financial highlights.

Please let's turn to page four to go over the financial highlights.

Speaker 3: We posted another good quarter with 82 million in net income or 46 cents per share, which translated into a fairly strong return asset of 1.72%. Net interest income register slightly decreased during the quarter.

We posted another good quarter with 82 million only net income or <unk> 46 per share, which translated into a fairly strong return on asset of 172% net interest income registered a slight decrease during the quarter.

Speaker 3: mainly due to expected upward pressure on deposit pricing and increasing the mix of interest-bearing deposits due to tautism.

Mainly due to the expected upward pressure on deposit pricing and increasing that mix of interest bearing deposits to total deposits.

Speaker 3: Expenses were quite in line with guidance at 160 million, and the efficiency ratio reached 50.7% during the quarter continued to the next level.

Expenses were quite in line with guidance at $160 million and the efficiency ratio reached 57% during the quarter continue to be.

Speaker 3: you know, very, very top of the industry. These variances were mostly offset by a lower provision for credit losses during the pandemic.

Larry.

On top of the industry. These variances were mostly offset by a lower provision for credit losses during the quarter.

Speaker 3: In terms of asset quality, MPA increased slightly by $9 million during the quarter, primarily attributed to the inflow of a single commercial loan in Puerto Rico.

In terms of asset quality.

Increased slightly by <unk> 9 million during the quarter, primarily attributed to the inflow of a single commercial loan in Puerto Rico.

Notwithstanding NPA levels remain at multi year lows now represent 70 basis points of total assets.

Speaker 3: Notwithstanding, NPA levels remain at multi-year lows and now represent your 70 basis points of total asset.

Speaker 3: As anticipated, we believe excess liquidity in the market has continued to taper off and we're starting to see normalization in the liquid deterrence. However, they're still way below pre-pandemic levels.

As anticipated it will be.

Believe excess liquidity in the market has continued to taper off and we're starting to see normalization in delinquency trends. However, there is still way below <unk> levels on.

Speaker 3: On the capital front, we continue the repurchase plan and we repurchase 75 million in common shares during the quarter.

On the capital front, we continue the repurchase plan, we repurchased $75 million in common shares during the quarter.

Speaker 3: That finalizes the remaining of the authorization under the 22 Capital Plan.

That finalizes, our remaining on the authorization under the capital plan.

Speaker 3: And given strong capital position, liquidity and outlook for the remainder of the year, we do expect to continue repurchasing shares of common stock during the fourth quarter. But now on the day 2023, capital panel...

And given our strong capital position liquidity and outlook for the remainder of the year. We do expect to continue repurchasing shares of common stock during the fourth quarter, but now under the 2023 capital <unk>.

Please let's move to slide five to go over the portfolio.

Speaker 3: Please let's move to slide 5 to go over the portfolio.

Speaker 3: This quarter we were really pleased with the long production activity that we experienced across the two decisions. Total long increase by 6% on a link quarter annualized basis and reached 12 billion.

This quarter, we were really pleased with the loan production activity that we that we experience that goes into these regions.

Total loans increased by 6% on a linked quarter annualized basis and reached $12 billion.

Speaker 3: healthy levels of both commercial and consumer long-range.

Healthy levels of both commercial and consumer loan origination.

Speaker 3: The long portfolio has been expanding since the third quarter of 2022, reflecting organic growth of over 150 million or 8% increase during this period.

The loan portfolio has been expanding since the third quarter of 2022.

Afflicting organic growth of over $150 million or 8% increase during this period.

And again, our loan growth loan growth strategy.

Speaker 3: Again, our long growth strategy.

Speaker 3: is supported by the increased business activity and economic activity that we see in the island, particularly the S.A.R.T.

If supported by the increased business activity.

Economic activity that we see in the island, particularly in this market.

Speaker 3: coupled with timely focused execution of the sales team.

Golf ball with tightly focused execution of the sales teams across the three regions.

Speaker 3: Going forward, we expect Long Rock to remain in line with our meeting of the broke guidance.

Going forward, we expect loan growth to remain in line with our mid single digit growth guidance.

Speaker 3: as we continue to redeploy a portion of the investment portfolio cash flows into higher yielding assets in the long portfolio.

As we continue to redeploy a portion of the investment portfolio cash flows into higher yielding assets in the loan portfolio.

Also we do expect that.

Speaker 3: facilities of the construction known that were approved this year begin to accelerate into this personage.

Possibilities or the construction loan that were approved this year being into accelerating into disbursements.

Let's go over to page six to go over the funding.

Speaker 3: You know, we're moving in line with industry trends. You know, they recently released the deposit market assessment of the FDIC as of June .

We are moving in line with industry trends.

The recently released the policy might get assessment about the FDIC as of June <unk>.

Those on overall contractual in total deposit in Puerto Rico as of June 2023rd and our reserves are.

Basically reflecting that we are retaining our market share. So we basically remaining flat to the market.

Speaker 3: This quarter, other than broken and government deposits, they decreased 159 million for 1.2%

This quarter other than broker and government deposits.

<unk> hundred $59 million or one 2%.

Speaker 3: Again, this reduction primarily driven by erosion of liquidity in the Euro market and migration of retail customers to higher rate options actually outside the traditional banking sector, particularly credit unions and the US Treasury.

Again, this reduction primarily driven by erosion of liquidity in the market and migration to both retail customer to higher rate options actually outside the traditional banking sector, I will say, particularly credit unions.

U S treasury market.

Speaker 3: the other hand, that was offset by stabilization in commercial deposit to have compliance balances.

On the other hand that was offset by stabilization in commercial deposit balances.

Okay.

Representing.

Speaker 3: 34% of our deposit base is non-intense betting deposit.

34% of our deposit base.

Bruno: Hello everyone and welcome to the first Bancorp Third Quarter 2023 financial results. My name is Bruno and I'll be operating your call today. During this presentation you can register to ask a question by pressing star followed by one or new telephone keypad.

Noninterest bearing deposits.

Speaker 3: Again, we remain focused on retaining our market share in the segment we serve, pricing our products competitively. Again, it's a function of the market environment and the rate.

Again, we remain focused on retaining our market share in this segment, we serve pricing our both competitively and again, it's a function of the market environment on the rates and and definitely retaining our most valuable relationships.

Ramon Rodriguez: I'll now hand over to your host, Hamon Rodriguez, Investor Relations Officer. Please go ahead. Thank you Bruno.

Speaker 3: and definitely retaining our most valuable relationships, it's key to the strategy.

It's key to the strategy.

Ramon Rodriguez: Good morning everyone and thank you for joining first bank orbs conference call and webcast to discuss the company's financial results for the third quarter of 2020 joining you today from first bank or bar, Aurelio Aleman, President and Chief Executive Officer, Orlando Berges, Executive Vice President and Chief Financial Officer.

Speaker 3: From the profile of the institution, to remain very attractive, is a very well diversified...

From them from the profile of the institution do remain very attractive.

He's a very well diversified deposit base.

Speaker 3: composed of a balanced mix of core and retail customer. When we combine average balances of these accounts, it really is around $19,000 so it's fairly grand.

Composed of a balanced mix of core and retail customer when we combined the average balances of these accounts.

It really is around $19000. So it's fairly granular and again, we have ample liquidity available to various funding options that allow them to continue to strategically manage our balance sheet growth plans.

Ramon Rodriguez: Before we begin today's call, it is my responsibility to inform you that this call involves certain four looking statements such as projections of revenue, earnings, capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could defer materially from the four looking statements made due to the important factors described in the company's latest SEC filings.

Speaker 3: And again, we have ample liquidity available to various funding options that are allowed to continue to take advantage of our policy.

Just move to page seven two over the macro we continue to see the Puerto Rico economy very stable.

Speaker 3: Just move to page 7 to over the macro, we continue to see the Puerto Rico economy very stable, performing fairly well considering the integrated environment and the emerging geopolitical events. Economic activity index of Puerto Rico reaches its highest level in eight years during the third quarter. Passenger traffic at the main airport continues to hit all-time highs. A

Performing fairly well considering the interest rate environment on the emerging geopolitical events.

Ramon Rodriguez: The company assumes no obligation to update any four looking statements made during the call.

Ramon Rodriguez: If anyone does not already have a copy of the webcast presentation or a rest release, you can access them at our website at FBBinvestor.com.

Economic activity index, Puerto Rico reached its highest level in eight years during the third quarter.

Passenger traffic at the main airports continue to hit all time highs consumers.

Aurelio Aleman: At this time, I'd like to turn the call over to our CEO Aurelio Aleman. Thank you Ramon. Good morning to everyone and thanks for joining the call today. Please let's turn to page four to go over to the financial highlights. We posted another good quarter with 82 million in income, or 46 cents per share, which translated into a fairly strong return asset of 1.72 percent. In the same income registers like the increase during the quarter, mainly due to expected upward pressure on the positive pricing and the increase in the mix of interest burden deposits to total deposits.

Continued to be adapting to rising rates and prices as evidenced by retail sales hohhot expanding auto sales.

Speaker 3: continue to be adapting to the rising rates and prices as evidenced by retail sales, household spending, auto sales, and more importantly, labor market remains stable with unemployment around 6.2%.

And more importantly, labor market remained stable with unemployment around six 2%.

The pace of disaster relief funding for the first of all the year.

Speaker 3: The pace of disaster relief funding for the first year of the year is 72% above the same period last year, which is definitely driving construction activity in the island. We started to see an additional number of low-income housing projects and obviously rebuilding of important infrastructure.

72% above the same period last year, which is definitely driving construction activity in the island.

We started to see.

Additional number of low income housing projects, and obviously rebuilding of important infrastructure.

Aurelio Aleman: Expenses were quite in line with guidance at 160 million, and the efficiency ratios reached 50.7 percent during the quarter continue to be very, very top of the industry. These variances were mostly observed by a lower provision for credit losses during the quarter. In terms of as a quality MPA increased wisely by 9 million during the quarter, primarily attributed to the inflow of a single commercial loan in Puerto Rico. Nowithstanding MPA levels remained at multi-year lows and now represent your 70 basis points of total asset.

Speaker 3: In addition, we continue to see private investors continue to allocate support to the island. There is a recently announced transaction where private investors a concession of the South Expressway under a P3 structure total concession which recently investors allocated $2.9 billion plus there will be an additional $2.4 billion in improvements. I think that is...

In addition, we continue to see private investors.

<unk> to allocate support to the island.

There is our recently announced transactions whereby reinvest or concession.

So.

Expressly on the repeat three structure toll road concession, which recently investor allocated $2 9 billion.

Plus there will be an additional two $4 billion in it.

And improvements.

I think that is a good example of what are we seeing.

We said in the past, we we have the experience.

Speaker 3: As we said in the past, we have the experience to continue operating under

Aurelio Aleman: As anticipated, we believe access liquidity in the market has continued to taper off and we're turning to see normalization in the link between trends. However, there's still way below pre-pandemic levels. On the capital front, we continue the repurchase plan, and we repurchase 75 million in income and shares during the quarter. That finalizes the remaining of the authorization under the 22 capital plan. And given strong capital position, liquidity and outlook for the remainder of the year, we do expect to continue to repurchase each share of income of stock during the fourth quarter, but now under the 2023 capital plan authorization.

To continue operating under under these challenging market and changing market and we continue to leverage our our brewer risk framework.

Speaker 3: this challenging market and changing market and we continue to leverage our proven risk framework and franchise to supporting the customers through the site.

And franchise to supporting our customers through the cycle.

Speaker 3: Now I will turn the call to Orlando to go over financials in more detail. Thanks. Thanks you all.

Now I will turn the call to Orlando to financials in more detail. Thanks, Thanks a lot.

Speaker 4: Thanks, Aurelio. Good morning, everyone. As you saw in the release, the results for the third quarter show an increase of $11.4 million in net income, which is primarily associated with a lower provision and a lower effective tax rate.

Thanks, and good morning, everyone.

As you saw in the release of the results for the third quarter drove an increase over $11 4 million and net income which is primarily.

Associated with the lower provision on a loan.

Our effective tax rate.

Speaker 4: We earn 82 million for the third quarter or 46 cents a chair, which compares to 70.7 million in the second quarter, or 39 cents per chair. Adjusted pre-tax pre-provision did come down by 4.6 million to 113.4 million.

We earned $82 million for the third quarter or <unk> 46, a share which compares to $70 7 million in the third in the second quarter was <unk> 39.

Aurelio Aleman: Please let's move to slide five to the portfolio. This quarter, we were really pleased with the long production activity that we experienced across the three regions, total low increased by 6% on a link quarter, annualized basis and reached 12 billion, a healthy levels of both commercial and consumer loan re-nation. The loan portfolio has been expanding since the first quarter of 2022, reflecting organic growth of over a hundred and fifty million or eight percent increase in this period.

Per chair.

Adjusted pretax pre provision did come down by $4 6 million to $113 4 million.

Speaker 4: The provision for credit losses in the quarter decreased to 4.4 million, which compares to the 22.2 million we had in the second quarter. When we look at...

The provision for credit losses in the quarter decreased to $4 4 million, which compares to $22 2 million, we had in the second quarter.

When we look at.

Speaker 4: components, the projected macroeconomic variables last quarter deteriorated, especially in the commercial real estate side and on the unemployment side.

The components the projected macroeconomic variables last quarter deteriorated, especially in the commercial real estate side.

Aurelio Aleman: Again, our long growth strategy is supported by the increased business activity and economic activity that we see in the island, particularly in this market, coupled with the timely focus execution of the sales teams across the regions. Going forward, we expect long growth to remain in line with our meeting in the growth guidance, as we continue to redeploy the portion of the investment portfolio cash flows into higher yielding assets in the loan portfolio.

Someone.

The unemployment side.

Speaker 4: which resulted in additional provisioning needs in the quarter. This quarter, the projection still shows the deterioration in the longer term, but current values of some of these variables are more favorable than they were originally estimated, which led to a slower pace of deterioration and a lower reserve impact.

Resulted in additional provisioning needs in the quarter.

This quarter the projections still chose deterioration on the longer term.

But karen values of some of these variables are more favorable than they were originally estimated which led to a lower.

Face slower based on the duration and also slower lower reserve impact.

Speaker 4: Also, this quarter we booked 1.4 million in recoveries on a commercial loan that was previously charge-stopped a few years ago and was collected. We did a refinancing of municipal bonds that we sell in our health to maturity portfolio.

Also this quarter, we booked a one 4 million in recoveries on a commercial loan that was previously charged up.

Aurelio Aleman: Also, we do expect that the facilities of the construction known that were approved this year, being into accelerated into these persons.

Years ago and was collect data.

And there was we did a refinancing of our municipal bond that.

That was held in our held to maturity.

Aurelio Aleman: Let's go over to pay six to go over the funding. You know, we're moving in line with industry trends, you know, the recently released deposit market assessment of the STIC as a June shows an overall contraction in total deposit in Puerto Rico as of June 2023. And our reserves are, you know, are basically reflecting that we are retaining our market share, so we basically remain in flat to the market. This quarter, other than broker and government deposits, it decreased 159 million or 1.2%.

<unk> portfolio.

Speaker 4: which resulted in some reserve releases since the new structure is that of a commercial loan which has a much shorter time.

Which resulted in some reserve releases since the new structure instead of a commercial loan which has a much shorter timeframe.

Aurelio Aleman: Again, this reduction primarily driven by erosion of liquidity in the overall market and migration of retail customers to higher rate options, actually outside the traditional banking sector, I will say particularly credit unions and the US Treasury market. On the other hand, that was observed by stabilization in commercial deposit balances. Still representing 34% of our deposit base has been non-interested in deposits. Again, we remain focused on retaining our market share in the segment.

The estimated tax rate for the quarter came down.

Speaker 4: The estimated tax rate for the quarter came down...

Speaker 4: to make the tax rate for the year, but impacting the quarter came down to 28.2% from 30.1%. The result of a higher proportion of tax exempt income to total income and additional business activities we did under tax advantages under the Puerto Rico code.

To me the tax rate for the year, but impact in the quarter came down to 28, 2% from 31%.

As a result of a higher proportion of tax exempt income to total income and additional business activities.

We did under tax advantages under the Puerto Rico code.

Speaker 4: Looking at that interest income for the quarter was $199.7 million relatively flat when we compared to prior quarter. As we have discussed in prior calls, deposit pricing pressures, especially on the public sector, have upset the improvement in interest income resulting from loan growth and loan replychildren.

Looking at net interest income.

For the quarter was $199 7 million relatively flat when compared to prior quarter.

As we have discussed in prior calls deposit pricing pressures, especially on the on the public sector.

Upset the improvement in interest income, resulting from loan growth and loan repricing.

Speaker 4: Total interest income for the quarter grew 11.2 million for 12 basis points improvement yields on interest earning.

Total interest income for the quarter grew 11, 2 million or 12 basis points improvement in yields on interest earning assets.

Speaker 4: But interest expense grew 11.3 million representing 28 basis points increase in cost offsetting the growth in in interesting

Interest expense grew $11 3 million, representing 28 basis points increase in cost.

Offsetting the growth in.

Aurelio Aleman: We serve pricing our products competitively. Again, it's a function of the market environment and the rates and the fairly retaining of our most valuable relationships is key to the strategy. From the profile of the institution to remain very attractive, it's a very well-diversified deposit base. Compose of the balance makes, of course, retail customers when we combine average balances of these accounts, it's around $19,000, so it's fairly granular. And again, we have ample liquidity available to various funding options that allow us to continue to strategically manage our balance in growth plans.

Interest income.

Speaker 4: On the commercial loans, interest income grew 6.1 million, which reflected loan repricing based on great changes, higher yielding new loans, as well as an increase of 104.5 million in average bonds.

On the commercial so.

Virtual loans interest income grew to $6 1 million.

Which are reflected loan repricing based on great changes higher yielding new loans as well as an increase of $104 $5 million in average balances.

Speaker 4: The increase also includes a $1.2 million in interest collected on the previously charged health loan that I mentioned before.

The increase also also includes a $1 2 million in interest collected on the on the previously charged off loan that I mentioned before.

Speaker 4: Commercial loan deals for the quarter are up 24 basis points compared to last quarter.

Commercial loan yields for the quarter are up 24 basis points compared to last quarter.

Speaker 4: In the case of consumer loans, interest income was up 4 million. Again, higher deals on new loans and we grew the portfolio on average 94.5 million.

In the case of consumer loans interest income plus.

$4 million.

Aurelio Aleman: Just to pay seven to all over the macro, we continue to see the Puerto Rico economy very stable, performing fairly well, considering the inter-rate environment and the emerging geopolitical events, economic activity index of Puerto Rico reaches the highest level in a year during the third quarter. Passing their traffic at the continued to be adapting to the rising rates and prices as evident by retail sales, how or spending or of sales, and more importantly, labor market remains stable with unemployment around 6.2%.

Again higher yields on new loans, and we grew our portfolio on average $94 5 million.

Speaker 4: Overall yields on the consumer portfolio increased six basis points during the quarter.

Overall yields on the consumer portfolio increased six basis points during the quarter.

They always had an interest expense on interest bearing deposits.

Speaker 4: The other hand, interest expense on interest bearing deposits, it's 12.7 million higher this quarter than last quarter. Most of this increase is driven by a combination of higher rates paid on checking and savings accounts, mostly public sector deposits.

It's $12 million higher this quarter than last quarter.

Most.

Of this increase is driven by a combination of a higher rates paid on checking and savings accounts, mostly public sector deposits.

Speaker 4: migration that we have been facing over the last few quarters from not interest-bearing to interest-bearing, especially on time deposit.

Migration that we have.

<unk> been facing over the last few quarters on unmet from noninterest bearing to interest bearing.

Ali on time deposits.

Speaker 4: And if we exclude broker deposits...

And if we exclude broker deposits.

Speaker 4: The average cost of deposits increased 37 basis points this quarter. However, the average cost of interest during check-in and savings accounts other than public deposits increased by only 7 basis points.

Aurelio Aleman: The pace of disaster relief funding for the first year is 72% above the same period last year which is definitely driving construction activity in the island. We started to see additional number of low-income housing projects and an obviously rebuilding of important infrastructure. In addition, we continue to see private investors continue to allocate support to the island. There is a recently announced transactions where private investors were a concession of the sales expressway on their EP3 structure, total concession, which a retail investor allocated $2.9 billion plus there would be an additional $2.4 billion in improvements. That is a good example of what are we seeing.

The average cost of deposits increased 37 basis points this quarter.

However, the average cost of interest bearing checking and savings accounts other than public deposits increased by only seven basis points.

Speaker 4: time deposits did increase by 41 basis points overall time deposits from the prior quarter.

Time deposits did increase by 41 basis points overall time deposits from the prior quarter.

Speaker 4: This the portfolio the time-deposited portfolio is now on average under ninety seven million more than we had in the second

The portfolio the time deposit portfolio, it's now on average $197 million more than we had in the <unk>.

Second quarter.

Speaker 4: On the chart on the top right hand you can see the cumulative betas on the bussets in September of 2022.

On the chart on the top right hand, you can see that cumulative battles.

<unk> since September of 'twenty two.

Speaker 4: However, due to the repricing lag, the polysector deposits had a much higher bet as this quarter than what we had in overall cumulative since September of 20...

However.

Due to a repricing lag public sector deposits had a much higher bad debts this quarter than what we had.

Overall cumulative since September of 'twenty two.

Speaker 4: Net interest margin for the quarter was down to $4.15 from $4.23 last quarter. As we mentioned last quarter, we expect somewhat normalization in the margin towards the beginning of $24 based on the expectation that our interest rate increases will stabilize thus normalizing some of the deposit pricing pressures we've had.

Net interest margin for the quarter was down to 415 from 423 last quarter.

Aurelio Aleman: We said in the past, we have the experience to continue operating under this challenge market and changing market and we continue to leverage our program risk framework and franchise to support the customers through the cycle.

As we mentioned last quarter, we expect.

Somewhat normalization in the margin at the beginning of 'twenty four based.

Based on the expectation that our interest rate increases will stabilize thus normalizing some of the deposit pricing pressure we've had.

Speaker 4: Also, we continue to redeploy the cash flows from the investment portfolio into either higher yielding loan growth or in some cases reduction of wholesale funding.

Also we continue to redeploy the cash flows from the investment portfolio into either higher yielding loan growth or or in some cases, we have reduction of wholesale funding.

Orlando Berges: Now, I will turn the call to Orlando to go financials in more detail. Thanks, thanks, Elio.

Orlando Berges: Good morning, everyone. As you saw in the release, the results for the third quarter show an increase of 11.4 million in net income, which is primarily associated with the lower provision and the lower effective tax rate. We earn 82 million for the third quarter or 46 cents a share which compares to 70.7 million in the second quarter or 39 cents per chair. Adjusted pre-tax pre-provision they've come down by 4.6 million to 113.4 million.

Speaker 4: We project that investment portfolio cash flows over the next quarter will be approximately 160 million.

We project that investment portfolio cash flows over the next quarter will be approximately $160 million.

Speaker 4: and looking through the middle of 2025, it's about a year and a half more, it's about 1.6 million more billion billion I'm sorry

And looking through the middle of 2025.

About a year and have more it's about $1 6 million more.

I'm sorry.

We look what this is going to do it we have ideal of $1 33 in the investment portfolio.

Speaker 4: What this is going to do is we have a yield of 133 in the investment portfolio. In essence, we would be replacing, although this got closed.

In essence, we would be replacing.

Orlando Berges: The provision for credit losses in the quarter decreased to 4.4 million, which compares to the 22.2 million we had in the second quarter. When we look at the component, the projected macroeconomic variables last quarter, deteriorated, especially in the commercial real estate side and on the unemployment side, which resulted in additional provisioning needs in the quarter. This quarter, the projection still shows deterioration in the longer term, but current values of some of these variables are more favorable than they were originally estimated, which led to a lower pace, slower pace of deterioration and slower reserve impact.

These cash flows.

Speaker 4: either into loans that are going to yield around 600 basis points more or reductions in wholesale funding or cash, keep it in the cash.

Neither into loans that are going to yield.

Around 600 basis points more.

Or reductions in wholesale funding.

Keep it in cash which would yield around 400 basis points more than we have on the on the investment portfolio. So that would offset any any impact we had on migration to <unk>.

Speaker 4: which would yield around 400 basis points more than we have on the investment portfolio.

Speaker 4: So that would have said any impact we had on migration to the time deposit side.

The time deposit side.

Speaker 4: In terms of other income, this quarter we had six million less in other income, but that was mostly related to certain non-recurring gains we had in the second quarter, amounting to 5.2 million that were on legal settlements and a couple of other items. If we exclude these gains on an un-GAAT basis, non-interest income decreased $700,000 in the quarter.

In terms of other income.

This quarter, we had $6 million less in other income, but that was mostly related to.

Certain nonrecurring gains we had in the second quarter amounted to $5 2 million.

That were on legal settlements.

A couple of other items, if we exclude these gains on a non-GAAP basis noninterest income decreased $700000 in the quarter.

Orlando Berges: Also, this quarter, we booked 1.4 million in recoveries on a commercial loan that was previously charged up a few years ago and was collected. We did a refinancing of municipal bond that was held in our health-to-machuities, securities portfolio, which resulted in some research releases since the new structure is that of a commercial loan, which has a much shorter time frame. The estimated tax rate for the quarter came down, estimated tax rate for the year, but in fact in the quarter came down to 28.2% from 30.1%.

Speaker 4: Expenses increased in the quarter by $3.7 million. It was mostly driven by $2.2 million in additional payroll expenses as we implemented our merit increases and salary adjustments in July of this year.

Expenses.

Decreased in the quarter by $3 7 million. It was mostly driven by $2 2 million in additional payroll expenses as we implement that.

Merit increases on a salary adjustment in July of this of this year.

Speaker 4: We did, you can see that we did continue to achieve some gains under this position of OREO properties, but we include these gains. Operating expenses for the quarter were $118.8 million, which fall within the guidance of $118 to $120 million we have provided.

We did you can see that we did continue to achieve some gains on the disposition of Oreo properties, but we applaud these gains operating expenses for the quarter were $118 8 million, which fall within the.

Guidance of $118 million to $120 million, we have provided.

Speaker 4: The efficiency ratio for the quarter was 50.7, slightly higher as suspense grew and some of the other income came down, which compares to 47.8% in the last quarter. However, the second quarter efficiency ratio was actually 48.9 if we exclude those non-recurring gains.

The efficiency ratio for the quarter was $50 seven slightly higher suspend such through on some of the other income came down which compares to 47, 8% in the law.

Orlando Berges: The result of a higher proportion of tax extent income to total income and additional business activities with the data on their tax advantage on the Puerto Rico code. Looking at that interest income for the quarter was $199.7 million relatively flat when we compare it to prior quarter. As we have discussed in prior calls, the positive pricing pressures, especially on the on the public sector, have upset the improvement in interest income resulting from a long growth and a long repricing.

Last quarter.

However, the second quarter efficiency ratio was at 12 $48 90, if we exclude those nonrecurring gains that I mentioned.

Speaker 4: Again, we have mentioned we continue to maintain a very disciplined expense management framework and our target is to remain close to that 50% efficiency ratio in a year.

Again, we have mentioned we continue to maintain a very disciplined expense management framework.

Good day rates to remain closer to that 50% efficiency ratio in the near term.

In terms of our credit quality as Aurelio mentioned NPH increased $9 1 million during the quarterly and that was primarily one $9 $5 million commercial case, one case that went into into nonperforming this quarter.

Speaker 4: In terms of our credit quality, as Aurelio mentioned, NPAs increased $9.1 million during the quarterly, and that was primarily a $9.5 million commercial case, one case that went into non-perform in this quarter. On the consumer side, we had $2.9 million increase in NPAs, but that was offset by $3 million reduction in Oreos and lower residential mortgage NPLs.

Orlando Berges: Total interest income for the quarter grew 11.2 million for 12 basis points improvement in yields on interest earning assets, but interest expense grew 11.3 million represent 28 basis points increasing cost. Of setting the growth in interest income. On the commercial loans, interest income grew 6.1 million which reflected a long repricing based on great changes, higher yielding new loans, as well as an increase of 104.5 million in average balances. The increase also includes a 1.2 million interest collected on the on the previously charged loan that I mentioned before.

On the consumer side, we had $2 $9 million increase in NPA, but that was offset by $3 million reduction in oreos and lower residential mortgage npls.

Speaker 4: Even with this increase in MPH levels, we made it at 70 basis points of total odds.

Even with this increase our NPA levels, we made at 70 basis points of total assets.

Speaker 4: In terms of inflows, they're up 15.6 million compared to the private quarter, which includes 8 million increase in commercial, which is the case I just mentioned, and 6 million increase in consumer.

In terms of inflows.

They are up $15 6 million compared to the prior quarter.

<unk> includes $8 million increase in commercial which is the case I, just mentioned and $6 million increase in consumer.

Also early delinquency in the quarter.

Speaker 4: Also, early delinquency in the quarter, which is defined as 30 to 89 days for this purpose, increased 18.5 million, mostly its consumer. However, I'd like to point out that September 30, which is the last day of the third quarter, fell on a weekend and affects collections, and approximately 11.5 million of this delinquency had been collected by October 2, so the increase was much less than with like...

Orlando Berges: Commercial loan deals for the quarter are up 24 basis points compared to last quarter. In the case of consumer loans, interest income was up 4 million again higher deals on new loans and we grew the portfolio on average 94.5 million. Overall, yields on the consumer portfolio increased 6 basis points during the quarter. The other hand, interest expense on interest wearing the faucets. It's 12.7 million higher this quarter than last quarter. Most of this increase, it's driven by a combination of higher rates paid on check and saving accounts, mostly public sector deposits.

Which is defined as at 30 to 89 days for this purpose increased $18.

$18 5 million, mostly its consumer however, I'd like to point out that.

At September 30 was the last day of third quarter fell on a weekend and FX collections on approximately $11 $5 million of this willing Quincy had been collected by our recycling. So the increase was much less than reflected.

Speaker 4: We have mentioned in prior calls that we anticipate delinquency levels in consumers should eventually start behaving more like historical trends. Obviously, as excess liquidity from the pandemic-related funds decreased. However, so far consumer delinquency as a percentage of loans remains below pre-pandemic levels.

We have mentioned in prior calls.

We anticipate delinquency levels and consumer should eventually start behaving more like historical trends.

Obviously as excess liquidity from the pandemic related funds decrease.

Orlando Berges: Migration that we have been facing over the last few quarters from not interest bearing to interest bearing, especially on time deposits. If we exclude broker deposits, the average cost of the deposits increased 37 basis points this quarter. However, the average cost of interest bearing checking and saving accounts other than public deposits increased by only 7 basis points. Time deposits did increase by 41 basis points, overall time deposits from the prior quarter.

So far delinquency.

Consumer delinquencies as a percentage of loans remains.

Below pre pandemic levels.

Speaker 4: In terms of the allowance, we get about 271 million, a decrease of 10 million.

In terms of the allowance.

There are about $271 million.

We have $10 million.

Speaker 4: from prior quarter. Six million of the reduction relates to lower reserve from HTM of health to maturity security.

From prior quarter $6 million of the reduction relates to lower reserve from HTM of held to maturity securities.

Speaker 4: Due to the refinancing of the 46 million long-term municipal bonds I mentioned, it went into a shorter term loan structure and also there were significant improvements or there were improvements in the underlying financials of certain Puerto Rico government municipalities that are held in the health and maturity portfolio.

Due to the refinancing.

$46 million long term municipal bond dimension. It went into a shorter term loan structure and also there were significant improvement or there were improvements in the underlying financials of certain Puerto Rico government municipalities that are held in the held to maturity portfolio.

Orlando Berges: The time deposit portfolio is now on average 187 million more than we had in the second quarter. On the chart on the top right hand, you can see the cumulative betas on the deposits in September of 22. However, due to a repricing lack, the public sector deposits had a much higher betas this quarter than what we had in overall cumulative since September of 20th, in 2002. Net interest margin for the quarter was down to 4.15 from 4.23 last quarter.

Speaker 4: Looking at the reserve on just loans and leases was down three and a half million, which mostly reflect that projected as lower deterioration on the macroeconomic variables as I previously mentioned.

Looking at the return around just loans and leases was down $3 5 million.

Which mostly reflect that breaks that are slower deterioration on the macroeconomic variables.

I previously mentioned.

Speaker 4: The reserve stands at 221 of our portfolio, compared to 228, still have healthy reserve coverage in our portfolio.

The reserve stands at $2 21 of our portfolio compared to 28 still a healthy reserve coverage in our portfolio.

Speaker 4: In terms of capital, regulatory capital rages continue to be significantly above well-capitalized.

In terms of capital regulatory capital ratios continue to be significantly above well capitalized.

Orlando Berges: As we mentioned last quarter, we expect somewhat normalization in the margin towards the beginning of 24, based on the expectation that interest rate increases will stabilize, thus normalizing some of the positive pricing pressures we've had. Also, we continue to redeploy the cash flows from the investment portfolio into either higher yielding non-growth or in some cases reduction of wholesale funding. We project that investment portfolio cash flows over the next quarter will be approximately 160 million and looking through the middle of 2025, it's about 1.6 million more billion.

Speaker 4: At the end of the quarter, the tangible common equity ratio did decrease in the quarter to 674, and the tangible book value per share decreased to 716.

At the end of the quarter.

Tangible common equity ratio the decrease in the quarter to 674 and <unk>.

Tangible book value per share decreased to 716.

Speaker 4: That was driven by the 79 million decrease in the fair value of available for sale securities.

That was driven by by the 79 million decrease in the fair value.

<unk> available for sale Securities.

Speaker 4: But also there'll be purchase of 75 million in common shares we did during the quarter and the payment of 25 million in dividends. Obviously all compensated, partially compensated by the earnings in the quarter.

But also their repurchase $75 million in common shares we did during the quarter and the payment of $25 million of dividends, obviously, all compensated partially compensated by the earnings in the quarter.

Speaker 4: At the end of the quarter, the net unrealized securities losses, including capital, were $151 million, which is about $4.88 in tangible book value per share and also represents a reduction in the PCE ratio of approximately 409.

But at the end of the quarter the net unrealized.

These losses, including capital one.

And a $51 million, which is.

Orlando Berges: What this is going to do, we have a deal of 133 in the investment portfolio. In essence, we would be replacing to this cash flows either in two loans that are going to deal around 600 basis points more or reductions in wholesale funding or cash, keep it in a cash which would yield around 400 basis points more than we have on the investment portfolio. That would have set any impact we had on migration to the time deposit side.

$4 88, intangible book value per share.

Also represents a reduction in the TCE ratio of approximately 490 basis points.

Speaker 4: As we have said in the past, we believe these unrealized losses are temporary in nature since we have the ability to hold the securities. The Basement portfolio had a duration of 3.2 and then of September , so it's a manageable timeframe on the portfolio.

We have said in the past we believe this unrealized losses are temporary in nature as we have the ability to hold the securities.

The investment portfolio had a duration of three two on there of September so.

It is a manageable type time frame.

I'm on the portfolio.

Speaker 4: With that operator, I would like to open the call for questions.

With that operator, I would like to open the call for questions.

Speaker 1: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on

Orlando Berges: In terms of other income, this quarter we had 6 million less in other income but that was mostly related to certain non-recurring gains we had in the second quarter, amounted to 5.2 million, that we're on legal settlements and a couple of other items. If we exclude these gains on an on-gap base, it's not interesting to increase $700,000 in the quarter. Expenses increased in the quarter by 3.7 million. It was mostly driven by 2.2 million in additional payroll expenses as we implemented our merit increases and salary adjustments in July of this year.

Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad.

Thats Star one on your telephone keypad.

Okay. We do have our first question comes from Alex <unk> from Piper Sandler Alex. Your line is now open. Please proceed.

Speaker 1: OK, we do have our first question. It comes from Alex Twerdahl from Piper Sandler. Alex, your line's now open. Please proceed.

Hey, good morning.

Good morning, Alex.

Speaker 5: First, I just want to, I guess, start on that last comment that you made, Orlando, on the securities portfolio. I'm just curious, I think we're going to see a lot more companies look at restructuring their securities portfolios into the next quarter, just given what's happened with rates and obviously the new outlook out there.

First I just wanted to I guess start on that last comment that you made.

Our Orlando on the.

The securities portfolio Im just curious I think we're going to see a lot more companies look at restructuring their securities portfolios into the next quarter, just given what's happened with rates.

Orlando Berges: You can see that we did continue to achieve some gains on the disposition of oreo properties but we exclude these gains operating expenses for the quarter where 118.8 million which fall within the guidance of 118 to 120 million we have provided. The efficiency ratio for the quarter was 50.7. It's slightly higher as expenses due and some of the other income came down which compares to 47.8% in the last quarter. However, the second quarter efficiency ratio was actually 48.9 if we exclude those non-recurring gains that I've mentioned.

Obviously, the new outlook out there.

Speaker 5: You know, I think one of the big factors is how much capital companies have, you know, with whether or not they're going to be looking at that more seriously. But you guys...

I think one of the big factors is how much capital companies have with whether or not they're going to be looking at that more seriously you guys. Clearly have a lot of regulatory capital and uses as you think about the uses of that regulatory capital.

Speaker 5: clearly have a lot of regulatory capital. As you think about the uses of that regulatory capital.

Speaker 5: you know, is restructuring of the securities portfolio, you know, in these small pieces of it on that radar at all.

Is restructuring of the securities portfolio.

It is small pieces of it on that radar at all.

Speaker 4: Well, obviously we have looked into it, but in reality we have concluded, Alex, that once you consider the tax benefit nature of the portfolio, the immediate impact, the time frame where we feel this is going to affect, we don't feel there is a pressure to do that immediately and we are not considering it at this point because of the...

Well, we obviously, we have looked into it.

But in reality, we have concluded Alex.

But once you consider the tax benefit nature of the portfolio.

Media to impact.

The timeframe, where we feel is going to affect.

Orlando Berges: Again, we have mentioned we continue to maintain a very discipline expense management framework and our target is to remain close to that 50% efficiency ratio in the year term. In terms of a credit quality as orelio mentioned, NPA increased 9.1 million during the quarter and that was primarily 1.5 million commercial case when case that went into non-performing this quarter. On the consumer side we had 2.9 million increase in NPAs but that was offset by 3.9 million reoccurring oreo and lower residential mortgage MPL.

We don't we don't feel there is.

There is a pressure to do that immediately and we are not considering.

At this point.

Because of that.

Okay.

Speaker 5: And then on deposits, is it safe to say now that the government deposit piece is pretty close to having fully reprised now that the Fed is presumably done?

And then on deposits.

Safe to say now that the government deposit piece is pretty close to having fully repriced now that the fed is presumably done.

I think any safe to say that yes.

Okay.

Speaker 5: And then, you know, as you think about sort of the expectations for the remaining portfolio, which has been much lower beta. You know, maybe you can walk through some of the expectations of the next couple quarters in terms of how you're thinking about how those betas might trend. I guess, as you see excess deposits and excess liquidity come out of the...

And then as you think about sort of the expectations for the remaining portfolio, which has been much lower beta.

Maybe you can walk through some of your expectations over the next couple of quarters in terms of how youre thinking about.

Orlando Berges: Even with this increase our MPI levels, we made that at 70 basis points of total assets. In terms of inflows, there are 15.6 million compared to the prior quarter, which includes 5.8 million increase in commercial, which is the case I just mentioned, and 6 million increase in consumer. Also, early the frequency in the quarter, which is defined as F30, 3.89 days for this purpose increase 18.5 million, mostly it's consumer. However, I'd like to point out that September 30 was the last day of third quarter felt on a weekend and affects collections, and approximately 11.5 million of this delinquency had been collected by a third second, so the increase was much less than reflected.

Those betas might trend.

I guess is that.

You see excess deposits and excess liquidity come out of the system.

Speaker 4: Yeah, we don't, you know, the betas on the other deposits, we feel they're going to be pretty stable of what we have seen so far. There is obviously the component of the migration still into, there could be still some migration into time deposit.

Yes, we don't the.

The betas on the other deposits, we feel there is going to be pretty pretty stable of what we have seen so far.

There is obviously the component of that migration still into there could be still some migration into time deposits.

Speaker 4: and there is the component of my shearing time deposit.

And there is the component of maturing time deposits.

Speaker 4: that we have that obviously are going to be priced at slightly higher rates. The average cost was about $291. The cost, obviously it's a little bit higher now as we have reprised others.

That we have that obviously are going to reprice at slightly higher rates.

The average cost.

With our 291.

The cost well, obviously, it's a little bit higher now as we as we have reprice others.

Orlando Berges: We have mentioned in our prior calls that we anticipate the delinquency levels in consumer should eventually start behaving more like historical trends, obviously at excess liquidity from the pandemic-related funds decreased. However, so far, the consumer delinquency has a percentage of loans remains below pre-bandemic levels. In terms of the allowance, there are about 271 million decrease of 10 million from prior quarter. 6 million of the reduction relates to lower reserve from HTM of health and maturity securities.

Speaker 4: but you know when you look at a one-year CD might be close to three and three quarters to four percent so there should be some impact in there.

But when you look at our one year Cds might be close to three and three quarters.

Two 4% so there should be some impact in there, but that's that's why we mentioned that I assume in your first statement that we agree that there is some stability on the Gorman the public sector side in terms of cost based on where rates are.

Speaker 4: But that's why we mentioned that assuming your first statement that we agree that there is some stability on the government, the public sector side, in terms of cost based on where rates are, those cash flows coming in from the portfolio, the investment portfolio, will be able to generate better deals, I would have said a large chunk of that.

That those cash flows coming in from from the portfolio the investment portfolio will be able to use be used.

To generate data, but our deals that would offset.

A large chunk of that.

So thats why we see that.

Speaker 4: So that's why we see that stability in the margin coming in and starting on 24.

Orlando Berges: Due to the refinancing of the 46 million long term municipal bond I mentioned, went into a shorter-term loan structure, and also there were significant improvements in the underlying financials of certain Puerto Rico government municipalities that are held in the health and maturity portfolio. Looking at the reserve on just loans and leases was down 3.5 million, which mostly reflect that projected a slower deterioration on the macroeconomic variables, as I previously mentioned. The reserve stands at 21 of the portfolio compared to 28 still have healthy reserve coverage in our portfolio.

Stability in the.

Margin coming in and starting on 24.

And that's important.

Yes, I just want to add that is very important I think the expectation of the cash flow from the investment portfolio are going to be increasing as we go forward.

Speaker 3: Yeah, I just want to add that's very important. I think the expectation of the cash flow from the investor portfolio are going to be increasing as we go forward.

Speaker 3: And obviously the pressure of the bad <expletive> of the government was significant. So we do expect to see some of that benefit of converting those sky floes into much higher cities in long portfolios to benefit us to the 2024 to be what we have seen in the NIMH and the NII.

And obviously the pressure of the of the matter is when the government.

With significant so we we do expect to see some of that benefit of converting those cash flows to Moshe DC portfolio loan portfolio.

Orlando Berges: In terms of regulatory capital ratios continued to be significantly above well capitalized at the end of the quarter, the tangible common equity ratio decreased in the quarter to 674, and the tangible book value per share decreased to 716, that was driven by the 79 million decrease in the fair value of available for sale securities, but also there were purchase of 75 million in commerce shares with it during the quarter and the payment of 25 million dividends, obviously all partially compensated by the earnings in the quarter. At the end of the quarter, the neton realized securities losses, including capital were 151 million, which is about $4.88 in tangible book value per share, and also represents a reduction in the PC ratio of approximately 409 basis points.

To the benefit of $2 24 to <unk>, while we have seen in the NIM and the NII.

So I guess just boiling it down do you expect this this uncertainty the inflection point on NII and the NIM starting in the fourth quarter, we could start to see both of those go higher.

Speaker 5: So I guess, you know, just boiling it down, do you expect this this sort of the inflection point on NIAI and the NIM and, you know, starting in the fourth quarter, we could start to see both those go higher.

Great.

Speaker 4: We feel that we see the inflection point starting next year, early next year, in the first quarter.

We feel that we have.

See that inflection point, starting next year early next year in the first quarter.

Speaker 4: We will see a little bit still the repricing on the time deposit side happening this quarter.

Where we'll see a little bit still the repricing on the time deposit side happening this quarter.

This fourth quarter of the year.

Speaker 4: So, again, going back to statements we have done in the past, we...

So.

Again Ed.

Going back to statements we have done in the past.

Speaker 4: the growth on the investment portfolio could be a factor to offset some of that, helping keep that net income.

The growth on the portfolio on the investment portfolio could be a factor to offset some of that.

And keep that net interest income.

Speaker 4: going up a bit from where we are or staying at the levels where we are.

Going off a bit from where we are or staying at the levels, where we are.

Orlando Berges: We have set in the past, we believe this on real-life losses are temporary in nature, as we have the ability to hold the securities. The best from portfolio had a duration of 3.2 and then off September, so it's a manageable time frame on the workforce.

Okay.

Speaker 5: Okay, and then just final question for me, just the, the, the highway deal that you alluded to in your prepared remarks. Can you just talk about how that

And then just final question for me just the.

The highway deal that you alluded to in your prepared remarks can you just talk about how that.

I'm not sure if thats been disclosed how big the bank financing pieces.

Speaker 5: I'm not sure if it's been disclosed how big the bank financing piece is exactly, but just how that might actually impact your balance sheet, both in the fourth quarter when that deal is expected to close as well as, you know, if there's a piece of it that might be, um, sort of a go forward piece.

Operator: with that operator, I would like to open the call for questions. Thank you. Ladies and gentlemen, if you'd like to ask questions, please press star one on your telephone keypad. Let's star one on your telephone keypad.

But just how that might actually impact your balance sheet. Both in the fourth quarter when that deal is expected to close as well as if there is a piece of it that might be.

Operator: Okay, we do have our first question. It comes from Alex Twerdahl from Piper Sandler. Alex, your lines are not open.

Sort of a go forward this year.

Speaker 3: Well, it was publicly announced this week on Tuesday by the government and the winner of the bid. They are working together to close it close to the end of the year.

Well it was publicly announced this week on Tuesday.

By the government on the in the winter a bit.

They are working together to close it close to the end of the usual.

Alexander Twerdahl: Please proceed. Good morning. Good morning, Alex. First, I just want to, I get to start on the last comment that you made, Aurelio or Orlando on the security portfolio. I'm just curious, you know, I think we're going to see a lot more companies look at restructuring their security portfolios into the next quarter, just given what's happened with rates and obviously the new outlook out there. And, you know, I think one of the big factors is how much capital companies have, you know, with whether or not they're going to be looking at that more seriously.

Speaker 3: most of the benefit will come in the balance sheets for really 2024, some this year but mostly 2024. Local banks, it was publicly in the statement that local banks contributed around 600 million of the financing required.

Most of the benefit will come.

And the balance sheets for really 2020 for some this year, but multi 'twenty 'twenty four.

Banks local banks it was publicly.

In the statement that local banks contributed around $600 million of.

Of the financing required.

Over the recent payment of $2 850.

Speaker 3: of the initial payment of 2.850.

Speaker 6: our position we contributed 150 million to the transaction.

Our position, we contributed under a fixed we committed $150 million transaction.

Alexander Twerdahl: You guys clearly have a lot of regulatory capital. And as you think about the uses of that regulatory capital, you know, is restructuring the security portfolio, you know, in at least small pieces of it on that radar at all? Well, we obviously, we have looked into it, but at reality, we have concluded Alex that once you consider the tax benefit nature of the portfolio, the immediate impact, the timeframe where we feel this is going to affect, you know, we don't we don't feel there is there is a pressure to do that immediately and we are not considering it at this point because of that.

We think which would be thanks for that.

We'd be disbursed at closing.

Thank you for taking my questions.

Thank you.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker 1: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. That's star 1 on your telephone keypad.

<unk> tier one auto telephone keypad.

Okay.

Yeah.

Speaker 1: Okay, we currently have no further questions registered, so I would like to hand the call back to Ramon Rodriguez for closing remarks. Ramon, over to you.

We currently have no further questions registered so I would like to hand, the call back to Robert <unk>.

For closing remarks over to you.

Speaker 2: Thanks to everyone for participating in today's call. We will be attending HOBBY's financial services conference in Palm Beach on November 2nd and Piper Sandler's conference in Miami November 16th. We look forward to seeing a number of you at these events, and we greatly appreciate your continued support. Have a great day.

Thanks to everyone for participating in today's call, we will be attending <unk> financial services conference in Palm Beach on November 2nd and Piper Sandler Conference in Miami November 16, we look forward to seeing a number of you at these events and we greatly appreciate your continued support.

Orlando Berges: Okay. And then on deposits, you know, is it safe to say now that the government deposit piece is pretty close to having fully reprised? Now that the Fed is, you know, presumably done? I think it is safe to say that yes.

Okay. Thank you.

Orlando Berges: Okay. Now, and then, you know, as you think about sort of the expectations for the remaining portfolio, which has been much lower beta, you know, maybe you can walk through some of the expectations of the next couple of quarters, you know, quarters in terms of how you're thinking about how those betas might trend, you know, I guess you see excess deposits and excess liquidity come out of the system. Yeah, we don't, you know, the betas on the other deposits, we feel they're going to be pretty stable of what we have seen so far.

Speaker 1: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.

Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.

Thank you.

Okay.

[music].

Speaker 7: So.

Orlando Berges: There is obviously the component of the migration still into, there could be still some migration into time deposits. And there is the component of my sharing time deposits that we have, that obviously are going to reprise at slightly higher rates. You know, the average cost was about $2.91. The cost, you know, obviously it's a little bit higher now as we have reprised others. But, you know, when you look at one-year cities, it might be close to three and three quarters to four percent.

Orlando Berges: So there should be some impact in there, but that's why we mentioned that assuming your first statement that we agree that there is some stability on the government, and the public sector side, in terms of cost based on where rates are, that those cash flows coming in from the portfolio, or the investment portfolio, will be able to use, you know, to generate a better deal that would have said a large chunk of that. Yeah.

Orlando Berges: So that's why, you know, we see that that my stability and the margin, you know, coming in and starting on 24. And that's, that's important. And that's very, yeah, that's, I just want to, that's very important. You know, I think the, you know, the expectation of, you know, the casual from the investor portfolio are going to be increasing as we go forward. And, and, and obviously, the pressure of the, of the bad ass on the government, you know, was, was, was, was significant.

Orlando Berges: So we, we, we do expect to see some of that benefit of, of, of converting those cash flow into more shiger days in portfolio, long portfolio, to, to benefit of 2024, to be the, you know, what we have seen in the, the name, and the NII. So, I guess, you know, just point like a down, do you expect this, this sort of the inflection point on an IIMM and, you know, starting in the fourth quarter, we can start to see both those go higher.

Orlando Berges: We, we feel that, we see the inflection point starting next year, early next year in the first quarter, where, where we will see a little bit still the reprising on the time the bus inside happening this quarter, this fourth quarter of the year. So it, it, again, it, you know, going back to statements, we have done in the past that the, the growth on the portfolio, on the investment portfolio could be a factor to, to offset some of that, helping keep that net income going up a bit from where we are or staying at the levels where we are.

Orlando Berges: Okay, and then just final question for me, just the, the highway deal that you alluded to in your prepared remarks, can you just talk about how that, I'm not sure if it's been disclosed how big the bank financing piece is exactly, but just how that might actually impact your balance sheet both in the fourth quarter, when that deal is expected to close as well as, you know, if there's a piece of it that might be sort of a go forward piece. Well, it was publicly announced this week on Tuesday by the government and the, and the winner of the bit, they, they're working together to close it close to the end of the year, so, so most of the benefit will come.

Orlando Berges: You know, in the balance sheets for, for really 2024, some this year, but mostly 2024, banks, local banks, it was publicly, you know, in the, in the statement that local banks contributed around 600 million of, of the financing required of the initial payment of the 2.850. Our position, we, we contributed 100, we committed 150 million to the transaction.

Orlando Berges: Thanks for the comment.

Orlando Berges: We'd be this burst at closing.

Orlando Berges: Yeah.

Orlando Berges: Thank you for taking my question.

Operator: Thank you.

Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad.

Ramon Rodriguez: Okay, we currently have no further questions registered, so I would like to hand a call back to Ramon Rodriguez for closing remarks. Ramon, over to you. Thanks.

Ramon Rodriguez: Thank you, everyone, for participating in today's call. We'll be attending hubby's financial services, Conferencing Palm Beach on November 2nd and Piper Sandler's Conferencing Miami on November 16th. We look forward to seeing a number of you at these events, and we greatly appreciate your continued support. A great day. Thank you.

Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may not disconnect your lines. Thank you.