Q4 2023 First BanCorp Earnings Call

Good morning, everyone and welcome to first Bancorp's fourth quarter and full year 2020 free financial results.

Good morning everyone and welcome to First Bancorp's fourth quarter and four year 2023 financial results. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end.

Lines have been placed on mute during the presentation portion of the call, but if an opportunity for question and answer again.

If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to turn this conference call over to our host, Ramon Rodriguez, Senior Vice President of Corporate Strategy and Investment Relations. Please go ahead.

If you'd like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: I'd now like to turn this conference call.

Speaker Change: But my own Rodriguez senior Vice President of corporate strategy and Investor Relations. Please go ahead.

Speaker Change: Yeah.

Ramon Rodriguez: Thank you, Candice. Good morning, everyone. Thank you for joining First Bank Corp's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2021.

Rodriguez: Thank you Candice good morning, everyone and thank you for joining first Bancorp's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2003, joining you today from first time corridor.

Ramon Rodriguez: Joining you today from First Bank Corp are Aurelio Alemn, President and Chief Executive Officer, and Orlando Berges, Executive Vice President and Chief Financial Officer.

Rodriguez: <unk>, President and Chief Executive Officer and Orlando.

Speaker Change: <unk> Executive Vice President and Chief Financial Officer.

Ramon Rodriguez: 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 companies involved.

Speaker Change: Before we begin today's call. It's 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.

Ramon Rodriguez: 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.

Companys actual results could differ materially from the forward looking statements made due to the important factors described in the Companys latest SEC filings. The company assumes no obligation to update any forward looking statements made during the call.

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

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

Speaker Change: 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.

Ramon Rodriguez: At this time, I'd like to turn the call over to our CEO, Aurelio Alemn.

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

Aurelio Alemn: Thanks, Armand. Good morning to everyone and thanks for joining our earnings call today.

Aurelio: Thanks, Good morning, everyone and thanks for joining our earnings call today.

Aurelio Alemn: I will begin by briefly discussing our business performance for the first quarter first.

Aurelio: I will begin by briefly discussing our business performance for the fourth quarter first.

Aurelio Alemn: Then we'll move on to provide some high-level highlights for the full year.

Aurelio: And then we will move on to provide some high level highlights for the full year.

Aurelio Alemn: and then share with you some of our priorities for 2020.

Aurelio: And then shares we view some of our priorities for 2024.

Aurelio Alemn: Our 4 quarter results were highlighted by strong profitability and non-growth. We earned $79.5 million or $0.42 per share and generated a 1.7% return on assets.

Aurelio: Our fourth quarter results were highlighted by strong profitability and loan growth.

Aurelio: We earn $79 5 million or 42 per share and generated a one 7% return on assets.

Aurelio Alemn: Our expenses for the quarter were impacted by a $6.3 million FDIC special assessment.

Aurelio: Our expenses for the quarter were impacted by a $6 $3 million FDIC special assessment expense.

Aurelio Alemn: Excluding this special item, the adjusted efficiency ratio was 52.2% for the quarter. The quarter also reflected higher provision expense.

Aurelio: Excluding these special items, the adjusted efficiency ratio was 52, 2% for the quarter. The border also reflected higher provision expense and some incremental operating expenses, which Orlando will cover both.

Aurelio Alemn: and some incremental operating expenses which Orlando will cover both.

Aurelio: Yes.

Aurelio: Detail later.

Aurelio Alemn: and many more.

Aurelio Alemn: The loan portfolio expanded by $233 million or 7.8% in quarter annualized.

Aurelio: The loan portfolio expanded by 233 million or seven 8% linked quarter annualized.

Aurelio Alemn: driven by growth across all business segments, particularly the strong commercial and auto long-run nation.

Driven by growth across all business segment, particularly the strong commercial and auto loan origination as we continue to deepen our share in those in those markets core deposits contracted slightly like 2% as we continued to see a gradual erosion of excess liquidity deal so our markets and MP.

Aurelio Alemn: as we continue to deepen our share in those markets.

Aurelio Alemn: Core deposits contracted slightly by 2% as we continue to see a gradual erosion of excess liquidity of our markets, and NPAs decreased again to just 67 basis points of total assets.

Aurelio: A decrease again to just 67 basis point of total assets.

Aurelio Alemn: We said for some time that credit metrics will gradually move closer to historical level.

Aurelio: We said for some time that credit metrics will gradually move closer to historical levels.

Aurelio Alemn: as the positive impact of excess liquidity related to the pandemic stimulus

Aurelio: The positive impact of.

Aurelio: Excess liquidity related to the pandemic stimulus on the consumer decreases.

Aurelio Alemn: on the Consumer Decreases

Aurelio Alemn: We saw a little bit of that in the fourth quarter, actually also in the third quarter.

Operator: Good morning everyone, and welcome to First Bancorp's fourth quarter and four-year 2023 financial results. All lines have been placed on mute during the presentation portion of the call, with an opportunity for question and answer at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to turn this conference call over to our host, Ramon Rodriguez, Senior Vice President of Corporate Strategy and Investment Relations. Please go ahead.

Aurelio: We saw a little bit of that in the fourth quarter actually also in the third quarter.

Aurelio Alemn: with the charge of rape and long-term early delinquency for the consumer book registering a slight increase when compared to previous quotes.

Aurelio: With the charge off rate and launched in early delinquency for the consumer group registered a slight increase when compared to previous quarters.

Aurelio Alemn: That said, our MPA and classified asset levels remain at multi-year lows.

Said, our NPA and classified asset levels remain at multiyear lows.

Aurelio Alemn: and our research coverage ratio is

Aurelio: And our reserve coverage ratio.

Aurelio Alemn: also very solid, and we continue to sustain and enforce our proactive risk management culture.

Aurelio: Sure.

Aurelio: Also.

Aurelio: Very solid.

Aurelio: We continue to sustain and enforce our broad good risk management culture.

Speaker Change: Definitely, we're ready to withstand any additional deterioration.

Aurelio: Definitely we're ready to withstand any additional deterioration.

Thank you, Candice. Good morning, everyone. Thank you for joining First Bank Corp's conference call and webcast to discuss the company's financial results for the fourth quarter and full year 2021. Joining you today from First Bank Corp are Aurelio Alemn, President and Chief Executive Officer, and Orlando Berges, Executive Vice President and Chief Financial Officer. Before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the companies involved. However, 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 assumes no obligation to update any forward-looking statements made during the call.

Speaker Change: as those rates move closer to the north.

Aurelio: Those rates move closer to the norm.

Speaker Change: Finally, it was a great quarter in terms of our capital position. Our annual book value per share increased by 19%.

Aurelio: Finally, it was a great quarter in terms of our capital position, our tangible book value per share increased by 19%.

Speaker Change: and the TCE ratio improved to 7.7%, mostly driven by the favorable variance in the value of our bond book, given the reduction in market rates during the quarter.

Aurelio: And the TCE ratio improved to seven 7%, mostly driven by the favorable variance in the value of our bond book given the reduction we might build rates during the quarter.

Speaker Change: This was accomplished even while repurchasing 75 million in common shares, as we have indicated, and paying 24 million in dividends.

Aurelio: This was accomplished even while repurchasing $75 million in common shares as we have indicated.

$24 million in dividends.

Speaker Change: Let's move to slide five to provide some highlights on the full year.

Aurelio: Let's move to slide five to provide some highlights on the full year.

Speaker Change: Definitely, you know, the 23D performance showcases our attractive profitability and improved risk profile.

Aurelio: Definitely.

Aurelio: Pro forma showcase our attractive profitability and improved risk profile.

If anyone does not already have a copy of the webcast presentation or press release, you can access them on our website at fbpinvestor.com. At this time, I'd like to turn the call over to our CEO, Aurelio Alemn. Thanks, Armand.

Speaker Change: even when, as we all know, operated in a challenging rate environment for our industry.

Aurelio: Even when as we all know operator in a challenging rate environment for our industry.

Speaker Change: Most importantly, it highlighted our capital management discipline and return flexibility.

Aurelio: Most importantly highlighted our capital management discipline and return flexibility.

Speaker Change: We generated 1.62% return on assets for the year and 41% return on equity.

Aurelio: We generated 162% return on assets for the year and 41% return on equity adjusted for the impact of the <unk>.

Good morning to everyone, and thanks for joining our earnings call today. I will begin by briefly discussing our business performance for the first quarter. Then we'll move on to provide some high-level highlights for the full year, and then share with you some of our priorities for 2020.

Speaker Change: adjusted for the impact of the AOCL.

Speaker Change: We added $628 million or 5.4% to the loan portfolio in the year, while deposit or dam broker contracted by $1.7.

Aurelio: We added 628 million or five 4% with the loan portfolio in the year.

Aurelio: While deposit or down brokered contracted by one 7%.

Speaker Change: Our strong and diversified deposit franchise is evidenced by a still healthy non-interest bearing ratio of 34% at the end of the year and a log-to-deposit ratio of 77%.

Aurelio: Our strong and diversified deposit franchise is evident by a still healthy noninterest bearing ratio was 34% at the end of the year and a lot doable two ratio of 77%.

Our four quarter results were highlighted by strong profitability and no growth. We earned $79.5 million, or $0.42 per share, and generated a 1.7% return on assets. Our expenses for the quarter were impacted by a $6.3 million FDIC special assessment. Excluding this special item, the adjusted efficiency ratio was 52.2% for the quarter.

Speaker Change: This achievement supports our goal of delivering close to 100% of our earnings to shareholders in the form of buybacks and dividends.

Aurelio: These achievements support our goal of delivering close to 100% of I don't know of earnings to shareholders in the form of buybacks and dividends for the third consecutive year.

Speaker Change: for the third consecutive.

Speaker Change: As we mentioned before, this year marked, 2023 marked our 75th anniversary, and we are very pleased.

Aurelio: As we mentioned before this year March 2023, Mark our <unk> anniversary and we're very pleased on our fragile.

The quarter also reflected higher provision expense and some incremental operating expenses which Orlando will cover both, and many more. The loan portfolio expanded by $233 million or 7.8% in the quarter annualized, driven by growth across all business segments, particularly the strong commercial and auto long-run nation, as we continue to deepen our share in those markets. Core deposits contracted slightly by 2% as we continue to see a gradual erosion of excess liquidity in our markets, and NPAs decreased again to just 67 basis points of total assets.

Speaker Change: on how our franchise has supported businesses, households, and ultimately the Puerto Rico economy and our markets during this period.

Aurelio: <unk> businesses households, and ultimately the Puerto Rico economy.

Aurelio: Our market during this period.

Speaker Change: by how we continue investing in our people, upgrading our product offerings and services, investing in technology,

Aurelio: By how we continue to invest in our people upgrading our broader offerings and services investing in technology.

Speaker Change: Thank you very much.

Aurelio: Operations and infrastructure.

Aurelio: And improving our operating leverage in the loan growth.

Speaker Change: I want to thank all my colleagues for their valuable contributions and dedication during the years and also our customers.

Speaker Change: I want to thank all my colleagues for their body would contribution and dedication during the year and also our customers.

Speaker Change: that we serve on a daily basis, our communities and our shareholders

Speaker Change: That we that we serve on a daily basis, our communities and our shareholders for different quarters.

Speaker Change: As we look forward to 2024,

Speaker Change: As we look forward to 2024.

We said for some time that credit metrics will gradually move closer to historical levels as the positive impact of excess liquidity related to the pandemic stimulus on the consumer decreases. We saw a little bit of that in the fourth quarter, actually also in the third quarter, with the charge of rape and long-term early delinquency for the consumer book registering a slight increase when compared to previous quotes. That said, our MPA and classified asset levels remain at multi-year lows, and our research coverage ratio is also very solid, and we continue to sustain and enforce our proactive risk management culture. Definitely, we're ready to withstand any additional deterioration as those rates move closer to the north.

Speaker Change: We expect to continue our long-growth momentum.

Speaker Change: We expect to continue all of our loan growth momentum.

Speaker Change: and

Speaker Change: We continue gaining market share and improving.

Speaker Change: and continue gaining market share and improving

Speaker Change: Our long book on what we consider is a stable economy across our markets, including Miami, Puerto Rico, and the Virgin Islands.

Speaker Change: Our loan book.

Speaker Change: While we consider is a stable economy across our markets, including Miami, Puerto Rico and islands.

Speaker Change: Our goal is to again achieve mid-single digit long-growth for the year, organic.

Our goal is to again achieve mid single digit loan growth for the year organically.

Speaker Change: However, we do continue to expect that average deposit balance will gradually come down.

Speaker Change: However, we do continue to expect that average deposit balance will gradually come down.

Speaker Change: In line with recent trends in the market, as excess liquidity in the system decreases during the year, our top priorities for the year number one will be to leverage the short duration of the investment portfolio.

Speaker Change: In line with recent trends in the market as excess liquidity in the system decreases during the year.

Speaker Change: Our top priority for the year number one will be to leverage the short duration of the investment portfolio.

Speaker Change: who redeployed Logili Maturi Security SkyFlow.

Speaker Change: To redeploy low yielding during security sky flow into higher yielding assets.

Speaker Change: Duhaeger, Yelena Asimov,

Speaker Change: also actively, proactively managing credit, particularly on the consumer lending basis.

Finally, it was a great quarter in terms of our capital position. Our annual book value per share increased by 19%, and the TCE ratio improved to 7.7%, mostly driven by a favorable variance in the value of our bond book, given the reduction in market rates during the quarter. This was accomplished even while repurchasing 75 million common shares, as we have indicated, and paying 24 million in dividends. Let's move to slide five to provide some highlights for the full year.

Speaker Change: We're also actively broad actively managing granted particularly on the consumer lending businesses.

Speaker Change: Finally, we continue to be

Speaker Change: Finally, we continue to be.

Speaker Change: very well positioned to deploy our capital based on our healthy capital levels and our ability to consistently generate organic capital.

Very well positioned to deploy our capital.

Speaker Change: Based on our healthy capital levels, and our ability to consistently generate organic we've done.

Speaker Change: We still have ample buyback capacity with $150 million in buybacks left from our current authorities.

Speaker Change: We still have ample buyback capacity with $150 million in buyback left on our current authorization.

Speaker Change: We will continue to monitor the general macro outlook.

Speaker Change: We will continue to monitor the macro outlook.

Speaker Change: continue to execute the remaining backpack authorization

Speaker Change: Continue to execute the remaining buyback authorization during the year beginning in the first quarter of this year.

Speaker Change: during the year beginning in the first quarter of this year.

Definitely, you know, the 23D performance showcases our attractive profitability and improved risk profile, even when, as we all know, we operate in a challenging rate environment for our industry. Most importantly, it highlights our capital management discipline and return flexibility. We generated 1.62% return on assets for the year and 41% return on equity, adjusted for the impact of the AOCL. We added $628 million or 5.4% to the loan portfolio in the year, while deposit or dam broker contracted by $1.7. Our strong and diversified deposit franchise is evidenced by a still healthy non-interest-bearing ratio of 34% at the end of the year and a log-to-deposit ratio of 77%. This achievement supports our goal of delivering close to 100% of our earnings to shareholders in the form of buybacks and dividends for the third consecutive year. As we mentioned before, this year marked, 2023 marked our 75th anniversary, and we are very pleased with how our franchise has supported businesses, households, and ultimately the Puerto Rico economy and our markets during this period by how we continue investing in our people, upgrading our product offerings and services, and investing in technology. Thank you very much.

Speaker Change: Now I will turn the call over to Orlando to go over the financial resource in more detail and we'll come back for questions.

Speaker Change: Now I will turn the call over to Orlando to go over the financial result in more detail and we will come back for questions later.

Speaker Change: Sure.

Orlando Berges: Good morning, everyone. As Aurelio mentioned at the beginning of the call, we reported a $75.5 million gain for the fourth quarter. This is $2.5 million lower than the third quarter. However, earnings per share for the quarter were $0.46, which is the same we had on the third quarter. These results include a $6.3 million charge for the one-time FDIC assessment, as well as a $3 million gain on the sale of a banking facility in our Florida region.

Speaker Change: Yes.

Orlando: Good morning, everyone.

Orlando: So I would tell you mentioned at the beginning of the Golar, We reported 75 5 million gain for the fourth quarter.

This is $2 5 million lower than the third quarter.

However earnings per share for the quarter were <unk> 46, which is the same we had.

Orlando: Third quarter.

These results include a $6 $3 million charge for the one time FDIC assessment as well as a $3 million gain on the sale of our banking facility.

Orlando: Our Florida region.

Orlando Berges: The provision expense for the quarter increased to 18.8 million as compared to 4.4 million last quarter. As you may recall from last quarter's earnings call, the lower provision in the third quarter reflected the benefit of what we define as a less severe economic outlook.

Orlando: The provision expense for the quarter increased to $18 8 million.

Orlando: Compared to $4 4 million last quarter.

Orlando: As you May recall from last quarter's earnings call the lower provision in the third quarter reflected the benefit of.

What we find is a less severe economic outlook on the third quarter that the one we had forecasted on the second quarter.

Orlando Berges: on the third quarter than the one we had forecasted on the second quarter.

Orlando Berges: This quarter, the outlook remains similar, so the increase was mostly related to the larger loan portfolios and the higher level of consumer charge-off to some extent.

Orlando: This quarter the outlook remains similar so the increase was mostly related to a larger loan portfolios on the higher level of consumer charge off to some extent.

Orlando Berges: The income tax expense for the quarter was $5.4 million, which compares to the $27 million we had in the third quarter. The effective tax rate came down from 28.2% we had as of the third quarter to 23.5%. As we ended up the year conducting, during the fourth quarter, several activities that were not previously forecasted and which have tax advantages under the Puerto Rico code.

Orlando: The income tax expense for the quarter was $5 4 million, which compares to the $27 million, we had in the third quarter.

Orlando: The effective tax rate came down from 28, 2%, we had as of the third quarter to 23, 5%.

I want to thank all my colleagues for their valuable contributions and dedication over the years and also our customers that we serve on a daily basis, our communities, and our shareholders. As we look forward to 2024, we expect to continue our long-growth momentum and continue gaining market share and improving our long book on what we consider is a stable economy across our markets, including Miami, Puerto Rico, and the Virgin Islands. Our goal is to again achieve mid-single digit long-growth for the year, organically. However, we do continue to expect that the average deposit balance will gradually come down. In line with recent trends in the market, as excess liquidity in the system decreases during the year, our top priorities for the first year will be to leverage the short duration of the investment portfolio, which redeployed Logili Maturi Security SkyFlow. Duhaeger, Yelena Asimov, also actively, proactively manages credit, particularly on a consumer lending basis.

Orlando: As we ended up the year conducting.

Orlando: During the fourth quarter several.

Orlando: Activities that were not previously forecasted.

Orlando: <unk> is on the Puerto Rico code.

Orlando Berges: Also, we had a lower pre-tax income on the quarter, which also translated into a reduced tax.

Orlando: Also we had lower pretax income.

Orlando: On the quarter.

Orlando: Which.

Orlando: Also translated into reduced tax.

Orlando Berges: If we look forward based on the current strategies that we have, we expect that the effective tax rate for 2024 will be around that 24% range, slightly under, slightly over, but it should be somewhere in that range.

Look forward based on the current strategies that we have we expect that the.

Aurelio Alemn: We saw a little bit of that in the fourth quarter, actually also in the third quarter, with the charge of rape and unlawful and early delinquency for the consumer book registering a slight increase when compared to previous quotas. That said, our MPA and classified asset levels remain at multi-year lows, and our research coverage ratio is also very solid, and we continue to sustain and enforce our proactive risk management culture. Definitely, you know, we're ready to withstand any additional deterioration as those rates move closer to the norm.

Orlando: The effective tax rate for 2024 will be around 24% range slightly under slightly over but it should be somewhere in that in that range.

Orlando: Yes.

Orlando Berges: For the full year, that income was, full year 23, I mean, that income was $303 million. It was pretty much in line with the $305 million we had in 2022, but earnings per share were higher at $1.71 compared to $1.59 we had a prior year. This is, you know, directly a result of the benefit of the lower share count due to the share buybacks we have been executing over the year, and also in 2022. Also, as Aurelio mentioned, we deliver strong return on average assets, again, 162, and ROE with return on average equity was 23.7%, which if we adjust to eliminate the other comprehensive laws, would represent a 14.7%. So, that's a solid number.

Orlando: For the full year net income was a.

Orlando: Full year 2003.

Orlando: Income was $303 million.

Orlando: It's pretty much in line with the $305 million, we had in 2022, but earnings per share were higher at $1 71.

Compared to $1 59, we had a prior year.

Orlando: Is directly a result of the benefit of the lower share count.

Orlando: Share buybacks, we have been executing over the year.

Aurelio Alemn: Finally, it was a great quarter in terms of our capital position; our annual book value per share increased by 19%, and the TCE ratio improved to 7.7%, mostly driven by a favorable variance in the value of our bond book, given the reduction in market rates during the quarter. This was accomplished even while repurchasing $75 million in common shares, as we have indicated, and paying $24 million in dividends. Now, we move to slide five to provide some highlights for the full year.

Orlando: And also in 2022.

Orlando: As Aurelio mentioned, we delivered a strong return on average assets again, one 162 in a row with return on average equity was 23, 7%.

Finally, we continue to be very well positioned to deploy our capital based on our healthy capital levels and our ability to consistently generate organic capital. We still have ample buyback capacity with $150 million in buybacks left from our current authorities. We will continue to monitor the general macro outlook, and continue to execute the remaining backpack authorization during the year beginning in the first quarter of this year. Now I will turn the call over to Orlando to go over the financial resources in more detail, and we'll come back for questions. Good morning, everyone.

Which we adjusted to eliminate the other comprehensive loss loss would represent a 14, 1% both solid numbers.

Orlando Berges: In terms of net interest income, the quarter shows $196.7 million of net interest income, which is $3 million below the third quarter. The third quarter, however, did include $1.2 million we collected on a construction loan that had been charged off in prior years. Therefore, the real reduction was $1.8 million.

Orlando: In terms of net interest income the quarter chose.

Orlando: $86 7 million of net interest income, which is $3 million below the third quarter.

Aurelio Alemn: Definitely, you know, the 23 performance showcased our attractive profitability and improved risk profile, even when, as we all know, operating in a challenging rate environment for our industry. Most importantly, it highlighted our capital management discipline and return flexibility. We generated 1.62% return on assets for the year and 41% return on equity, adjusted for the impact of the AOCL. We added $628 million or 5.4% to the loan portfolio in the year, while deposits or the broker contracted by 1.7%. Our strong and diversified deposit franchise is evident by a still healthy non-interest bearing ratio of 34% at the end of the year and a loan-to-deposit ratio of 77%. This achievement supports our goal of delivering close to 100% of our normal earnings to shareholders in the form of buybacks and dividends for the third consecutive year, as we mentioned before. This year will mark 2023 mark our 75th anniversary, and we're very pleased with I want to thank all my colleagues for their valuable contributions and dedication during the years and also our customers that we serve on a daily basis, our communities, and our shareholders as we look forward to 2024.

Orlando: The third quarter. Our did include a $1 2 million, we collected on a construction loan that had been charged off in prior years.

Orlando: Therefore, the reduction the real reduction was $1 8 million.

Orlando Berges: The interest in common loans increased $6.1 million in the quarter, which was to some extent offset by $3.9 million decrease in other earning assets.

Orlando: The interest income on loans increased $6 1 million during the quarter, which was to some extent offset by $3 $9 million decrease in other earning assets.

As Aurelio mentioned at the beginning of the call, we reported a $75.5 million gain for the fourth quarter, $2.5 million lower than the third quarter. However, earnings per share for the quarter were $0.46, which is the same as we had in the third quarter. These results include a $6.3 million charge for the one-time FDIC assessment, as well as a $3 million gain on the sale of a banking facility in our Florida region. The provision expense for the quarter increased to 18.8 million as compared to 4.4 million last quarter.

Orlando Berges: mostly cash and securities, but interest expense grew by $5.4 million.

Orlando: Mostly catch on securities, but interest expense grew by $5 4 million.

Orlando Berges: The interest income grew $2.9 million in consumer and $2.1 million in commercial.

Orlando: The lending side, the interest income grew $2 $9 million in consumer onto one 1 million in commercial.

Orlando Berges: Most of the growth was in those two portfolios.

Most most of the growth was in those two portfolios.

Orlando Berges: Overall, however, even though loans increased during the quarter, total average earning assets did decrease by $269 million.

Orlando: Overall, however, it even though loans increased during the quarter total average, earning assets decreased by $269 million.

Orlando Berges: In the quarter, we continue to see funding cost pressures as the excess liquidity in the market has continued to decline, which resulted in decreases in retail and commercial core deposits.

Orlando: The quarter, we in the quarter, we continued to see funding cost pressures. So your excess liquidity in the market has continued to decline.

As you may recall from last quarter's earnings call, the lower provision in the third quarter reflected the benefit of what we define as a less severe economic outlook in the third quarter than the one we had forecasted in the second quarter. This quarter, the outlook remains similar, so the increase was mostly related to the larger loan portfolios and the higher level of consumer charge-offs to some extent. The income tax expense for the quarter was $5.4 million, which compares to the $27 million we had in the third quarter. The effective tax rate came down from 28.2% we had as of the third quarter to 23.5%. As we ended the year conducting, during the fourth quarter, several activities that were not previously forecasted and which have tax advantages under the Puerto Rico code. Also, we had a lower pre-tax income for the quarter, which also translated into a reduced tax. If we look forward, based on the current strategies that we have, we expect that the effective tax rate for 2024 will be around that 24% range, slightly under, slightly over, but it should be somewhere in that range.

Orlando: This resulted in decreases in retail and commercial core deposits.

Orlando Berges: That excludes public funds.

Orlando: That excludes.

Orlando: All the funds.

Orlando Berges: We also continue to see the impact of the shift from non-interest bearing deposits into interest bearing deposits.

Orlando: We also continue to see the impact of this shift from noninterest bearing deposits into interest bearing deposits.

Orlando Berges: Even though when looking at the quarter and our interest-bearing deposits declined only $36 million, in reality the formal $100 million decline we had in the third quarter impacted significantly the funding costs for the fourth quarter.

Orlando: Even though when looking at the quarter noninterest bearing deposits declined only $36 million.

Orlando: In reality, the former $100 million decline, we had in the third quarter impacted significantly the funding costs for the fourth quarter.

Orlando: These deposits have been moving into time deposits.

Orlando Berges: These deposits have been moving into time deposits or other interest-bearing options, or ultimately we have been replacing some of them with wholesale funding sources.

Orlando: Other interest bearing options or.

Orlando: Ultimately, we have been replacing some of them with wholesale funding sources.

Orlando Berges: To put in perspective, over the last six months of 23 time deposits grew 153 million and a large fortune came from these deposits.

Orlando: To put in perspective over the last six months of 'twenty three time deposits grew $153 million and a large portion came from these deposits.

Orlando Berges: On the other hand, during the quarter, we saw that the trend in the pace of core deposit cost increases has slowed down as market interest rates have stabilized.

Orlando: On the other hand during the quarter we saw.

Aurelio Alemn: We expect to continue our long-ruled momentum, and continue, you know, gaining market share and improving, our long book on what we consider is a stable economy across our markets including Miami, Puerto Rico, and the Virgin Islands. Our goal is to, again, achieve mid-single digit long growth for the year, organically. However, we do continue to expect that average deposit balance will gradually come down, in line with recent trends in the market as excess liquidity in the system decreases during the year, our top priorities for the year number one will be to leverage the short duration of the investment portfolio, who redeployed Logili Maturi Security SkyFlow, to Heide Yelenas, also actively, proactively managing credit, particularly on the consumer lending-based finally will continue to be, very well positioned to deploy our capital based on our healthy capital levels and our ability to consistently generate organic capital.

Orlando: The trend in the pace of core deposit cost increases have slowed down.

Orlando: As market interest rates have stabilized.

Orlando Berges: The average cost of interest bearing checking and savings accounts other than public funds remains stable at 73 basis points when compared to the prior quarter.

Orlando: The average cost of interest bearing checking and savings accounts other than public funds remained stable at 73 basis points when compared to the prior quarter.

Orlando Berges: also we have seen the deposit price repricing pressures on the government deposits easing up the cost of these deposits increased only 14 basis points in the quarter which compares to our 54 basis points increase we had in the third quarter

Also we have seen deposit.

Orlando: Repricing pressures on the government deposits easy now.

For the full year, that income was, full year 23, I mean, $303 million. It was pretty much in line with the $305 million we had in 2022, but earnings per share were higher at $1.71 compared to $1.59 we had a prior year. This is, you know, directly a result of the benefit of the lower share count due to the share buybacks we have been executing over the year and also in 2022. Also, as Aurelio mentioned, we deliver strong return on average assets, again, 162, and ROE with return on average equity was 23.7%, which if we adjust to eliminate the other comprehensive laws would represent 14.7%. So, that's a solid number.

Orlando: The cost of these deposits increased only 14 basis points in the quarter.

Orlando: Which compares to our 54 basis points increase we had in the third quarter.

Orlando Berges: The increase in this quarter in reality was mostly a lag effect from last quarter repricing since short-term market interest rates on average did not increase this quarter, which is an indicator of the structure used for pricing government deposits.

Orlando: The increase in this quarter in reality was mostly a lag effect.

Orlando: Last quarter repricing since.

Short term market interest rates on average did not increase this quarter, which is indicator of the structure used pricing Gordon deposits.

Orlando Berges: That said, we did have a $6.1 million increase in interest expense on broker and time deposits during the quarter as we increased average broker deposits by $253 million and average time deposits by $85 million.

Orlando: That said, we did have a $6 1 million increase in interest expense on program time deposits during the quarter as we increase average broker deposits by $253 million.

Orlando: Average time deposits by $85 million.

Orlando Berges: The yield or the cost of a non-broker time deposit, I think, was 26 basis.

The yield or the cost of our non brokered time deposits increased 26 basis points during.

Orlando Berges: during the quarter. A lot has to do with also with the maturing time deposits that get issued at new rates.

Aurelio Alemn: We still have ample buyback capacity with $150 million in buybacks left on our current authority. We will continue to monitor the General Macro Outlook, and continue to execute the remaining back-to-back authorizations during the year beginning in the first quarter. Now I will turn the call over to Orlando to go over the financial results in more detail, and we'll come back for questions. Good morning, everyone.

Orlando: During the quarter a lot has to do with also with the maturing time deposits.

Orlando: Good.

Issue new rates.

Orlando Berges: The overall funding cost impact has been impacted by the pick-up on the yields from the growth in the loan portfolios. Loans, as you saw in the release, grew $233 million in the fourth quarter and have grown $459 million since the end of the second quarter. And looking specifically at the yield in the fourth quarter, the loan yields increased seven bases.

Orlando: The overall funding cost impact that has been impacted by the pickup on the yields from the growth in the loan portfolios.

Orlando: Loans.

Orlando: You saw the release grew $233 million in the fourth quarter and have grown $459 million in Seattle or the second quarter.

In terms of net interest income, the quarter shows $196.7 million of net interest income, which is $3 million below the third quarter. The third quarter, however, did include $1.2 million we collected on a construction loan that had been charged off in prior years. Therefore, the real reduction was $1.8 million.

Orlando: And looking at specifically at the yield in the fourth quarter the loan yields increased seven basis points.

Orlando Berges: As Aurelio mentioned at the beginning of the call, we reported a $75.5 million gain for the fourth quarter, $2.5 million lower than the third quarter. However, earnings per share for the quarter were $0.46, which is the same as we had in the third quarter. These results include a $6.3 million charge for the one-time FDIC assessment, as well as a $3 million gain on the sale of a banking facility in our Florida region. The provision expense for the quarter increased to $18.8 million as compared to $4.4 million last quarter.

Orlando Berges: Margin for the quarter was relatively flat at 414, almost the same as last quarter, which was 415.

Orlando: Margin for the quarter was relatively flat at 414, almost the same as last quarter, which was 415.

Orlando Berges: We have seen a change in the mix of earning assets resulting in higher yields.

Orlando: We have seen a change in the mix of earning assets, resulting in higher yields, but us being offset by an increase in the cost of funds.

Orlando Berges: but has been upset by the increase in the cost of funds.

The interest on common loans increased $6.1 million in the quarter, which was to some extent offset by a $3.9 million decrease in other earning assets, mostly cash and securities, but interest expense grew by $5.4 million. The interest income grew $2.9 million in consumer and $2.1 million in commercial. Most of the growth was in those two portfolios. Overall, however, even though loans increased during the quarter, total average earning assets did decrease by $269 million. In the quarter, we continue to see funding cost pressures as the excess liquidity in the market has continued to decline, which resulted in decreases in retail and commercial core deposits. This excludes public funds.

Orlando Berges: As we discussed last quarter with the assumption that a market interest rate would stabilize or start to come down, we expected that the inflection point for net interest margin would happen somewhere between the end of 23 and the first quarter of 24, and we see that happening already. And assuming no meaningful changes to the deposit balances, the net interest income should improve in 2024 as higher yielding loans will be funded with the cash flows that are coming from the investment portfolio, which is a much slower yielding. We estimate those cash flows for 2024 to be around $1 billion throughout the year. A good chunk comes in the second half because of maturity, but it's still throughout the year. It's a full year.

Orlando: As we discussed last quarter with the assumption that our market interest rate would stabilize or start to come down we expect that the inflection point for net interest margin would have been somewhere between the end of 'twenty three.

Orlando: First quarter of 'twenty floor, and we see that happening already.

Orlando: Assuming no meaningful changes to deposit balances the.

Orlando Berges: As you may recall from last quarter's earnings call, the lower provision in the third quarter reflected the benefit of what we define as a less severe economic outlook for the third quarter than the one we had forecasted for the second quarter. This quarter, the outlook remains similar, so the increase was mostly related to the larger loan portfolios and the higher level of consumer charges to some extent. The income tax expense for the quarter was $5.4 million, which compares to the $27 million we had in the third quarter. The effective tax rate came down from 28.2% we had as of the third quarter to 23.5%, as we ended the year conducting, during the fourth quarter, several activities that were not previously forecasted and which have tax advantages under the Puerto Rico Code. Also, we had lower pre-tax income in the quarter, which also translated into a reduced tax rate. Looking forward, based on the current strategies that we have, we expect that the effective tax rate for 2024 will be around that 24% range, slightly under, slightly over, but it should be somewhere in that range.

Orlando: Net interest income should improve in 2024 of higher yielding loans.

Orlando: Will be funded with the cash flows that are going from the from the investment portfolio, which has a much lower yielding.

Orlando: <unk> made those cash flows for 2020 for it to be around $1 billion.

Orlando: About a year.

Orlando: Good chunk constant in the second half because of maturity, but it is still throughout the full year.

Orlando Berges: Our interest rate forecast is fairly consistent with the forward yield curve, and our planning assumption is that future Fed funds rate cuts will begin in April. That's what we've been using for the assumptions in the net interest margin and net interest income project.

Orlando: Our interest rate forecast is fairly consistent with the forward yield curve.

Orlando: Our planning assumption is that a future fed funds rate cuts will begin in April that would we've been using for <unk>.

For the assumptions in there.

Orlando: And the net interest.

Orlando: Margin on an interest income projections.

Orlando Berges: Looking at other income, we had a $3.3 million increase to $33.6 million during the quarter. It was driven by a $3 million gain on the sale of a banking facility in Florida. If we exclude this item, the other income was essentially flat versus the prior quarter.

Orlando: Looking at other income we had a $3 $3 million increased to $33 6 million during the quarter was driven by by a $3 million gain on the sale of our banking facility in Florida.

We also continue to see the impact of the shift from non-interest-bearing deposits into interest-bearing deposits. Even though when looking at the quarter and our interest-bearing deposits declined only $36 million, in reality, the formal $100 million decline we had in the third quarter significantly impacted the funding costs for the fourth quarter. These deposits have been moving into time deposits or other interest-bearing options, or ultimately, we have been replacing some of them with wholesale funding sources. To put this in perspective, over the last six months of 23, time deposits grew by 153 million, and a large fortune came from these deposits.

Orlando: If we exclude these items.

Orlando: Other income was essentially flat versus <unk>.

Orlando: Prior quarter.

Orlando Berges: Expenses increased $10 million during the quarter, but was largely driven by that $6.3 million one-time FDIC special assessment.

Orlando: Expenses increased $10 million during the quarter, but was largely driven by the six.

Orlando: $6 3 million, one time FDIC special assessment.

Orlando Berges: Excluding this item, adjustment expenses were 120.3 million, which results in an efficiency ratio of 52.2 million during the quarter.

Orlando: Excluding this item adjusted expenses were $123 million, which results in an efficiency ratio of $52 2 million during the quarter.

Orlando Berges: For the full year, that income was, full year 23, I mean, $303 million. It was pretty much in line with the $305 million we had in 2022, but earnings per chair were higher at $1.71 compared to $1.59 we had in the previous year. This is directly a result of the benefit of the lower chair count due to the chair buybacks we have been executing over the year and also in 2022. Also, as Aurelio mentioned, we deliver strong return on average assets, again, 162, and ROE with return on average equity was 23.7%, which if we adjust to eliminate the other comprehensive loss would represent 14.1%, both solid numbers. In terms of net interest income, the quarter shows $196.7 million of net interest income, which is $3 million below the third quarter. The third quarter, however, did include $1.2 million we collected on a construction loan that had been charged off in prior years. Therefore, the real reduction was $1.8 million.

Orlando Berges: Business promotion increased $2 million for the quarter, which is related to year-end marketing efforts and completion of some of the activities of the 75th anniversary celebration, including some customer activities.

Orlando: Business promotion increased $2 million for the quarter was related to year end marketing efforts on completion of some of the activities.

Orlando: 95 <unk>.

Orlando: We're sorry celebration, including some customer activities.

Orlando Berges: and you also saw that Oreo Games decreased $1 million for the quarter.

You also saw that Oreo gains decreased $1 million for the quarter.

Orlando Berges: In terms of expenses, over the last few quarters, we have been guiding expenses to fall within $118 million to $120 million, excluding the benefit of the Oreo game.

In terms of expenses over the last few quarter, we have been guiding expenses to fall within $118 million to $120 million.

On the other hand, during the quarter, we saw that the trend in the pace of core deposit cost increases has slowed down as market interest rates have stabilized. The average cost of interest bearing checking and savings accounts other than public funds remains stable at 73 basis points when compared to the prior quarter, also we have seen the deposit price repricing pressures on the government deposits easing up the cost of these deposits increased only 14 basis points in the quarter which compares to our 54 basis points increase we had in the third quarter, The increase in this quarter in reality was mostly a lag effect from last quarter repricing since short-term market interest rates on average did not increase this quarter, which is an indicator of the structure used for pricing government deposits.

Orlando: Excluding the benefit of the Oreo gains.

Orlando Berges: Looking at the fourth quarter, excluding the Oreo, expenses fell above that range at $121.3 million.

Orlando: Looking at the fourth quarter, excluding the Oreo expenses fell above that range at a $121 3 million.

Orlando Berges: And looking at, you know, current pace and some of the strategies accounting for some seasonality and things like payroll taxes, we believe that expenses for the first couple of quarters of 2024 to be in the range of $120 to $122 million.

Orlando: And looking at.

Orlando: Based on some of these strategies are accounting for some seasonality on things like payroll taxes.

Orlando: We believe that expenses for the first couple of quarters of 'twenty 'twenty four to be in the range of a 120 to 122 million.

Orlando Berges: per quarter and the efficiency ratio should be should hover around that 52 percent that we just

Orlando: Per quarter.

Orlando: And the efficiency ratio should be should hover around that 52% that we just had.

Orlando: In terms of asset quality.

Orlando Berges: In terms of asset quality, NPAs increased 4.3 million, 226 million, represent 67 basis points of total assets.

Orlando: NPA decreased $4 3 million to $126 million, representing 67 basis points of total assets.

Orlando Berges: The interest income on loans increased $6.1 million in the quarter, which was to some extent offset by a $3.9 million decrease in other earning assets, mostly cash and securities, but interest expense grew by $5.4 million. On the lending side, interest income grew $2.9 million in consumer and $2.1 million in commercial. Most of the growth was in those two portfolios. Overall, however, even though loans increased during the quarter, total average earning assets did decrease by $269 million.

Orlando Berges: Most of the reduction relates to $7.7 million in collections and loans returned to accrual status in the commercial loan portfolios.

Most of the reduction relates to $7.7 million in collections and loans returned to accrual status in the commercial loan portfolios that.

Orlando Berges: That includes 2.7 million commercial real estate loans that are cured during the quarter.

Orlando: That includes $2 7 million commercial real estate loan that occurred during the quarter.

Orlando Berges: that this reduction was partially offset by a $3.3 million increase in the consumer non-accrual loan.

This reduction was partially offset by a $3 3 million increase in the consumer non accrual loans.

That said, we did have a $6.1 million increase in interest expense on broker and time deposits during the quarter as we increased average broker deposits by $253 million and average time deposits by $85 million. The yield, or the cost of a non-broker time deposit, I think, was 26 basis points during the quarter. A lot has to do with maturing time deposits that get issued at new rates. The overall funding cost impact has also been impacted by the pick-up in yields from the growth in the loan portfolios. Loans, as you saw in the release, grew $233 million in the fourth quarter and have grown $459 million since the end of the second quarter. And looking specifically at the yield in the fourth quarter, the loan yields increased seven basis points. Margin for the quarter was relatively flat at 414, almost the same as last quarter, which was 415.

Orlando Berges: Total inflows to non-accrual during the quarter were $35 million, which is $5 million less than the last quarter. It's net impact of some increases in consumer and decreases in the commercial portfolio.

Total inflows to non accrual during the quarter.

Orlando: $35 million, we just $5 million less than last quarter as net net impact of some increases in consumer and <unk>.

Orlando Berges: In the quarter, we continue to see funding cost pressures; the excess liquidity in the market has continued to decline, which resulted in decreases in retail and commercial core deposits, which excludes public funds. We also continue to see the impact of the shift from non-interest-bearing deposits into interest-bearing deposits. Even though, when looking at the quarter, our interest-bearing deposits declined only $36 million, in reality, the formal $100 million decline we had in the third quarter significantly impacted our funding costs for the fourth quarter. These deposits have been moving into time deposits or other interest-bearing options, or, ultimately, we have been replacing some of them with wholesale funding sources.

Orlando: <unk> is in the commercial portfolio.

Orlando Berges: However, loans in early delinquency, defined as 30 to 89 days, did increase by approximately $14 million, and it was mostly a $15 million increase in the consumer portfolios that we had in the court.

Orlando: However loans in early delinquency.

Orlando: <unk> 30 to 89 days that did increase by approximately $14 million.

Orlando: It was mostly for $3 million increase in the consumer portfolios.

Orlando: That we had in the quarter.

Orlando Berges: In terms of the allowances, allowances ended up at $269 million, which is $1.8 million less than prior quarter. The coverage decreased slightly to $215. However, given the rise in the consumer loan delinquency and some of the charge of impact, the ACL on just consumer did increase $3 million during the quarter to 3.64% of loan.

Orlando: In terms of the allowance.

Orlando: Allowance ended up at 169 million, which is.

$1 $8 million less than prior quarter, the coverage decreased slightly to $2 15.

Orlando: However, given the rising in the consumer loan delinquency and some of the charge of the impacts of the ACL on just consumer lead increase of $3 million during the quarter to 364% of loans.

Orlando Berges: Overall charts for the quarter were 69 basis points as you saw in the release.

Orlando: Overall charge off for the quarter was 69 basis points. So as you saw in the release.

Orlando Berges: The AC, you know, the allowance for credit losses consistently with prior quarters is estimated using a combination of a baseline and a downside economic scenario. Therefore, we see it providing very adequate coverage for any possible loss.

Orlando: The AC the allowance for credit losses.

Orlando Berges: To put this in perspective, over the last six months, deposits grew by 153 million times, and a large fortune came from these deposits. On the other hand, during the quarter, we saw that the trend in the pace of core deposit cost increases has slowed down as market interest rates have stabilized. The average cost of interest-varying checking and savings accounts other than public funds remained stable at 73 basis points when compared to the prior quarter.

Orlando: Suddenly with prior quarter, it's estimated using a combination of a baseline.

Orlando: Downside economic scenario, therefore, we see they're providing very adequate coverage for any possible losses.

We have seen a change in the mix of earning assets resulting in higher yields, but this has been upset by the increase in the cost of funds. As we discussed last quarter, with the assumption that the market interest rate would stabilize or start to come down, we expected that the inflection point for net interest margin would happen somewhere between the end of 23 and the first quarter of 24, and we see that happening already. And assuming no meaningful changes to the deposit balances, the net interest income should improve in 2024 as higher-yielding loans will be funded with the cash flows that are coming from the investment portfolio, which is a much slower yielding. We estimate those cash flows for 2024 to be around $1 billion throughout the year. A good chunk comes in the second half because of maturity, but it's throughout the year. It's been a full year.

Orlando Berges: In terms of capital, our ratios remain very strong, significantly well capitalized. Most of the ratios either had a small decrease or a small increase.

Orlando: In terms of capital.

Orlando: Our ratios remain very strong significantly well capitalized.

Orlando: Most of the ratios either had a small decrease or a small increase.

Orlando Berges: as the earnings generated during the quarter, mostly compensated for the $75 million in share buybacks we executed during the fourth quarter and the $24 million in common dividends that were paid.

Orlando: The earnings generated during the quarter, mostly compensated for the $75 million in share buybacks, we executed during the fourth quarter.

Orlando Berges: Also, we have seen deposit repricing pressures on government deposits ease up. The cost of these deposits increased only 14 basis points in the quarter, which compares to the 54 basis points increase we had in the third quarter. The increase in this quarter was, in reality, mostly a lag effect from last quarter's repricing since short-term market interest rates on average did not increase this quarter, which is an indicator of the structure used for pricing government deposits. That said, we did have a $6.1 million increase in interest expense on broker and time deposits during the quarter as we increased average broker deposits by $253 million and average time deposits by $85 million. The yield, or the cost of non-broker time deposits increased 26 faces during the quarter.

Orlando: $24 million in common dividends that were paid.

Orlando Berges: Total gap equity increased to $1.5 billion. Basically, the improvement in interest rates and the overall environment resulted in a $212 million increase in the fair value.

Orlando: Total GAAP equity increased to $1 5 billion.

Orlando: Basically the improvement in interest rates.

Orlando: The overall environment, we sold it at $212 million increase in the fair value.

Orlando Berges: of Available for Sale Securities and therefore reduce the other comprehensive laws and just

Orlando: Our allowance for sale securities and therefore reduces the other comprehensive loss adjustment.

Orlando Berges: Tangible book value per share as a result increased by 19% to $8.54 and the tangible common equity ratio increased to 7.7%.

Orlando: Tangible book value per share as a result increased by 19% to $8 54.

Orlando: The tangible common equity ratio increased to seven seven.

Orlando: 7%.

Orlando Berges: Still, when you look at the remaining other comprehensive loss adjustment, it represents approximately $3.74 in tangible value per share and over 300 on basis points in the tangible common equity ratio.

Orlando: It's still when you look at the remaining other comprehensive loss adjustment. It represents approximately $3 74 in tangible book value per chair.

Orlando: On over 300 basis points and the tangible common equity ratio.

Orlando Berges: Human rates remain stable. We will continue to recover this other comprehensive loss based on the short duration of our investment portfolio. And as we have mentioned in prior calls, we continue to reiterate our intention and our ability to retain this investment through maturity.

Orlando: Assuming rates remain stable, we will continue to recover there's other comprehensive loss based on the duration of our investment portfolio and as we have mentioned in prior calls we continue to reiterate our intention on our ability to retain this investment through through maturity.

Orlando Berges: A lot has to do also with maturing time deposits that get issued at new rates. The overall funding cost impact has been impacted by the pickup in yields from the growth in the loan portfolios. Loans, as you saw in the release, grew $233 million in the fourth quarter and have grown $459 million since the end of the second quarter. And looking at this specifically at yield, in the fourth quarter, loan yields increased seven basis points. Margin for the quarter was relatively flat at 414, almost the same as last quarter, which was 415.

Our interest rate forecast is fairly consistent with the forward yield curve, and our planning assumption is that future Fed funds rate cuts will begin in April. That's what we've been using for the assumptions in the net interest margin and net interest income projects. Looking at other income, we had a $3.3 million increase to $33.6 million during the quarter. It was driven by a $3 million gain on the sale of a banking facility in Florida. If we exclude this item, the other income was essentially flat versus the prior quarter. Expenses increased $10 million during the quarter, but that was largely driven by that $6.3 million one-time FDIC special assessment.

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

Speaker Change: With that I would like to open the call for questions.

Speaker Change: Thanks.

Speaker Change: If you would like to ask a question, please press star followed by one on your telephone keypad. If you feel your question has been answered at any time and you'd like to withdraw it, it's star followed by two. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. So that's star followed by one to ask your question.

Speaker Change: Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad. If you steal your question has been answered at any time and you'd like to withdraw it staff followed by Jay and as a reminder, if you are using speaker.

Speaker Change: Your final patient.

Speaker Change: Johan.

Speaker Change: Asking your question.

Speaker Change: Followed by one to ask a question.

Speaker Change: So our first question comes from the line of Tim <unk> of Wells Fargo. Your line is now open. Please go ahead.

Speaker Change: So our first question comes from the line of Timar Brazila of Wells Fargo. Your line is now open. Please go ahead.

Excluding this item, adjustment expenses were 120.3 million, which resulted in an efficiency ratio of 52.2 million during the quarter. Business promotion increased $2 million for the quarter, which is related to year-end marketing efforts and completion of some of the activities of the 75th anniversary celebration, including some customer activities. And you also saw that Oreo Games decreased $1 million for the quarter. In terms of expenses, over the last few quarters, we have been guiding expenses to fall within $118 million to $120 million, excluding the benefit of the Oreo game. Looking at the fourth quarter, excluding the Oreo game, expenses fell above that range at $121.3 million.

Orlando Berges: We have seen a change in the mix of earning assets resulting in higher yields, but this has been upset by the increase in the cost of funds. As we discussed last quarter, with the assumption that the market interest rate would stabilize or start to come down, we expected that the inflection point or net interest margin would happen somewhere between the end of 2023 and the first quarter of 2024, and we see that happening already. And assuming no meaningful changes to deposit balances, the net interest income should improve in 2024 as higher-yielding loans will be funded with the cash flows that are coming from the investment portfolio, which is a much slower yielding. We still made those cash flows for 2024 to be around a billion dollars throughout the year. A good chunk comes in the second half because of maturity, but it's still throughout the full year.

Timar Brazila: Hey, good morning.

Tim: Hi, good morning.

Timar Brazila: Starting on the deposit side, I'm just wondering how costs trend now that the lag effect of public funds is in the rear view. You mentioned excess liquidity in your prepared comments a couple times.

Tim: Good morning.

Tim: Starting on the deposit side I'm, just wondering how cost trend.

Tim: Effect of public funds is in the rearview you mentioned excess liquidity in your prepared comments a couple of times.

Timar Brazila: I'm just wondering, can you frame what you consider excess liquidity remaining on your deposit base?

Tim: I'm just wondering can you frame what you consider excess liquidity remaining on your deposit base.

Timar Brazila: As that exits is the expectation that it's backfilled with broker deposits and then all in kind of what does that mean for deposit pricing and costs as we go through the first couple of quarters of 24?

Tim: Has that exits is there expectation that its backfill of those broker deposits and then all in kind of what does that mean for deposit pricing and costs as we go through the first couple of quarters of 'twenty four.

Speaker Change: Well, in terms of cost, clearly what I mentioned in the remarks is that with rates being stable, as we have seen over the last couple of months, and adding the possibility of rates coming down, we believe that we're going to start seeing cost reductions in the market in terms of the possible.

Speaker Change: Well in terms of our cost clearly.

Speaker Change: What I mentioned in the call.

Speaker Change: Market setup.

Speaker Change: Rates being stable as we have seen over the last couple.

Speaker Change: A couple of months.

Adam the possibility of rates coming down we believe that we're going to start seeing.

Speaker Change: Cost reductions in the market in terms of deposits.

And looking at, you know, current pace and some of the strategies, accounting for some seasonality and things like payroll taxes, we believe that expenses for the first couple of quarters of 2024 will be in the range of $120 to $122 million per quarter, and the efficiency ratio should hover around that 52 percent that we just. In terms of asset quality, NPAs increased 4.3 million, 226 million, representing 67 basis points of total assets. Most of the reduction relates to $7.7 million in collections and loans returned to accrual status in the commercial loan portfolios. That includes 2.7 million commercial real estate loans that were cured during the quarter. This reduction was partially offset by a $3.3 million increase in the consumer non-accrual loan. Total inflows to non-accrual during the quarter were $35 million, which is $5 million less than the last quarter.

Speaker Change: the only question continues to be still there could be some shift we have

Orlando Berges: Our interest rate forecast is fairly consistent with the forward yield curve, and our planning assumption is that future Fed funds rate cuts will begin in April. That's what we've been using for the assumptions in the net interest margin and net interest income projections. Looking at other income, we had a $3.3 million increase to $33.6 million during the quarter. It was driven by a $3 million gain on the sale of a banking facility in Florida. If we exclude this item, the other income was essentially flat versus the prior quarter. Expenses increased $10 million during the quarter, but that was largely driven by that $6.3 million one-time FDIC special assessment.

Speaker Change: The only question continues to be still there could be some shift that we have.

Speaker Change: Strong 34% non-interest-bearing ratio to total deposits.

Speaker Change: A strong 34%.

Speaker Change: Noninterest bearing ratio to total deposits.

Speaker Change: and we could still see a little bit, although that slowed down a lot in the quarter, that migrates to higher cost. Not all the time-deposit portfolio has repriced, you know, still some of the older things are coming due.

Speaker Change: Noninterest bearing deposits to total deposits.

Speaker Change: And we could still see a little bit although thats slowed down a lot in the quarter that migrates to higher cost not all the time deposit portfolio has repriced skilled.

Speaker Change: Still some of the older things are coming due.

Speaker Change: and that should be some of the other side of the impact on the cost, but clearly on the most of the interest bearing savings and checking accounts, we're there and government repricing shouldn't change much based on this rate.

Speaker Change: And that should be some of the other other site of impact or the impact on the on the cost, but clearly on the most of the noninterest bearing inventory interest bearing savings and checking accounts.

Speaker Change: Were there on Gorman repricing shouldnt.

Speaker Change: Shouldnt change much based on lease rates.

Orlando Berges: Excluding this item, adjustment expenses were $120.3 million, which resulted in an efficiency ratio of $52.2 million during the quarter. Business promotion increased $2 million for the quarter related to year-end marketing efforts and completion of some of the activities of the 75th anniversary celebration, including some customer activities. And you also saw that Oreo gains decreased $1 million for the quarter. In terms of expenses, over the last few quarters, we have been guiding expenses to fall within $118 million to $120 million, excluding the benefit of the Oreo game. Looking at the fourth quarter, excluding Oreo, expenses fell above that range at $121.3 million.

Speaker Change: uh in terms of the of the liquidity of the excess liquidity that obviously what we have seen is the market uh

Speaker Change: In terms of the of the liquidity of the excess liquidity outside of obviously, where we have seen is the market.

<unk>.

Speaker Change: Yeah, market contracted, overall market, Puerto Rico, Myanmar.

Speaker Change: Yes, Mike might get might get contracted.

Overall market, Puerto Rico main market.

Speaker Change: contracted about 3% in the first three quarters overall market.

Speaker Change: Contract at about 3% in the first three quarters overall market.

Speaker Change: of

Speaker Change: <unk>.

Speaker Change: about 3% of the overall. In 2023. They posted about 7% in the Florida market.

Speaker Change: Okay.

Speaker Change: Our 3% of the overall.

Speaker Change: What are your regulatory deposit about seven contract that was 10% in the Florida market.

Speaker Change: So, you know, when we say excess liquidity,

Speaker Change: So, while we say excess liquidity.

Speaker Change: We really talk about, you know, there was a significant incremental liquidity that took place during the pandemic.

It's the net impact of some increases in consumer and decreases in the commercial portfolio. However, loans in early delinquency, defined as 30 to 89 days, did increase by approximately $14 million, and it was mostly a $15 million increase in the consumer portfolios that we had in the court. In terms of the allowances, allowances ended up at $269 million, which is $1.8 million less than the prior quarter.

Speaker Change: Really talk about that.

Speaker Change: Significant incremental liquidity that took place during the pandemic in 2021 and 2022.

Speaker Change: I think 2021 and 2022 actually started.

Speaker Change: <unk> actually started in 2020.

Speaker Change: That started, you know, obviously normalizing in 2023. And we probably expect a few more quarters of that normalization on the deposit, which is customers using that liquidity that they had in the accounts and they've been buying more or consuming more. And those is based on that data that we do expect, you know,

Speaker Change: Started obviously normalizing in 2023, and we broadly expect a few more quarters of that normalization when the deposit which is customers using that liquidity that they had in the account and they've been buying more or controlling Moore and is based on the data that we do expect.

The coverage decreased slightly to $215. However, given the rise in consumer loan delinquency and some of the charge of impact, the ACL on just consumers did increase $3 million during the quarter to 3.64% of loans. Overall charts for the quarter were 69 basis points, as you saw in the release. The AC, you know, the allowance for credit losses, is consistently estimated using a combination of a baseline and a downside economic scenario. Therefore, we see it as providing very adequate coverage for any possible loss.

Orlando Berges: And looking at, you know, current space and some of the strategies accounting for some seasonality and things like payroll taxes, we believe that expenses for the first couple of quarters of 2024 will be in the range of $120 to $122 million. And the efficiency ratio should hold around that 52% that we just saw. In terms of asset quality, NPA decreased $4.3 million to $126 million, representing 67 basis points of total assets.

Speaker Change: That liquidity to be, you know,

Speaker Change: That liquidity to be utilized.

Speaker Change: It was larger, the contraction in the U.S.

Speaker Change: It was larger contraction in the U S that in Puerto Rico.

Speaker Change: Danny Puerto Rico

Speaker Change: but also on a per capita basis,

Speaker Change: We're also on a per capita basis.

Speaker Change: The pandemic brought more money into Puerto Rico than actually the U.S.

Speaker Change: <unk> broad more money into Puerto Rico restaurant dining naturally the U S. A number of capital leases.

Speaker Change: Okay, thanks for that. And then maybe pulling it all together and looking at NII trajectory in anticipation of a forward, in anticipation of kind of modeling in the forward yield curve, forward rate curve, we have inflection in 1Q, you're assuming rate cuts begin in 2Q. Can you give us a sense of what NII trajectory looks like as we go through the year?

Speaker Change: Okay. Thanks for that and then maybe pulling it all together and looking at NII trajectory in anticipation of a forward.

Speaker Change: Anticipation of kind of modeling in the forward yield curve forward rate curve.

Speaker Change: We have inflection in <unk> youre, assuming rate cuts began in <unk> can you give us a sense of what NII trajectory looks like as we go through the year.

In terms of capital, our ratios remain very strong, significantly well capitalized. Most of the ratios either had a small decrease or a small increase, as the earnings generated during the quarter mostly compensated for the $75 million in share buybacks we executed during the fourth quarter and the $24 million in common dividends that were paid. Total gap equity increased to $1.5 billion. Basically, the improvement in interest rates and the overall environment resulted in a $212 million increase in the fair value of Available for Sale Securities and therefore reduced the other comprehensive laws and just. Tangible book value per share, as a result, increased by 19% to $8.54, and the tangible common equity ratio increased to 7.7%. Still, when you look at the remaining other comprehensive loss adjustment, it represents approximately $3.74 in tangible value per share and over 300 basis points in the tangible common equity ratio. However, human rates remain stable.

Orlando Berges: Most of the reduction relates to $7.7 million in collections and loans returned to accrual status in the commercial loan portfolio, which includes a $2.7 million commercial real estate loan that accrued during the quarter. This reduction was partially offset by a 3.3 million increase in the consumer non-accrual loan. Total inflows into non-accrual during the quarter were $35 million, which is $5 million less than the last quarter.

Speaker Change: Well, in terms of actual percentages, we haven't given specific guidance, but, yeah, we're assuming that there is going to be a pickup on the margin going up with those assumptions on the way the market rates move. Again, it goes back to the $1 billion in securities that will – cash flows would come in in 2024. Those securities are yielding less than 1.5%. That would be replaced with a lending side. The consumer lending portfolio, it's a fixed-rate portfolio.

Speaker Change: Well in terms of percentages, we haven't given.

Speaker Change: Some specific guidance, but but.

Speaker Change: Yes, we are assuming that there is going to be a pickup on the margin going up with those assumptions on the way the market rates move.

Speaker Change: Again, it goes back to that.

Speaker Change: 1 billion in Securities that will cash flows would come in in 2020 for those.

Speaker Change: Those securities are yielding less than one 5%.

Speaker Change: That would be replaced with our with our lending with the lending side.

Orlando Berges: It's the net impact of some increases in consumer and decreases in the commercial portfolio. However, loans in early delinquency, defined as 30 to 89 days, did increase by approximately $14 million, and it was mostly a $15 million increase in the consumer portfolios that we had in the quarter. In terms of the allowances, allowances ended up at $269 million, which is $1.8 million less than the prior quarter.

Speaker Change: The consumer lending portfolio, it's a fixed rate portfolio.

Speaker Change: as well as most of the CRE portfolio. So those will continue to be there. But assuming rates move as expected, you know, conversations of four to five rate cuts in the year should also lower the cost of deposits. That would compensate for that. And the wholesale funding components are short-term nature. So they would be replaced with shorter, I mean, lower rates.

Speaker Change: That's what I would say most of the CRE portfolio. So those will continue to be there, but assuming rates move as expected.

Speaker Change: We are.

Speaker Change: Conversations are 4% to five breakouts in the year.

Speaker Change: <unk> also lowered our cost of deposits that would compensate for that.

Speaker Change: Wholesale funding components are short term nature so they.

Speaker Change: Would be replaced with.

Speaker Change: Lower rates.

Speaker Change: Therefore, we're assuming that net interest margin should start picking up going forward. The one caveat on the deposits is that obviously, you know, the non-interest-bearing component, we saw more stability in the fourth quarter, but if it changes a lot, changes a little bit the dynamics, but still the overall, I believe, trend would be, as I just mentioned, with some improvements in margin.

Speaker Change: Therefore, we're assuming that our net interest margin should start picking up.

Orlando Berges: The coverage decreased slightly to $215; however, given the rise in consumer loan delinquency and some of the charge-off impacts, the ACL on just consumer loans did increase $3 million during the quarter to 3.64% of loans. Overall, charge-offs for the quarter were 69 basis points, as you saw in the release. The allowance for credit losses is consistently estimated using a combination of a baseline and a downside economic scenario.

We will continue to recover this other comprehensive loss based on the short duration of our investment portfolio. And, as we have mentioned in prior calls, we continue to reiterate our intention and our ability to retain this investment through maturity. With that, I would like to open the call for questions. If you would like to ask a question, please press star followed by one on your telephone keypad. If you feel your question has been answered at any time and you'd like to withdraw it, it's a star followed by two.

Speaker Change: Going forward.

Speaker Change: The one caveat on the deposits is that obviously the non interest bearing component, we saw more stability in the fourth quarter, but.

Speaker Change: It changes a lot of changes a little bit the dynamics, but still the overall I believe trend would be as I just mentioned with some improvement in margin.

Speaker Change: and the other component we have a lot.

Speaker Change: I'd say the other component.

Speaker Change: We have a lag.

Speaker Change: We have a larger portfolio starting the quarter than we had the private

Speaker Change: The larger portfolio starting the quarter, then we had the prior quarter.

Speaker Change: for their long portfolios.

Speaker Change: The loan portfolio size.

Speaker Change: Got it that's good color. Thank you and then just last from me looking at credit.

Speaker Change: That's good, Colin. Thank you. And then just last for me, looking at credit, we're continuing to see a normalization of the consumer, it seems like, from a charge-off standpoint. I guess, A, how close are we to reaching what you ultimately expect to be a normalization in that charge-offs? And then looking at the allowance ratio that's moved lower every quarter in 23, is that a sign of confidence around broader credit? And could it ultimately get back to a level pre-pandemic in the 1.7s again?

Operator: And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. So that's a star followed by one to ask your question. So our first question comes from the line of Timar Brazila of Wells Fargo. Your line is now open. Please go ahead. Hey, good morning.

Orlando Berges: Therefore, we see they're providing very adequate coverage for any possible loss. In terms of capital, our ratios remain very strong, significantly well capitalized; most of the ratios either had a small decrease or a small increase. As the earnings generated in the quarter mostly compensated for the $75 million in share buybacks we executed during the fourth quarter and the $24 million in common dividends that were paid, total GAAP equity increased to $1.5 billion.

Speaker Change: We're continuing to see a normalization of the consumer it seems like from a charge off standpoint, I guess, a how close are we to reaching what you ultimately expect to be a normalization in net charge offs and then looking at the allowance ratio that's moved lower every quarter in 'twenty three.

Speaker Change: Or is that a sign of confidence around broader credit and could it ultimately get back to a level pre pandemic 100 Seven's again.

Starting on the deposit side, I'm just wondering how costs trend now that the lag effect of public funds is in the rear view. You mentioned excess liquidity in your prepared comments a couple of times. I'm just wondering, can you define what you consider excess liquidity remaining on your deposit base?

Speaker Change: Yeah, yeah, you know, first I think we, you know, we probably have a couple of more quarters of this consumer normalization.

Speaker Change: Yes, first I think we probably have a couple of more quarters of this consumer normalization.

Orlando Berges: Basically, the improvement in interest rates and the overall environment resulted in a $212 million increase in the fair value of Available for Sale Securities and, therefore, reduced the other comprehensive laws and just. Tangible book value per share, as a result, increased by 19% to $8.54, and the tangible commodity ratio increased to 7.7%. Still, when you look at the remaining other comprehensive loss adjustment, it represents approximately $3.74 in tangible value per share and over 300 basis points in the tangible common equity ratio. So, when rates remain stable, we will continue to recover this other comprehensive loss based on the short duration of our investment portfolio. And, as we have mentioned in prior calls, we continue to reiterate our intention and our ability to retain this investment through maturity. With that, I would like to open the call for questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you feel your question has been answered at any time and you'd like to withdraw it, it's a star followed by two.

Speaker Change: and Joseph Mejiaire will guest.

Speaker Change: Refer to mid year, we will guess.

Speaker Change: On the other hand, remember that charge of a consumer, they don't accumulate.

On the other hand.

Speaker Change: Remember that charge offs consumers.

As that exits is the expectation that it's backfilled with broker deposits and then all in kind of what does that mean for deposit pricing and costs as we go through the first couple of quarters of 24? Well, in terms of cost, clearly what I mentioned in the remarks is that with rates being stable, as we have seen over the last couple of months, and adding the possibility of rates coming down, we believe that we're going to start seeing cost reductions in the market in terms of the possible, the only question continues to be still there could be some shift we have, Strong 34% non-interest-bearing ratio to total deposits, and we could still see a little bit, although that slowed down a lot in the quarter, that migrates to higher cost.

Speaker Change: They don't accumulate.

Speaker Change: you know so they they move to charge up very quickly so they cycle pretty quickly so so the ACL you know the allowance that you state is a function of you know what remains on the portfolio and obviously

Speaker Change: So they move to charge off very quickly so they cycle break lately. So so the ACL.

Speaker Change: You say this is a function well.

Speaker Change: What remains on the portfolio and obviously.

Speaker Change: The coverage you will see on the provision every quarter, if we have to increase the coverage or not.

Speaker Change: The coverage you see on the probation every quarter if we have to increase the coverage,

Speaker Change: to absorb the losses.

Speaker Change: To absorb the losses so so.

Speaker Change: So

Speaker Change: You know, we haven't done a projection.

Speaker Change: We haven't done it broad action.

Speaker Change: all of that matter, but I was up too late.

Speaker Change: On that matter.

Speaker Change: As of today obviously.

Speaker Change: You can take it by, you know, the mortgage business.

Speaker Change: Good bye.

Speaker Change: The mortgage business.

Speaker Change: you know showing much better metrics than pre-pandemic as you mentioned commercial also

Speaker Change: Surely much better metrics.

Speaker Change: Pre pandemic as you mentioned commercial also and the consumer still getting there and most of the growth.

Speaker Change: and consumers still not getting their emotions across.

Speaker Change: which, you know, we manage the book as a one large book, which is now 3.6 billion. So under that, auto is the primary.

Speaker Change: We manage that bolus of one large book, which is now 3.3 dollars 6 billion. So that auto is a primary and a.

Not all the time-deposit portfolio has repriced, you know, still some of the older things are coming due, and that should be some of the other side of the impact on the cost, but clearly on the most of the interest bearing savings and checking accounts, we're there and government repricing shouldn't change much based on this rate, uh in terms of the of the liquidity of the excess liquidity that obviously what we have seen is the market uh, Yeah, market contracted, overall market, Puerto Rico, Myanmar, contracted about 3% in the first three quarters overall market, of about 3% of the overall. In 2023.

Speaker Change: are still registering much better performance.

Speaker Change: Registering much better performance.

Speaker Change: and so charge your rate than we had pre pandemic.

Speaker Change: Charge off rate than than we had pre pandemic.

Speaker Change: What you're seeing is the commercial side is behaving very well, so we have seen some of that reduction coming on the commercial portfolios, as you have seen on the release. The consumer side has increased in the allowance coverage only because of this trend.

Speaker Change: Yes.

What youre seeing in the commercial side is behaving very well. So we have seen some of that reduction comment on the commercial portfolios as us.

Speaker Change: You have seen on the on the on the release the consumer side have increasing the allowance coverage.

Operator: And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. So that's a star followed by one to ask your question. So our first question comes from the line of Timar Brasilia of Wells Fargo. Your line is now open, please go ahead. Hi, good morning.

Speaker Change: Because of this trend.

Speaker Change: You mentioned a 1.7 or something in the call. I don't remember what you were referring to, but we can discuss more. We were above 1.7 if you were talking at ACL pre-pandemic, so we can discuss later if you want a little bit of those ratios.

Speaker Change: The you mentioned, a one seven or something in the call I don't I don't remember, what you where that number you're referring to.

Speaker Change: But we can discuss.

Speaker Change: We were about $1 70, we were talking at ACL.

They posted about 7% in the Florida market. So, you know, when we say excess liquidity, we really talk about, you know, there was a significant incremental liquidity that took place during the pandemic. I think 2021 and 2022 actually started.

Speaker Change: Pre pandemic, so we can discuss.

Operator: Good morning. Starting on the deposit side, I'm just wondering how costs trend now that the lag effect of public funds is in the rear view. You mentioned excess liquidity in your prepared comments a couple of times. I'm just wondering, can you define what you consider excess liquidity remaining on your deposit base?

Speaker Change: Later, if you want a little bit of those ratios.

Speaker Change: Great, thank you.

Speaker Change: Great. Thank you.

Thank you.

Speaker Change: Our next question comes from the line of Alex Twerdahl of Piper Sandler. Your line is now open. Please go ahead.

Speaker Change: Question comes from the line of Alex model.

That started, you know, obviously normalizing in 2023, and we probably expect a few more quarters of that normalization on the deposit, which is customers using that liquidity that they have in their accounts, and they're buying more or consuming more. And that is based on data that we do expect, you know, That liquidity to be, you know, It was larger, the contraction in the U.S. Danny Puerto Rico, but also, on a per capita basis, the pandemic brought more money into Puerto Rico than into the U.S.

Alex: Your line is now open. Please go ahead.

Alexander Roberts Huxley Twerdahl: Hey, good morning.

Alex: Hey, good morning.

Alexander Roberts Huxley Twerdahl: Morning, Adam. Morning, Adam.

Speaker Change: Good morning.

Orlando Berges: As that exits, is the expectation that it's back filled with broker deposits, and then all in kind, what does that mean for deposit pricing and costs as we go through the first couple of quarters of 24? Well, in terms of cost, clearly, what I mentioned in the remarks is that with rates being stable, as we have seen over the last couple of months, and the possibility of rates coming down, we believe that we're going to start seeing cost reductions in the market. The only question continues to be whether there could still be some shift. We have a strong 34% non-interest-bearing ratio to total deposits, and non-interest-bearing deposits to total deposits, and we could still see a little bit, although that's slowed down a lot in the quarter, that migrates to higher costs.

Alexander Roberts Huxley Twerdahl: Orlando, with respect to your NII and your NIM guidance, which I think you said is inclusive of rate cuts, what if we don't get rate cuts? Is the repricing on the asset side you think sufficient to fully offset, you know, deposit, I guess, continued deposit pressure?

Orlando with respect to your NII and your NIM guidance, which I think you said is inclusive of rate cuts, where do we don't get rates cuts as the repricing on the asset side, you think sufficient to fully offset.

Speaker Change: Deposit I guess continued deposit pressure.

Orlando Berges: I believe so, Alex. Remember that a significant portion of the pressure came on the way pricing in the market was foregoing deposits. A great state where we are shouldn't be similar, that repricing shouldn't be similar to what we faced in the past.

Speaker Change: I believe so.

Speaker Change: Thanks.

Speaker Change: Remember that a significant portion of the pressure game on the way pricing in the market, which we're growing deposits.

Speaker Change: Rates stayed with where we are.

And then maybe pulling it all together and looking at the NII trajectory in anticipation of a forward, in anticipation of kind of modeling in the forward yield curve, forward rate curve, we have an inflection in 1Q, you're assuming rate cuts begin in 2Q. Can you give us a sense of what the NII trajectory looks like as we go through the year? Well, in terms of actual percentages, we haven't given specific guidance, but, yeah, we're assuming that there is going to be a pickup on the margin going up with those assumptions on the way the market rates move. Again, it goes back to the $1 billion in securities that will bring in cash flows in 2024. Those securities are yielding less than 1.5%.

Speaker Change: It Shouldnt shouldnt be similar that repricing should it be similar to what we faced in the past.

Orlando Berges: The only repricing on the deposit side would definitely come from the mature in-time deposit.

Speaker Change: The only repricing on the deposit side would definitely come from from the maturing time deposits.

Orlando Berges: Still, that is a manageable one, but once you consider that the lending portfolio is larger, it has a yield of about 7%.

That is a manageable one but once you consider that.

Speaker Change: That the lending portfolio, it's larger rate it has.

Orlando Berges: Not all the time-deposit portfolio has repriced, you know; still some of the older things are coming due. And that should be some of the other side of the impact on the cost. But clearly, most of the interest-bearing savings and checking accounts were there, and government repricing shouldn't change much based on this rate. In terms of the excess liquidity side, obviously, the market, Yeah, the overall market for Puerto Rico, contracted about 3% in the first three quarters of August. There were 3% of overall. In 2023?

Speaker Change: A deal above 7%.

Orlando Berges: I mean, on the commercial side, it's going to be a little bit less combined, but it's still a very ample yield. And the fact that the investment portfolio, as I mentioned, continues to run off, and it's a very low yielding, we should definitely be able to still increase the margin.

Speaker Change: Meaning on the commercial side, it's going to be a little bit later, unless combined but it's still a very.

Speaker Change: Ample yield.

Speaker Change: And the fact that that the investment portfolio as I mentioned continues to run off.

Speaker Change: It's a very low yielding we should definitely be able to still increase the margins.

Orlando Berges: assuming those components.

That would be replaced by a lending side. The consumer lending portfolio is a fixed-rate portfolio, as well as most of the CRE portfolio. So those will continue to be there. But assuming rates move as expected, you know, conversations of four to five rate cuts in the year should also lower the cost of deposits. That would compensate for that.

Speaker Change: Assuming those those components.

Speaker Change: Okay.

Speaker Change: Okay. And then, you know, you kind of alluded a little bit to sort of the yield on commercial loans. Can you just give us a sense for, you know,

Speaker Change: And then.

Speaker Change: You kind of alluded a little bit just around the yield on commercial loans can you just give us a sense for it.

Speaker Change: We've seen a pretty big pullback in the five-year,

Speaker Change: Like what sort of spreads or like down there right now.

Speaker Change: We've seen a pretty big pullback in the five year and I think some bank managements are saying that customers are demanding that and others are saying that they've got pricing power and just kind of curious.

Speaker Change: I think some bank management are saying that customers are demanding that and others are saying that they've got pricing power. I'm just kind of curious.

Orlando Berges: Deposit about 7%, contracted about 7% in Florida. So, you know, what we say is just liquidity. We really talk about, you know, there was a significant incremental liquidity that took place during the pandemic in 2021 and 2022 that actually started, you know, obviously normalizing in 2023. And we probably expect a few more quarters of that normalization on the deposit, which is customers' use of that liquidity that they had in the accounts and they've been buying more or consuming more. And well, that is based on the data that we do expect. That's the query we need to be... It was larger, the contraction in the U.S. Valley Blu-ray market, but also, on a per capita basis, the pandemic brought more money to Puerto Rico than to the U.S.

And the wholesale funding components are of a short-term nature. So they would be replaced with shorter, I mean, lower rates. Therefore, we're assuming that net interest margin should start picking up going forward. The one caveat on deposits is that obviously, you know, the non-interest-bearing component, we saw more stability in the fourth quarter, but if it changes a lot, changes a little bit the dynamics, but still, the overall, I believe, trend would be, as I just mentioned, with some improvements in margin, and the other component we have a lot We have a larger portfolio starting the quarter than we had in the private for their long portfolios. That's good, Colin.

Speaker Change: were able to put on new production.

Speaker Change: Were you able to put on new production in Puerto Rico.

Speaker Change: and Puerto Rico.

Speaker Change: The overall yields on the commercial portfolio, on the portfolio, on the general loan portfolio, it's about 773 in...

Speaker Change: The overall yields on the on the commercial portfolio on the portfolio and the yen on our loan portfolio, it's about $7 73.

Speaker Change: In.

Speaker Change: as of the for the third quarter. The spreads, we continue to price similarly, which are based on market rates. So we try to sustain a spread according to internal profitability models that we want to achieve on each case considering, you know, operating expenses and things like that.

For the third quarter.

Speaker Change: The spreads.

Speaker Change: We continue to price similarly, which are based on market rates. So we try to to sustain that spread according to internal profitability models that we wanted to achieve.

Speaker Change: On each case considering.

<unk> expenses and things like that.

Speaker Change: So you'll see, depending on the kind of loan and the kind of pricing, somewhere between 2.5% and 3.5% spreads, but it all depends on the terms and the nature of the facility.

So so youll see the bundle under guidance alone on the kind of pricing somewhere between three 5% spreads.

And then, just last for me, looking at credit, we're continuing to see a normalization of the consumer, it seems like, from a charge-off standpoint. I guess, A, how close are we to reaching what you ultimately expect to be a normalization in those charge-offs? And then looking at the allowance ratio, which has moved lower every quarter in 23, is that a sign of confidence around broader credit? And could it ultimately get back to a level before the pandemic in the 1.7s again?

Speaker Change: It all depends on the terms.

Speaker Change: And the nature of the of the facility.

Speaker Change: So over market terms, I'm assuming, or market rates.

Speaker Change: So over market terms, I'm, assuming or market rates.

Speaker Change: So the consumer side, we continue to see on the auto yields above 8%.

Speaker Change: So.

Orlando Berges: Okay, thanks for that. And then, maybe pulling it all together and looking at the NII trajectory, in anticipation of a forward and anticipation of some kind of modeling in the forward yield curve, forward rate curve, we have an inflection in 1Q; you're assuming rate cuts begin in 2Q. Can you give us a sense of what the NII trajectory looks like as we go through the year? Well, in terms of actual percentages, we haven't given specific guidance, but yeah, we're assuming that there is going to be a pickup on the margin going up with those assumptions about the way market rates move. Again, it goes back to the $1 billion in securities that cash flows would come in in 2024. Those securities are yielding less than one and a half percent.

Speaker Change: The consumer side.

Speaker Change: Continue to see.

Speaker Change: On the auto yields above 8%.

Speaker Change: Credit Card, it's priced out of a prime rate, so it's, you know, the 16 to 18% range.

Speaker Change: The credit card it spreads out over Brian right. So.

Speaker Change: Sure.

Speaker Change: The end of 16% to 18% range.

Speaker Change: and obviously residential, we do exactly the same as you see in the marketing in the U.S.

Speaker Change: And.

Speaker Change: Obviously residential we do exactly the same as Youll see in the marketing in the U S.

Yeah, yeah, you know, first, I think we probably have a couple of more quarters of this consumer normalization, and Joseph Mejiaire will be our guest. On the other hand, remember that charges from a consumer don't accumulate, you know, so they move to charge up very quickly, so they cycle pretty quickly, so the ACL, you know, the allowance that you state is a function of what remains in the portfolio and, obviously, the coverage you see on the probation every quarter if we have to increase the coverage to absorb the losses. So, you know, we haven't done a projection, all of that matters, but I was up too late.

Speaker Change: But we are not adding too much in terms of portfolio on the residential side. So the average yields on that portfolio are 570 or 580 on the overall portfolio.

Speaker Change: But we are not adding too much in terms of portfolio and the residential side. So.

Speaker Change: The average yields on that portfolio.

Speaker Change: $575 80 on the overall portfolio.

Speaker Change: and that should stay somewhere in there.

Speaker Change: And that should stay somewhere in there.

Speaker Change: because of the movement of the new cases, the repayments are upsetting, you know, a lot of what we put in and the new things we put in.

Speaker Change: Because of the movement of the new gate of the repayments are offsetting.

Speaker Change: A lot of what we put in.

Speaker Change: New things we put in.

Speaker Change: Great, thanks. And then I guess just final question for me, just as I think about capital and capital generation and, you know, Aurelio, you, I think, mentioned your prepared remarks, third year of 100% payout.

Speaker Change: Great. Thanks, and then I guess just final question for me just as I think about capital and capital generation.

You mentioned in your prepared remarks third year of a 100% payout and you think about the growth down in Puerto Rico. It seems like the growth that's available even though it's picked up a lot is probably still not sufficient to utilize it.

Speaker Change: You think about the growth down in Puerto Rico, it seems like the growth that's available, even though it's picked up a lot, is probably still not sufficient to utilize the full amount of capital that you guys generate every year. So is it fair to assume 100% payout with respect to dividend buyback in the near term should continue?

Orlando Berges: That would be replaced by a lending side. The consumer lending portfolio is a fixed-rate portfolio, as well as most of the CRE portfolio. So those will continue to be there.

You can take it by, you know, the mortgage business, showing much better metrics than pre-pandemic, as you mentioned commercial also, and consumers still not getting their emotions across, which, you know, we manage the book as a one large book, which is now 3.6 billion. So under that, auto is the primary, and they are still registering much better performance, and so charge your rate than we had pre-pandemic. What you're seeing is the commercial side is behaving very well, so we have seen some of that reduction coming on the commercial portfolios, as you have seen in the release. The consumer side has increased in the allowance coverage only because of this trend.

Speaker Change: Full amount of capital that you guys generate every year. So is it fair to assume 100% payout with respect to dividend buyback in the near term should it should continue.

Orlando Berges: But assuming rates move as expected, you know, conversations of four to five rate cuts in the year should also lower the cost of deposits that would compensate for that. And the hotel funding components are short-term in nature. So they would be replaced with shorter, I mean, lower rates.

Speaker Change: Yes, it's a fair assumption.

Speaker Change: Yes, it's a fair assumption, yes, that's correct.

Speaker Change: Correct.

Speaker Change: Perfect. Thanks for taking.

Speaker Change: Perfect, thanks for taking the time.

Speaker Change: Thank you.

Speaker Change: Okay. Thank you.

Orlando Berges: Therefore, we're assuming that net interest margin should start picking up going forward. The one caveat on deposits is that obviously, you know, the non-interest-bearing component, we saw more stability in the fourth quarter, but if it changes a lot, changes a little bit the dynamics, but still, the overall, I believe, trend would be, as I just mentioned, with some improvements in margins, and the other component, we have We have a larger portfolio starting the quarter than we have in the private sector of the Law Portfolio. Got it. That's a good color.

Speaker Change: As a reminder, if you'd like to ask a question, please press the bar followed by one on your telephone keypad. Our next question comes from the line of Kelly Motor of KBW. Your line is now open. Please go ahead.

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

Speaker Change: Our next question comes from the line of Kelly <unk> with <unk>. Your line is now open. Please go ahead.

Kelly: Hi, good morning, Thanks for the question.

Kelly:

Kelly Motor: might circle back.

Kelly: I'll go back.

The loan growth side of things I appreciate that.

You mentioned a 1.7 or something in the call. I don't remember what you were referring to, but we can discuss it more. We were above 1.7 if you were talking at ACL pre-pandemic, so we can discuss later if you want a little bit of those ratios. Great, thank you. Our next question comes from the line of Alex Twerdahl of Piper Sandler. Your line is now open. Please go ahead. Hey, good morning. Morning, Adam. Good morning, Adam.

Color that you are.

Speaker Change: Thank you Dan you're looking for mid single digit growth.

Speaker Change: Sounded like you were optimistic that crop.

Speaker Change: Morris.

Kelly Motor: and many more.

Speaker Change: One is that was that the right interpretation.

Speaker Change: Where do you see could you see opportunities.

Speaker Change: Do better or Conversely, where.

Speaker Change: Might there be more pressure.

Orlando Berges: And then just last for me, looking at credit, we're continuing to see a normalization of the consumer. It seems like from a charge-off standpoint, I guess how close are we to reaching what you ultimately expect to be a normalization and those charge-offs, and then looking at the allowance ratio, that's moved lower every quarter in 23. Is that a sign of confidence around broader credit? And could it ultimately get back to a level before the pandemic in the one sevens again?

Kelly Motor: yeah you know obviously the mix if you look at the three prior years you know you know we have we have achieved double digit growth in the consumer

Speaker Change: Yes, obviously the mix if you look at the three prior years.

Speaker Change: We have achieved double digit growth in the consumer.

Kelly Motor: You know, we expect that demand to reduce a little bit. Obviously, the larger the portfolios, you know, the repayments are larger too. So when you combine, you know, demand and repayments, so we don't see double digit growth in the consumer world this year.

Speaker Change: We expect that demand to reduce a little bit obviously, the larger the portfolio of the.

Speaker Change: The repayments on larger too so when you combine demand and repayments. So so we don't see double digit growth in the consumer world. This year.

Orlando, with respect to your NII and your NIM guidance, which I think you said was inclusive of rate cuts, what if we don't get rate cuts? Is the repricing on the asset side you think sufficient to fully offset, you know, deposit, I guess, continued deposit pressure? I believe so, Alex. Remember that a significant portion of the pressure came from the way pricing in the market was foregoing deposits. A great state where we are shouldn't be similar, that repricing shouldn't be similar to what we faced in the past.

Kelly Motor: On the other hand, we do have the construction portfolio.

Speaker Change: On the other hand, we do have the construction portfolio.

Kelly Motor: So we see, you know, we experience

Orlando Berges: Yeah, yeah, you know, first, I think we probably have a couple of more quarters of this consumer normalization to get on the air. On the other hand, you know, remember that charges on the consumer don't accumulate, you know, so they move to charges very quickly. So they cycle pretty quickly.

Speaker Change: So we see.

Speaker Change: Experience.

Kelly Motor: You know, mid-single digit in the commercial overall when we add the disbursement that we expect this year.

Speaker Change: Mid single digit in the commercial overall when we add.

Speaker Change: It is imperative that we expect next year in the construction.

Kelly Motor: so that should actually be larger than that. And then mortgage, we see basically almost flat year

Speaker Change: That should actually be larger than that and then mortgage we see basically.

Almost flat year.

Kelly Motor: We have achieved, you know, in the most recent quarter. So definitely there are, you know, we look for opportunities.

The only repricing on the deposit side would definitely come from the mature in-time deposit. Still, that is a manageable one, but once you consider that the lending portfolio is larger, it has a yield of about 7%. I mean, on the commercial side, it's going to be a little bit less combined, but it's still a very ample yield. And the fact that the investment portfolio, as I mentioned, continues to run off, and it's a very low yielding asset, we should definitely be able to increase the margin, assuming those components. Okay.

Speaker Change: We have achieved in the most recent quarter, so definitely there will offer opportunities.

Orlando Berges: So the ACL, you know, the allowance that you state is a function of, you know, what remains in the portfolio. And obviously, the coverage you see on the probation every quarter, we have to increase the coverage to absorb the losses. So. You know, we haven't done a projection that matter, but I was up too late, you know, obviously.

Kelly Motor: to do better than that, but obviously when we look at all the noise around the world and rates, I think rates could improve that, so we'll see how markets move and how the rate cuts

Speaker Change: A little better than that.

Speaker Change: But obviously when we look at all the noise around the world and in rates I think rates would.

Speaker Change: Good could improve that so we'll see how how markets molten and how the rate cuts.

Kelly Motor: you know, motivate, you know, that incremental investments for us to continue to participate. So that, but obviously, you know, we're sticking with our guidance on mid-single. Obviously, we like to do better.

Speaker Change: Multi bay that incremental investments.

Speaker Change: For us to continue to participate so that while obviously, we were sticking with our guidance of mid single, obviously, we like to do better.

And then, you kind of alluded a little bit to sort of the yield on commercial loans. Can you just give us a sense for, you know, we've seen a pretty big pullback in the five-year. I think some bank managers are saying that customers are demanding that, and others are saying that they've got pricing power. I'm just kind of curious, if they were able to put on new production, and Puerto Rico.

Orlando Berges: They get by probably, you know, it's business, a, showing much better metrics than pre-pandemic, as you mentioned, commercial also, and consumers still not getting their emotions across, which, you know, we manage the book as one large book, which is now 3.6 billion. So under that, auto is the primary, and is still registering much better performance. What you're seeing is the commercial side is behaving very well, so we have seen some of that reduction coming on the commercial portfolios, as you have seen in the release. The consumer side has increased in the allowance coverage only because of this trend.

Speaker Change: Thank you.

Speaker Change: Got it that's helpful.

Speaker Change: I'm

Speaker Change: And clearly this quarter.

Speaker Change: Um,

Speaker Change: Growth was impacted by macro pieces, just wondering I appreciate the color overall about.

Speaker Change: We are new commercial production yields are coming on just wondering is that kind of larger alone.

Speaker Change: What.

Speaker Change: Noticeably different than.

Speaker Change: We're commercially.

The overall yields on the commercial portfolio, on the portfolio, on the general loan portfolio are about 773 in., as of the third quarter. The spreads, we continue to price similarly, which are based on market rates. So we try to sustain a spread according to internal profitability models that we want to achieve in each case considering, you know, operating expenses and things like that.

Speaker Change: I think typically price right now just to be mindful that modeling it.

Yeah.

Speaker Change: no it it was on on the same it was uh in fact i i think that's probably gonna you you can get that on the high side of the range that Orlando mentioned yeah yes

Speaker Change: No. It was on the same it was in fact, I think thats probably good you can get.

Speaker Change: On the high side of the range I Rolando mentioned the spreads here.

Speaker Change: Yeah, and then the pilot, I have to tell you, the commercial pilot is very healthy, you know, definitely the, you know, some projects on the reconstruction side for housing, so, you know, supported by CDBG, you know, some acquisition of businesses, expansion of businesses.

Speaker Change: Yeah.

Orlando Berges: You mentioned a 1.7 or something in the call; I don't remember what you were referring to, but we can discuss more. We were above 1.7 if you were talking at ACL pre-pandemic, so we can discuss later if you want a little bit of those ratios. Great.

Speaker Change: And then the final <unk> I have to tell you the commercial problem its very healthy.

Speaker Change: Definitely the some projects on the reconstruction side for housing.

So you'll see, depending on the kind of loan and the kind of pricing, somewhere between 2.5% and 3.5% spreads, but it all depends on the terms and the nature of the facility. So, over market terms, I'm assuming, or market rates. So on the consumer side, we continue to see auto yields above 8%. Credit Card, it's priced out of the prime rate, so it's, you know, the 16 to 18% range, and obviously, residential, we do exactly the same as you see in the marketing in the U.S.

Speaker Change: So as reported by <unk>.

Speaker Change: From the acquisition of businesses expand general businesses.

Speaker Change: So today we see the pipeline as a healthy one,

Speaker Change: So we do.

Speaker Change: Today, we see the <unk>.

Orlando Berges: Thank you. Our next question comes from the line of Alex Twerdahl of Piper Sandler. Your line is now open, please go ahead. Hey, good morning. Morning, Adam.

Speaker Change: It's a healthy one.

Speaker Change: if we compare to what we saw the last quarter.

Speaker Change: If we compared to what we saw the next quarter or so.

Speaker Change: So obviously, as we said always, the 150 loan was a one-off loan, the usual loan that we do every quarter.

So obviously the as we said always that 150 long was a.

Orlando Berges: Orlando, with respect to your NII and your NIM guidance, which I think you said was inclusive of rate cuts, what if we don't get rate cuts? Is the repricing on the asset side you think sufficient to fully offset? You know, deposit, I guess, continued deposit pressure. I believe so, Alex.

Speaker Change: The one off loan they usually alone that we do every quarter.

Speaker Change: but we see enough volume additionally to continue sustaining

Speaker Change: What we see in Av.

Speaker Change: Volume on nationally to continue sustaining.

Speaker Change: and the other commercials that we did last

Speaker Change: The level of commercials that we did last year.

Speaker Change: Got it.

Speaker Change: Got it maybe husky.

Speaker Change: a lot.

Speaker Change: A housekeeping question for me.

Seems like the repricing of that.

But we are not adding too much in terms of the portfolio on the residential side. So the average yields on that portfolio are 570 or 580 on the overall portfolio, and that should stay somewhere in that range because of the movement of the new cases, the repayments are upsetting, you know, a lot of what we put in and the new things we put in. And then I guess just one final question for me, just as I think about capital and capital generation and, you know, Aurelio, you, I think, mentioned your prepared remarks, third year of 100% payout. When you think about the growth down in Puerto Rico, it seems like the growth that's available, even though it's picked up a lot, is probably still not sufficient to utilize the full amount of capital that you guys generate every year. So is it fair to assume 100% payout with respect to dividend buyback in the near term should continue? Yes, it's a fair assumption.

Speaker Change: It's going to be a big part of the story.

Orlando Berges: Remember that a significant portion of the pressure came from the way pricing in the market with foregoing deposits. Rates to stay where we are shouldn't be similar. That repricing shouldn't be similar to what we faced in the past.

Speaker Change: As we head through this year.

Speaker Change: Can you remind us what.

Yeah.

Speaker Change: and many more.

Speaker Change: About where those securities are rolling off that.

Speaker Change: Just similar to where average security yield right now.

Orlando Berges: The only repricing on the deposit side would definitely come from the maturing time deposit. Still, that is a manageable one, but once you consider that the lending portfolio is larger, it has a yield of about 7%. I mean, on the commercial side, it's going to be a little bit less combined, but it's still a very ample yield. And the fact that the investment portfolio, as I mentioned, continues to run off, and it's a very low yielding asset, we should definitely be able to increase the margin, assuming those components.

Speaker Change: Well, the average yield on those securities

Speaker Change: While the average yield on those securities.

Speaker Change: on a non-taxable equivalent basis is about one and a half percent.

Speaker Change: Not only on a non taxable equivalent basis until our one 5%.

Speaker Change: So that's basically the average of what's rolling off should be close to that.

Speaker Change: So that's basically the average of what's rolling off.

Speaker Change: Would be close to that.

Speaker Change: I appreciate it I'll step back. Thank you so much for the color.

Speaker Change: Thank you, Gurley.

Speaker Change: Thank you Kelly.

Speaker Change: Thank you Mr <unk>.

Speaker Change: If there are no additional questions waiting at this time, I'd like to hand the conference call back over to Ramon Rodriguez for closing remarks.

Speaker Change: No questions at this time I would like to hand, the call back over to Robert Rodriguez for closing remarks.

Robert Rodriguez: Thanks to everyone for participating in today's call, we will be attending <unk> financial services conference in Boca on February 15th Banc of America Conference in Miami on February 21, Raymond James Institutional Investor Conference in Orlando on March five.

Ramon Rodriguez: Thanks to everyone for participating in today's call. We will be attending KBW's Financial Services Conference in Boca on February 15th, Bank of America's Conference in Miami on February 21, Raymond James Institutional Investor Conference in Orlando on March 5th.

Orlando Berges: And then, you kind of alluded a little bit to sort of the yield on commercial loans. Can you just give us a sense for, you know, like what sort of spreads are like down there right now? We've seen a pretty big pullback in the five-year, and I think some bank managers are saying that customers are demanding that, and others are saying that they've got pricing power. I'm just kind of curious about where you're able to put on a new production in Puerto Rico.

Ramon Rodriguez: We look forward to seeing a number of you at these events as we greatly appreciate your continued support. Have a great day. Thank you. Thank you. Thank you all.

Robert Rodriguez: Look forward to seeing a number of you at these events as we greatly appreciate your continued support of a great day.

Correct. Perfect. Thanks for taking the time. Thank you. As a reminder, if you'd like to ask a question, please press the bar followed by one on your telephone keypad. Our next question comes from the line of Kelly Motor of KBW. Your line is now open.

Speaker Change: Thank you. Thank you all.

Speaker Change: © transcript Emily Beynon

Speaker Change: Ladies and gentlemen, thank you for joining us on today's call have a great rest of your day you may now disconnect your lines.

Speaker Change: Ladies and gentlemen, thank you for joining us on today's call. Have a great rest of your day. You may now disconnect your line.

Speaker Change: For more information, visit www.fema.org

[music].

Please go ahead, and I might circle back, and many more. Obviously, the mix if you look at the three prior years, you know we have achieved double-digit growth in the consumer. We expect that demand to reduce a little bit. Obviously, the larger the portfolios, you know, the repayments are larger too. So when you combine, you know, demand and repayments, we don't see double-digit growth in the consumer world this year.

Orlando Berges: The overall yields on the general loan portfolio are about $7.73 in total. The spreads, we continue to price similarly, which are based on market rates. So we try to sustain a spread according to internal profitability models that we want to achieve in each case, considering operating expenses and things like that. So you'll see, depending on the kind of loan and the kind of pricing, somewhere between 2.5% and 3.5% spreads, but it all depends on the terms and the nature of the facility.

Speaker Change: Yes.

[music].

On the other hand, we do have the construction portfolio. So we see, you know, we experience mid-single digit growth in the commercial overall when we add the disbursements that we expect this year, so that should actually be larger than that. And then mortgage, we see basically an almost flat year. We achieved that in the most recent quarter. So definitely, there are, you know, we look for opportunities to do better than that, but obviously, when we look at all the noise around the world and rates, I think rates could improve that, so we'll see how markets move and how the rate cuts motivate, you know, those incremental investments for us to continue to participate. So that, but obviously, you know, we're sticking with our guidance on mid-single. Obviously, we would like to do better.

Orlando Berges: So, over market terms, I'm assuming over market rates. So, you know, on the consumer side, we continue to see, you know, on the auto yields above 8%. The credit card, it's priced out of the prime rate, so it's, you know, in the 16-18% range. And obviously, residential, we do exactly the same as you see in the marketing in the U.S. But we are not adding too much in terms of portfolio on the residential side, so the average yields on that portfolio are, you know, 570 or 580 on the overall portfolio, and that should stay somewhere in that range because of the movement of the new cases. The repayments are upsetting, you know, a lot of what we put in and the new things we put in.

Thank you. I'm, Um, no it was on the same level, and in fact, I think that's probably gonna you can get that on the high side of the range that Orlando mentioned, yeah, yeah, and then the pilot, I have to tell you, the commercial pilot is very healthy, you know, definitely the, you know, some projects on the reconstruction side for housing, so, you know, supported by CDBG, you know, some acquisition of businesses, and So today we see the pipeline as a healthy one compared to what we saw in the last quarter. So obviously, as we always say, the 150 loan was a one-off loan, the usual loan that we do every quarter, but we see enough volume additionally to continue sustaining and the other commercials that we did last. Got it, a lot, and many more. Well, the average yield on those securities, on a non-taxable equivalent basis, is about one and a half percent.

Orlando Berges: Great, thanks. And then I guess just one final question for me, just as I think about capital and capital generation, and you know, really, you, I think, mentioned in your prepared remarks the third year of 100% payout. When you think about the growth down in Puerto Rico, it seems like the, you know, the growth that's available, even though it's picked up a lot, is probably still not sufficient to utilize the full amount of capital that you guys generate every year. So is it fair to assume 100% payout with respect to dividend buyback in the near term should continue? Yes, it's a fair assumption.

Orlando Berges: Perfect. Thanks for taking the time. Thank you. As a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. Our next question comes from the line of Kelly Motors of KBW. Your line is now open; please go ahead.

So that's basically the average of what's rolling off should be close to that. Thank you, Gurley. If there are no additional questions waiting at this time, I'd like to hand the conference call back over to Ramon Rodriguez for closing remarks. Thanks to everyone for participating in today's call. We will be attending KBW's Financial Services Conference in Boca on February 15th, Bank of America's Conference in Miami on February 21, and Raymond James Institutional Investor Conference in Orlando on March 5th.

Orlando Berges: Yeah, you know, obviously, the mix, if you look at the three prior years, you know, we have achieved double-digit growth in the consumer. We expect that demand to reduce a little bit. Obviously, the larger the portfolios, you know, the repayments are larger too. So when you combine, you know, demand and repayment, we don't see double-digit growth in the consumer world this year. On the other hand, we do have the construction portfolio. So we see, you know, we experience it. You know, I may think of DG in the commercial overall when we add the disbursement that we expect this year. So that should actually be larger than that.

We look forward to seeing a number of you at these events as we greatly appreciate your continued support. Have a great day! Thank you. Thank you. Thank you all. Transcript Emily Beynon, Ladies and gentlemen, thank you for joining us on today's call. Have a great rest of your day. You may now disconnect your line. For more information, visit www.fema.org

Orlando Berges: And then mortgage, we see basically almost flat years we achieved in the most recent quarter. So definitely there, you know, we look for opportunities to do better than that, but, obviously, when we look at all the noise around the world and rates, I think rates will, you know, could improve that. So we'll see how markets move and how the rates cut motivate, you know, those incremental investments for us to continue to participate. So, obviously, you know, we're sticking with our guidance on mid-single. Obviously, we'll aim to do better. http://TheBusinessProfessor.com I'm, No, it was on the same level, it was, in fact, I think that's probably, you can get that on the high side of the range that Orlando mentioned, yeah. Yeah, and then the pilot meets, I have to tell you, the commercial pilot meets very healthy.

Orlando Berges: You know, definitely some projects on the reconstruction side for housing, so, you know, supported by CDBG, you know, some acquisition of businesses, expansion of businesses. So we, you know, today we see the pipeline, you know. It's a healthy one if we compare it to what we saw during the last world war. So obviously, as we always say, the 150 loan was a one-off loan, not the usual loan that we do every quarter. But what we see is enough volume additionally to continue sustain. You know, the level of commercials that we did last year got it, and much, much more. Thank you so much. About. Well, the average yield on those securities... not only on a non-taxable equivalent basis is about one and a half percent.

Orlando Berges: So that's basically the average of what's rolling off. It should be close to that. Thank you. As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Ramon Rodriguez for closing remarks. Thanks to everyone for participating in today's call. We will be attending KBW's financial services conference in Boca on February 15th, Bank of America's conference in Miami on February 21, and Raymond James Institutional Investor Conference in Orlando on March 5. We look forward to seeing a number of you at these events as we greatly appreciate your continued support.

Operator: Have a great day. Thank you. Thank you. Ladies and gentlemen, thank you for joining us on today's call. Have a great rest of your day; you may now disconnect your line. Thanks for watching! www.globalonenessproject.org