Q2 2024 First BanCorp Earnings Call

Operator: Good morning, everyone. My name is Kiki, and I will be your conference operator today. I would like to welcome everyone to First Bancorp's 2Q 2024 financial results. During the presentation, you will have the opportunity to ask a question by pressing a star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Ramon Rodriguez, Corporate Strategy and Investor Relations for First Bancorp. Ramon, please go ahead.

Good morning, everyone. My name is Keith and I will be your conference.

Operator: My name is Kiki, and I will be your perfect operator today.

Speaker Change: Later today I would like to welcome everyone to the first Bancorp took Q2 thousand 24 financial results. During the presentation you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad. If you change your mind. Please press star followed by two.

Operator: I would like to welcome everyone to the First Bancorp ToolQ 2024 financial results. During the presentation, you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two.

Ramon Rodriguez: I will now hand you over to your host, Ramon Rodriguez, Corporate Strategy and Investor Relations for First Bancorp to begin.

Ramon Rodriguez: I'll now hand, you over to your host Ramon Rodriguez corporate strategy and Investor Relations for first Bancorp to begin Ramon. Please go ahead.

Ramon Rodriguez: Ramon, please go ahead. Thank you, operator.

Ramon Rodriguez: Thank you, operator. Good morning, everyone.

Ramon Rodriguez: Thank you operator, good morning, everyone. Thank you for joining first Bancorp's conference call and webcast to discuss the company's financial results for the second quarter of 'twenty 'twenty four.

Ramon Rodriguez: Good morning, everyone. Thank you for joining First Bancorp's conference call and webcast to discuss the company's financial results for the second quarter of 2024. Joining you today from First Bancorp are Aurelio Aleman, President and Chief Executive Officer, and Orlando Berges, Executive Vice President and Chief Financial Officer.

Ramon Rodriguez: Thank you for joining First Bancorp's conference call and webcast to discuss the company's financial results for the second quarter of 2024. Joining you today from First Bancorp are Aurelio Aleman, 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 regarding the plans and objectives of the company's business.

Speaker Change: You do they from first Bancorp are Aurelio Aleman, President and Chief Executive Officer, and Orlando Beta has 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 company's business. The company's actual results could defer materially from the forward-looking statements made due to the important factors described in the company's latest SEC filings. The company assumes no obligation to update any forward-looking statements made during the call.

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

Speaker Change: Before we begin todays 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. That's what our statements on the plans and objectives of the company's business. The company's 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. If anyone does not already have a copy of the webcast presentation or press release, you can access them at our website App FPP investor Dot Com at this time I'd like to turn the call over to our CEO Aurelio anymore.

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

Ramon Rodriguez: Thank you, Ramon.

Aurelio Aleman: Thank you, Ramon. Good morning to everyone, and thank you for joining us today.

Ramon: Thank you Ramon.

Aurelio Aleman: Good morning to everyone, and thank you for joining today. Let's turn to page 4 to go over the highlights of the quarter. We posted another solid quarter for the franchise of Trump Profitability and Positive Operating Leverage, earning 76 million in net income and delivering external returns of 1.61%. Adjusted pre-tax preparation income moved upward, reaching 130 million, up to 24% versus the prior quarter, mostly driven by 90% income and lower expenses. In terms of the balance, total loan grew by 2.4% in quarter. Analyze driven by growth across all business segments. We see in a slightly late some of the construction funding during the year, in the first half of the year, and we do expect to close this gap during the back end of the year.

Aurelio Aleman: Turning to everyone and thank you for joining today.

Aurelio Aleman: Let's turn to page four to go over the highlights of the quarter. We posted another solid quarter for the franchise of strong profitability and positive operating leverage, earning $76 million in net income and delivering a strong return on assets of 1.61%. Adjusted Pre-Tax Pre-Provision Income Moved Upward, reaching $113 million, up 2.4% versus the private borrower, mostly driven by net interest income and lower expenses. In terms of the balance sheet, total loans grew by 2.4% in the quarter, annualized, driven by growth actually across all business segments.

Speaker Change: Let's turn to page four to go over the highlights of the quarter.

Speaker Change: We bolstered another solid quarter for the franchise, a strong profitability and positive operating leverage.

Speaker Change: 76 million and net income on delivering a strong return on assets of 161%.

Adjusted pre tax pre provision income.

Ramon: Upward.

Ramon: Reaching 30 million up two 4% versus the prior quarter, mostly driven by mainly that is income and lower expenses.

Ramon: In terms of the balance sheet total loans grew by two 4% linked quarter.

Ramon: Driven by growth actually a growth you all business segments.

Aurelio Aleman: We've seen a slight delay in some of the construction funding during the year, in the first half of the year, and we do expect to close this gap during the back end of the year. Long pipelines remain healthy and are mostly supported by the stable environment that we continue to experience in our operating regions. And we do continue to sustain our mixing and digital growth guidance for the year, primarily due to the commercial construction on auto loan activity that we continue to experience.

Ramon: We've seen a slight delay in some of the construction funding during the year in the first couple of years and we do expect to close this gap.

Ramon: The back end of the year.

Aurelio Aleman: Loan pipeline remains healthy and are mostly supported by the stable environment that we continue to experience in our operating regions. And we do continue to sustain our meeting at the Loan Rose Guidance for the year, primarily due to the commercial construction on oral activity that we continue to experience. In terms of the positive franchise, we had a positive quarter. We were very pleased to see improvement in the core deposit flows during the quarter, particularly in the non-interesting accounts, because now represents 34% of our total deposits. Core deposits are ordered and broken, and government deposits were up 132 million registered in growth, according to all the three years.

Ramon: Loan pipelines remain healthy and are mostly supported by the stable environment. We continued to experience in our operating regions.

Ramon: And we do continue to sustain our mid single digit loan growth guidance for the year, primarily with commercial construction loan quarter on activity that we continue to experience.

Aurelio Aleman: In terms of the deposit franchise, we had a positive quarter; we were very pleased to see improvement in the core deposit flow during the quarter, particularly in the non-interest-paying accounts, which now represent 34% of our total deposit. Core Deposit Ordered and Brokered and Government Deposits were up $132 million, registered in gross at Coros Holder Treasuries. We are highly encouraged by the accretive nature of our balance sheet position for the remainder of the year, as it will benefit from the sizable bond book repricing opportunities coupled with the expected gradual easing in deposit costs. The credit environment continues to play out as expected, even though NPAs decreased to $127 million.

Ramon: In terms of deposit Brian Jay is we had a positive quarter. We were very pleased to see improvement in the core deposit flows during the quarter, particularly in the north and spending accounts now represent 34% of our total deposits.

Speaker Change: Core deposits eroded in Brooklyn in government deposits were up 132 million raised it in growth at <unk>.

Aurelio Aleman: We are highly encouraged by the accredited nature of our balance position for the remainder of the year. As definitely it will benefit from the size of all bond repressing opportunities, coupled with the expected gradual easing in deposits. of course. Decree, the environment continued to play out as expected. Even though MPA decreased to $121 million, we continue to see early the link when seeing a charge of trend within our consumer book returning to a historical level consistently with our expectations, actually. On the capital front, we sustain our commitment to preserve the value during the quarter by returning 100% of earnings in the form of buybacks and dividends, while continuing to execute our organic long growth strategy. We did maintain a very strong seat in one ratio of 15.8%.

We are highly encouraged by the accretive nature of our balance sheet position for the remainder of the year.

Speaker Change: Definitely it will benefit from the sizable bonville repricing opportunities.

Speaker Change: Cobalt with the expected groundwater easing in deposit costs.

Speaker Change: Be great environment continued to play out as expected, even though npa's decrease to $127 million, we continue to see early delinquency and charge off trends.

Aurelio Aleman: We continue to see early delinquency in charge of trends within our consumer book returning to the SOTICA levels consistently with our expectations. On the capital front, we continue our commitment to preserve value during the quarter by returning 100% of earnings in the form of buybacks and dividends. While continuing to execute our organic long-growth strategy, we did maintain a very strong CET1 ratio of 15.8%. Once again, you know, really great quarter, another great quarter of strong financial results.

Speaker Change: Within our consumer book return to historical levels consistently with our expectations actually.

Speaker Change: On the capital front, we sustain our commitment to research over the value of it in the quarter by returning 100% of earnings in the form of buybacks and dividends.

Speaker Change: While continued to executing our organic loan growth strategy.

Speaker Change: We did maintain a very strong CET one ratio of 15, 8%.

Aurelio Aleman: Once again, you know, really great quarter; another great quarter of strong financial resolve. We thank our teams for making this possible.

Once again really great quarter, and another great quarter with strong financial result, we thank our teams were making this possible.

Aurelio Aleman: We thank our teams for making this possible. They are the backbone of the organization, and we're extremely proud of what we have accomplished over the past few years. Now, let's go to slide five for some additional highlights of the macro.

Aurelio Aleman: They are the backbone of the organization, and we're extremely proud of what we have accomplished over the past few years.

Speaker Change: The backbone of the organization, we are extremely proud of what we have accomplished over the past few years.

Aurelio Aleman: Let's go to slide five to some additional highlights of the macro. You know, definitely our team has a proven track record on delivering consistent performance and adapting to changing market conditions, particularly in our main market. In Puerto Rico, the macro background continues to reflect stabilization across most economic fronts. With labor market trend, sustaining the robot trajectory, passenger activity in the main airport, reaching record levels, and, you know, strong consumer confidence every day is why, you know, year-to-day self-collection, self-tax collections, actually. As we say in the past, the unprecedented level of the Earth reports continue to drive economic activity in the island.

Speaker Change: Let's go to slide five to some additional highlights for the macro.

Aurelio Aleman: You know, definitely, our team has a proven track record of delivering consistent performance and adapting to changing market conditions, particularly in our main market. In Puerto Rico, the macro backdrop continues to reflect stabilization across most economic fronts, with labor market trends sustaining their over-trajectory passenger activity in the main airport reaching record levels and, you know, strong consumer confidence evidenced by, you know, year-to-date self-tax collections, et As we have said in the past, the unprecedented level of federal support continues to drive economic activity on the island. This year, close to $2.5 billion of disaster relief funds have been distributed, actually during the first five months, and this represents a 35% increase compared to prior years.

Speaker Change: Definitely our team has a proven track record on delivering consistent performance and adapting to changing market conditions, particularly in our main market.

Speaker Change: In Puerto Rico, the macro backdrop continue to reflect stabilization of our gross most economic fronts.

Speaker Change: With Labour market trend sustaining the reward trajectory passenger activity in EMEA airport, reaching record levels.

Speaker Change: <unk>.

Speaker Change: Strong consumer confidence everything right.

Speaker Change: Year to date sales collection of sales tax collections actually.

Speaker Change: As we say in the past and present the level of reps report continued to drive economic activity in the island.

Aurelio Aleman: This year, close to 2.5 billion of the Saturn relief funds have been distributed actually during the first five months, and this represents a 35% increase compared to the prior year. In terms of our franchise bill, you know, our teams continue to manage multiple capital projects in advancing the evolution of the IT infrastructure and additional enhancement of digital capabilities in particular. We're excited to deploy our new commercial lending platform in the coming months, which will provide, you know, a more seamless interaction with commercial clients and will support additional growth in the business.

Speaker Change: This year close to $2 5 billion of the sector really phones have been distributed actually during the first five months and this represents a 35% increase compared to prior year.

Aurelio Aleman: In terms of our franchise build, you know, our teams continue to manage multiple capital projects aimed at advancing the evolution of the IT infrastructure and additional enhancement of digital capabilities. In particular, we're excited to deploy our new commercial lending platform. In the coming months, we should provide, you know, a more seamless interaction with commercial clients, and we'll support additional growth in the base. Finally, an important point I want to make is an update on the capital strategy.

In terms of our franchise build our teams continue to manage multiple capital projects aimed at advancing the evolution of the IP infrastructure.

Speaker Change: And additional enhancement of digital capabilities in particular, we are excited to deploy our new commercial lending platform in the coming months, which will provide a more seamless interaction.

Speaker Change: Interaction with commercial clients.

Speaker Change: And we will support additional growth in the business.

Aurelio Aleman: Finally, important, I want to provide an update on the capital strategy. You know, our approach to manage capital has been always thoughtful and center our making capital decisions that best serve the long term interest of the franchise and shareholders. With this in mind, and given our strong capital position, as we announced yesterday, our board approved a new authorization of 250 million in capital that can be used either to repurchase our common stock or within existing insecurities. This is in addition to the 50 million remaining from the prior approval. Over the next few quarters, we will focus our efforts on redeeming our stunning trust-prefer adventures, which at this moment, that will represent an immediate PSA Christian opportunity, and we'll resort in a simplified capital structure.

Speaker Change: Finally.

Speaker Change: Importantly, I want to provide an update on our capital strategy.

Aurelio Aleman: You know, our approach to managing capital has always been thoughtful and centered on making capital decisions that best serve the long-term interests of the franchise and shareholders. With this in mind, and given our strong capital position, as we announced yesterday, our board approved a new authorization of up to $250 million in capital that can be used either to repurchase our common stock or redeem existing securities. This is in addition to the $50 million remaining from the prior approval.

Speaker Change: Yes.

Speaker Change: Our approach to manage capital has been always thoughtful and center, we're making capital decisions that best serve the long term.

Speaker Change: So the franchise and shareholders.

Speaker Change: With this in mind and given our strong capital position.

Speaker Change: As we announced yesterday, our board approved a new authorization of up to $250 million in capital.

Speaker Change: That can be used either to repurchase our common stock or redeem existing securities.

Speaker Change: This is in addition to the $50 million remaining from the prior approval.

Aurelio Aleman: Over the next few quarters, we will focus our efforts on redeeming our standing trust, Preferred Ventures, which at this moment will represent an immediate EPS accretion opportunity and will result in a simplified capital structure. Our 100% capital return goal will remain intact for 2024. Really, the strategy has not changed; we will continue to capitalize as a priority on organic growth opportunities in our markets and deploy excess capital into opportunistic buybacks, or, in this case, we're going to focus initially on redeeming our outstanding prospects. Now I will turn it over to Orlando to go over in more detail the financial results. Thanks very much.

Speaker Change: Over the next few quarters, we will focus our efforts on.

Speaker Change: Redeeming, our Sterling Trust preferred debentures, which has at this moment that will represent an immediate EPS accretion opportunity.

Speaker Change: And will result in a simplified capital structure.

Aurelio Aleman: Our 100% capital return goal remaining in 2004. Really, the study has no change. We will continue to capitalize as a priority in organic opportunities in our markets and deploy as capital into the opportunistic, you know, buybacks or in this case, we're going to focus initially on the redeeming our outstanding prosperity for its.

Speaker Change: Our 100% capital return goal remaining for 2024.

Speaker Change: Okay.

Speaker Change: Really the strategy has not changed we will continue to capitalize as a priority to organic growth opportunities in our markets.

Speaker Change: And deploy excess capital into the opportunity.

Speaker Change: No.

Speaker Change: Buybacks or in this case, we're going to we're going to focus initially on the redeemed our outstanding Trust preferred.

Orlando Berges: Now, I would turn over to Orlando to go over more detail over the financial reserve. Thanks very much.

Speaker Change: Now I will turn over to Orlando to go over more detailed financial review thanks very much.

Orlando Berges: Good morning, everyone. As Aurelio mentioned, we reported net income of 75.8 million per second quarter. That's 46 cents a share, which compares with 73.5 million last quarter, or 44 cents per share. We're extremely pleased with the results, as we have continued to generate strong withdrawal assets, which reached at 1.61 percent this quarter. The result for this quarter have been very consistent with the discussions. Many of the discussions we've had with the market, named for the quarter, expanded six basis points and an interesting congruent 3 million, and expenses have been within the guidelines that we have provided.

Orlando Berges: Good morning to everyone. As Aurelio mentioned, we reported a net income of $75.8 million for the second quarter. That's $0.46 a share, which compares with $73.5 million last quarter, or $0.44 per share. We're extremely pleased with the results, as we have continued to generate strong return on assets, which reached 1.61% this quarter. The results for this quarter have been very consistent with many of the discussions we've had with the

Orlando Berges: Good morning to everyone.

Orlando: As Aurelio mentioned, we reported net income of $75 8 million for the second quarter, that's 46, a share which compares with.

Orlando: $73 5 million last quarter or <unk> 44 per share.

Speaker Change: We are extremely pleased with our results as we are.

Orlando: <unk> continued to generate strong return on assets.

Speaker Change: <unk> reached 161% this quarter.

Orlando: Yes.

Orlando: The result for this quarter have been very consistent with the discussions.

Orlando: Many of the discussions we've had with the market NIM.

Orlando Berges: NIM for the quarter expanded six basis points, and net interest income grew $3 million, and expenses have been within the guidelines that we have provided. Similar to last quarter, which was $11.6 million, which compares to $12.2 million. The provision for this quarter reflects benefits from lower recent historical loss levels on the residential mortgage portfolio, as well as lower projected losses on the commercial real estate portfolios. These losses have been driven by macroeconomic variables being actual macroeconomic variables being better than they have been previously forecasted.

Orlando: NIM for the quarter expanded six basis points and net.

Orlando: Net interest income grew 3 million net expenses have been within the guidelines that we have provided.

Orlando Berges: Provision for the quarter was similar to last quarter, with 11.6 million, which compares to 12.2 million. The provision for this quarter reflects benefits from the lower recent historical loss levels and the residential mortgage portfolio, as well as lower projected losses on the commercial real estate portfolios. These ones have been driven by macroeconomic variables being, actual macroeconomic variables being better than they have been previously forecasted. The two combined have offset the impact of the higher level of charge shops we've had on the consumer portfolio, which have affected the provision for those portfolios. Effective tax rate for the quarter was 24.1 percent, very similar to last quarter, and we have continued to work on the tax position.

Orlando: Provision for the quarter was.

Orlando: Similar to last quarter was 11, $11 6 million, which compares to $12 2 million.

Orlando: The provision for this quarter reflect benefits from from the lower recent historical loss levels on the residential mortgage portfolio.

Orlando: As well as lower projected losses on the commercial real estate portfolios.

Speaker Change: This ones have been driven by by E.

Speaker Change: Macroeconomic variables being artwork macroeconomic variables.

Speaker Change: And then they have been previously forecasted.

Orlando Berges: The two combined have offset the impact of the higher level of charge-ups we've had on the consumer portfolio, which has affected the provision for those portfolios. The effective tax rate for the quarter was 24.1%, very similar to last quarter, and we have continued to work on the TAG position. As I mentioned, interest income for the quarter improved $3 million with $199.6 million for the quarter. Total interest income grew $3.7 million, which included $2.8 million in interest income growth on the loan portfolios, while interest expense only grew $600,000.

Speaker Change: The two combined.

Offset the impact of the level of.

Speaker Change: Higher level of charge offs, we've had on the consumer portfolio, which have affected the provision for those portfolios.

Speaker Change: Our effective tax rate for the quarter was 24, 1% very similar to last quarter.

Speaker Change: And we have continued to work on the positioning.

Orlando Berges: As I mentioned, an interest income for the quarter improved 3 million was $199.6 million for the quarter. Total interest income grew 3.7 million, which includes 2.8 million interesting income growth on the loan portfolios, while interest expense only grew $600,000. The yield on total earning assets grew 7 basis points in the quarter, which is a combination of a five basis points growth in the loan portfolio yield and higher level of interest were in cash balances at the Fed. When combined with the portfolio, the higher cash balances resulted in approximately 7 basis points higher deals on the portfolio.

Speaker Change: As I mentioned net interest income for the quarter improved $3 million was $199 6 million.

Speaker Change: For the quarter.

Speaker Change: Total interest income grew $3 7 million, which includes $2 8 million at.

Interest income growth in the loan portfolios.

Speaker Change: While interest expense only grew $600000.

Orlando Berges: The yield on total earning assets grew 7 basis points in the quarter, which is a combination of a 5 basis point growth in the loan portfolio yields and a higher level of interest-bearing cash balances at the Fed. When combined with the investment portfolio, the higher cash balances resulted in approximately seven basis points higher yields on the portfolio. Funding costs increased only one basis point for the quarter as we continue to see more stability in deposit pricing. The increase in interest expense was mostly on time deposits, where average balances grew $110 million, and we saw a 60 basis points increase in the average cost of these deposits.

Speaker Change: The yield on total earning assets grew seven basis points in the quarter.

Speaker Change: Which is a combination of a five basis points growth in the loan portfolio yields and higher level of interest bearing.

Cash balances at the fed.

Speaker Change: When combined with the investment portfolio and higher <unk>.

Speaker Change: Cash balances.

Speaker Change: Sold at an approximately seven.

Speaker Change: Seven basis points higher yields on the portfolio.

Orlando Berges: Funding costs increased only 1 basis point for the quarter, as we continue to see more stability on the positive pricing. The increase in interest expense was mostly on time deposits, where average balances grew 110 million, and we saw a 6 basis points increase in the average cost of B.C.Boss. Roberts. During the quarter, overall the deposits grew in the quarter and we were able to replace some of our higher cost broker deposits. The average balance of broker deposits increased 73 million dollars for the quarter. Quarter and quarter, and it's about a hundred million. And the average cost of this deposit is down nine basis points.

Speaker Change: Funding costs increased only one basis points for the quarter as we continue to see more stability on deposit pricing.

Speaker Change: The increase in interest expense was mostly on time deposits, where average balances grew $110 million.

Speaker Change: And we saw a 60 basis point increase in the average cost of these deposits.

Orlando Berges: During the quarter, overall deposits grew during the quarter, and we were able to replace some of our higher-cost broker deposits. The average balance of broker deposits decreased $73 million for the quarter, quarter-end to quarter-end it's about $100 million, and the average cost of this deposit is down $9 million. As we have mentioned in prior quarters, assuming current interest rates, the net interest margin reached an inflection point in the first quarter, and we saw an expansion of six basis points this quarter, reaching 422.

Speaker Change: During the quarter overall deposits grew in the quarter, we were able to replace some some of our higher cost brokered deposits.

Speaker Change: The average balance of broker deposits increased 73 decrease I'm, sorry, $73 million for the quarter.

Speaker Change: At quarter end to quarter end, it's about $100 million and the average cost of deposits is down nine basis points.

Orlando Berges: As we have mentioned in prior quarters, assuming Karen interest rates, then an interest margin reached the inflection point in the first quarter and we saw an expansion of six basis points this quarter reaching for 22. Again, all the composition of our earning assets continues to shift. There are higher yielding assets, which more than upset any increase in the cost of the deposits. Similar to what we said before, we continue to benefit from reprising opportunities on the investment portfolio, either into loans or ultimately into higher-yielding securities. Most recent estimates of cash flow, which is about 720 to 730 million for the last six months, 250 of that in the third quarter, and now I want 470 to 480 in the fourth quarter.

Speaker Change: As we have mentioned.

Speaker Change: In prior quarters, assuming current interest rates.

Speaker Change: The net interest margin.

Speaker Change: Reached an inflection point in the first quarter.

Speaker Change: We saw an expansion of six basis points this quarter, reaching $4 22.

Orlando Berges: In general, the composition of our earning assets continues to shift towards higher-yielding assets, which more than offsets any increase in the cost of the bus. Similar to what we said before, we continue to benefit from repricing opportunities on the investment portfolio, either into loans or ultimately into higher yielding securities. Our most recent estimates of cash flow, which is about $727 to $730 million for the last six months, $250 of that in the third quarter, and $470 to $480 in the fourth quarter, which, you know, over the two quarters, the combined cash flows coming from agency and treasury papers that So the full impact of this repricing will be seen in the first quarter of 2025. The other income components, non-interest income components, were fairly consistent.

You can get out of the composition of our earning assets continue to chip there is higher yielding assets, which more than offset any increase in the cost of deposits.

Speaker Change: Sure.

Speaker Change: Similar to what we said before we continue to benefit from repricing opportunities on the investment portfolio either into loans or ultimately into higher yielding securities.

Speaker Change: Our most recent estimates of.

Speaker Change: Cash flow, it's about $727 million to $730 million for the last six months 250 of that in the third quarter and another hour $4 70 to $4 80 in the fourth quarter.

Orlando Berges: Which over the two quarters, the combined cash flows coming from agency and treasury papers that have contractual maturities would be about 500 million. So there's a full impact of this reprising will be seen in the first quarter of 2025. The other income components, non-interesting components, were fairly consistent. We did have a reduction of 2 million, which is basically 3.2 million in seasonal contingent insurance commissions that we collected in the first quarter. On the other hand, we had some pickup on mortgage banking activity income for the quarter. In terms of expenses, expenses were 118.7 million, which is 2.2 million lower than last quarter.

Speaker Change: Which.

Speaker Change: Over the two quarters, the combined cash flows coming from agency and gradually papers that have contractual maturities.

Speaker Change: Our 500 million so the full impact of this repricing will be seen in the first quarter of 2025.

Speaker Change: Other income components non interest income components were fairly consistent we did have a reduction of $2 million, which is basically due to a $3 2 million in seasonal contingent insurance commissions that we collected in the first quarter.

Orlando Berges: We did have a reduction of $2 million, which is basically due to $3.2 million in seasonal contingent insurance commissions that we collected in the first quarter. On the other hand, we had some pickup in mortgage banking activity income for the quarter. In terms of expenses, expenses were $118.7 million, which is $2.2 million lower than last quarter. This this reduction includes $2.3 million gain we realized on the disposition of a large commercial Aurelio.

Speaker Change: On the other hand, we had some pick up on on mortgage banking activity income for the quarter.

Speaker Change: In terms of expenses.

Speaker Change: <unk> expenses were $118 7 million, which is $2 2 million lower than last quarter.

Orlando Berges: This reduction includes 2.3 million gain and we realize on the disposition of a large commercial orio. We also saw 2.1 million decreasing compensation expenses, mostly payroll taxes and stock-based compensation we had in the first quarter. And we had a 700,000 reduction in the aircrewals for the FVAC special assessment in the quarter. However, we did have an increase of 1.8 million in credit, and they've incurred processing expenses. In reality, last quarter, we received 1.3 million expense reimbursement incentives from the networks, which lower our expense rates in the first quarter. If we exclude a orio and leave the I.C.

Speaker Change: This reduction includes $2 3 million gain we realized on the disposition of a large commercial Oreo.

Orlando Berges: We also saw a $2.1 million decrease in compensation expenses, mostly payroll taxes and stock-based compensation we had in the first quarter. And we had a $700,000 reduction in the accruals for the FDIC special assessment in the quarter. However, we did have an increase of $1.8 million in credit and debit card processing expenses.

Speaker Change: We also saw a $2 1 million a decrease in compensation expenses, mostly payroll taxes and stock based compensation, we had in the first quarter.

Speaker Change: And we had a 700000 reduction.

Speaker Change: In the accruals for the FDIC special assessment in the quarter.

Speaker Change: We did have an increase of $1 8 million in credit and debit card processing expenses.

Orlando Berges: In reality, last quarter, we received $1.3 million in expense reimbursement incentives from the networks, which reduced our expense base in the first quarter. If we exclude Aurelio and the FDIC expenses, expenses for the quarter were $122.3 million, which compares to $121.5 million last quarter, which is very much in line with the $120 to $122 million expense range that we have been guiding excluding Aurelio benefits. And we continue to maintain this guidance for the next couple of quarters. The efficiency ratio for the quarter was 51.2%, which is also in line with our 52% guidance.

Speaker Change: Reality last quarter, we received $1 3 million expense.

Speaker Change: <unk> incentives from the networks, which lower our expense base in the first quarter.

Speaker Change: If we exclude Oreo and the FDIC expenses.

Orlando Berges: Expenses for the quarter were 122.3 million, which compares to 121.5 million last quarter, which is very much in line with 122.2 million expense rates. We have been guiding, excluding a orio benefits. And we continue to maintain these guidance for the next couple of quarters. The efficiency ratio for the quarter was 51.2%, which is also in line with our 52% guidance. We should continue to see the efficiency ratio at this level based on current interest rates and margins. In terms of asset quality, non-performing assets decreased to 0.7 million in the quarter to 126.9 million, which is 69 basis points of total assets.

Speaker Change: Expenses for the quarter were $122 3 million, which compares to $121 5 million last quarter.

Speaker Change: Which is very much in line with the.

Speaker Change: $120 million to $122 million expense range that we have been guiding excluding the Oreo benefits and we continue to maintain this guidance for the next couple of quarters.

Speaker Change: The efficiency ratio for the quarter was 51, 2%, which is also in line with our with our 52% guidance.

Orlando Berges: And we should continue to see the efficiency ratio at this level based on current interest rates and margins. In terms of asset quality, non-performing assets decreased 2.7 million in the quarter to 126.9 million, which is 69 basis points of total assets. Most of the reduction was in the other real estate owned decreased $7.2 million due to the sale of the $5.3 million commercial real estate owned in Puerto Rico. Non-performing loans, however, did increase $3.2 million, basically commercial and construction.

Speaker Change: And.

Speaker Change: And we should continue to see.

Speaker Change: Patiency ratio at this level.

Speaker Change: Based on current interest rates and margins.

Speaker Change: In terms of asset quality nonperforming assets decreased $2 7 million in the quarter too.

Speaker Change: $126 9 million, which is 69 basis points of total assets.

Orlando Berges: Most of the reduction was in the other real estate owned decreased to 7.2 million due to the sale of the 3.5.3 million commercial real estate owned in Puerto Rico. Non-performing loans, however, did increase 3.2 million, basically commercial and construction during the quarter. Commercial relationship in Puerto Rico with a total exposure of 16.5 million migrated to non-performing. However, we did remember that 10.5 million Florida case that went into non-performing last quarter was restored to a cruel status based on the payment status of the case and restructuring. Lones, in early delinquency, the rates are an increase of 13.7 million.

Speaker Change: Most of the reduction we're seeing the other real estate owned decreased seven 2 million due to the sale of the three.

Speaker Change: $5 3 million commercial real estate of one input in Puerto Rico.

Nonperforming loans, our did increase $3 2 million.

Speaker Change: Basically commercial and construction during.

Orlando Berges: During the quarter, a commercial relationship in Puerto Rico with a total exposure of $16.5 million migrated to non-performing. However, we did remember the $10.5 million Florida case that went into non-performing last quarter was restored to accrual status based on the payment side of the case and restructuring. Loans in early delinquency did raise an increase of $13.7 million, all of it was in consumer. We continue to see some trends gradually moving towards a historical level.

Speaker Change: During the quarter, our commercial relationship in Puerto Rico with a total exposure of $16 5 million migrated to nonperforming.

Speaker Change: However, we did.

Speaker Change: You'll remember that $10 5 million, Florida case, it went into nonperforming last quarter.

Speaker Change: But was restored to accrual status based on.

Speaker Change: On the payment side of the case and restructuring.

Loans.

Speaker Change: In early delinquency rates.

Speaker Change: <unk> saw an increase of $13 seven.

Orlando Berges: All of it was in consumer. We continue to see some trends gradually moving towards historical levels. The allowance for credit losses was 254.5 million and at the end of the quarter, which is 9.1 million lower than product water. Basically, the reduction came from the mortgage and CR report folios, as I mentioned before, while the consumer reserves Joe an increase. The coverage on loans decreased to 2.06 from 2.14, still healthy, and the allowance, including unfounded loan commitments and debt securities, was 261 million versus the 270 million we had last quarter. Net chart jobs for the quarter were 21.1 million or 69 basis points of average loans.

Speaker Change: All of it was in consumer.

Speaker Change: We continue to see some trends gradually moving to our historical levels.

Orlando Berges: The allowance for credit losses was $254.5 million at the end of the quarter, which is $9.1 million lower than the prior quarter. Basically, the reduction came from the mortgage and CRE portfolios, as I mentioned before, while the consumer reserves, Choban Inc. The allowance coverage on loans decreased to $206 from $214, still healthy, and the allowance, including unfunded loan commitments and debt securities, was $261 million versus the $270 million we had last quarter. Net charge-offs for the quarter were $21.1 million, or 69 basis points of average loans. That compares to the 37 basis points we had last quarter.

Speaker Change: The allowance for credit losses was.

Speaker Change: $254 5 million at the end of the quarter, which is 2.9 dollars 1 million lower than prior quarter.

Speaker Change: Basically the reduction came from the mortgage on CRE portfolios as I mentioned before while the consumer reserves.

Speaker Change: Show an increase.

Speaker Change: The coverage the allowance coverage on loans decreased two six from 2014 still healthy.

Speaker Change: And in the allowance.

Speaker Change: <unk> unfunded loan commitments and debt securities.

Speaker Change: 261 million versus $2 70, 270 million, we had last quarter.

Speaker Change: Net charge offs for the quarter were $21 1 million or 69 basis points of average loans that compares to 37 basis points, we had last quarter, but you remember last quarter. We included a $9 5 million recovery from the sale of previously charge off loans.

Orlando Berges: At compares to 37 basis points, we had last quarter. But you remember last quarter, we included a 9.5 million recovery from the sale of previously chart job loans, including this recovery in the first quarter with 68 basis points, which is very much in line with this quarter. On the capital front, the value made reference to it, but our rates just continue to remain very strong and significantly above well-capitalized levels. We continue to deploy capital to chair repurchases and dividend payments. Repurchases and dividends for the quarter amounted to 76 million, which is essentially 100% of the earnings we had in the quarter.

Orlando Berges: But if you remember last quarter, we included a $9.5 million recovery from the sale of previously charged-off loans. Excluding this recovery in HR chops in the first quarter by 68 basis points, which is very much in line with this quarter. On the capital front, Aurelio made reference to it, but our ratios continue to remain very strong and significantly above well-capitalized levels. We continue to deploy capital through share repurchases and dividend payments.

Excluding this recovery net charge offs in the first quarter was 68 basis points, which is very much in line with this quarter.

Speaker Change: On the capital front.

Speaker Change: You made reference to it but our ratios continued to remain very strong and significantly above well capitalized levels.

Speaker Change: We continue to deploy capital through share repurchases and dividend payments and dividend payments.

Orlando Berges: Repurchases and dividends for the quarter amounted to $76 million, which is essentially 100% of the earnings we had in the quarter. The Tangible Book Value per Share and the Tangible Common Equity Ratio increased to $8.81 and 7.7%, respectively. Basically, we had an improvement in the fair value of the investment portfolio, and that improved the ratio since earnings basically were offset by the capital act. The Adjusted Early Comprehensive Loss represents now over $3.89 in tangible book value and over 300 basis points on the DCE ratio.

Repurchases and.

Speaker Change: And dividends for the quarter amounted to $76 million, which is essentially 100% of the earnings we had in the quarter.

Orlando Berges: The tangible book value per share and the tangible common equity ratio increased to $8.81 and $7.27, each respectively. Basically, we had an improvement in the fair value of the investment portfolio, and that improved the ratio since earnings basically were offset by questions. The Adjuster-Other Comprehensive Bloss, represents now over $3.89 in Tanya Wilbur Ballyu, and over 300 basis points on the DCE ratio. Assuming the stable rates that we are seeing in the market and we expect, we will continue to recover the Adjuster-Other Comprehensive Bloss based on the short duration of the portfolio.

Speaker Change: The tangible book value per share and tangible common equity ratio increased to $8 81, and seven 7% each respectively.

Speaker Change: Basically.

Speaker Change: We had an improvement in the fair value of.

Speaker Change: The investment portfolio.

Speaker Change: <unk>.

Speaker Change: And in that improve the ratios earnings basically.

Offset by the capital actions.

Speaker Change: Yes.

Speaker Change: We adjust our other comprehensive loss represents now over $3 89, and tangible book value.

Speaker Change: And over 300 basis points on the TCE ratio.

Orlando Berges: And assuming the stable rates that we're seeing in the market and that we expect to, we will continue to recover the AC, the adjusted order comprehensive loss based on the short duration of the portfolio. This concludes our remarks. Operator, we would like to now open the call to questions.

Speaker Change: And assuming stable rates that we're seeing in the market and we expect we.

Speaker Change: We will continue to recover the adjusted other comprehensive loss.

Speaker Change: Based on the short duration of the portfolio.

Orlando Berges: This concludes our remarks.

Speaker Change: This concludes our remarks.

Operator: On the operator, we would like to now 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 now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is muted locally.

Speaker Change: Operator, we would like to now open the call for questions.

Speaker Change: Okay.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is in a muted location. We have now received the question from Brett Rabatin from Hofty Group. Brett, your line is now open, please go ahead.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question. Please press star followed by Glenn on your telephone keypad now if you change your mind. Please press star followed by Kim when preparing to ask a question. Please ensure your devices and you said no kidney.

Brett Rabatin: We have now received the question from Brett Rabatin from Hosty Group. Brett, your line is now open. Please go ahead.

Speaker Change: We have now received a question from Robert <unk> from <unk>. Your line is now open. Please go ahead.

Brett Rabatin: Hey, good morning, everyone. I wanted to start with just the macro in Puerto Rico. It sounded to me like you were kind of intimating that steady state was what you were seeing most recently. But you mentioned the $2.5 billion distribution, and then I saw Core 3 had actually distributed a billion here so far this year. And then I look at the GDB AI Index. It's down actually in April, a little under 124. But that looks to be mostly concrete and gasoline.

Brett D. Rabatin: Hey, good morning, everyone. Good morning, Brett wanted to start.

Robert: Hey, good morning, everyone.

Unknown Executive: Hey guys, wanted to start with just the macro in Puerto Rico. And it sounded to me like you were kind of intimating that, you know, it's kind of a steady state was what you were seeing, most recently. But you mentioned the $2.5 billion distribution, and then I saw core three had actually distributed a billion here so far this year. And when I look at the GDB AI index, it's down actually in April, a little under 124, but that looks to be mostly concrete and gasoline. As you guys think about the back half of the year from an economic perspective, is there anything that you would point out as drivers for either growth or maybe some atrophy in the economy?

Robert: Good morning, Brad wanted to start.

Brad: You guys wanted to start with just the macro in Puerto Rico and it sounded to me like you're kind of intimating that kind.

Brad: Kind of a steady state and that's what you were seeing.

Speaker Change: Most recently.

Speaker Change: But you mentioned that $2.5 billion distribution and then I saw of course Reed had actually distributed 1 billion here so far this year.

Speaker Change: Look at the GDP AI index, it's it's down actually in April a little under a 124.

Speaker Change: But that looks to be mostly concrete and gasoline.

Aurelio Aleman: As you guys think about the back half of the year from an economic perspective, is there anything that you would point out as drivers for either growth or maybe somatrophy and the economy? Well, you know, we continue to see, you know, I think the $2.5 billion is the five months, the beginning of the year, and that is actually higher than last year. And you can see in that, the bulk part of that, it's actually CDBG construction elements, which, you know, it's primarily there's significant projects in what they call the light that you, you know, line, you know, low income housing.

Speaker Change: As you guys think about the back half of the year from an economic perspective is there anything that you would point out as drivers for either growth or maybe some atrophy in the economy.

Aurelio Aleman: Well, you know, we continue to see, you know, I think the 2.5 billion is for the five months, the beginning of the year, and that is actually higher than last year. And you can see in that the bulk part of that is actually CDBG.

Speaker Change: Well, we continue to see.

Speaker Change: The two qualifying Bailey.

Speaker Change: Five months, the beginning of the year and that is actually higher than last year and you can see in the bulk part of that is actually CBD.

Aurelio Aleman: Construction, you know, elements, which are primarily significant projects in the what they call the light, you know, line, which is, you know, low-income housing. We have some of those in the books, obviously they're being approved and, you know, initial disbursement, but we expect that to show up in the second half of the year as we originally had planned. We continue to see, you know, foreign investors bringing capital to Puerto Rico, buying corporations. More and more deals like that. Some of them are being published in the newspapers. Some of them require financing.

Speaker Change: A construction elements.

Speaker Change: Which you know its primarily there are significant projects in the what they call delight.

Speaker Change: Line.

Speaker Change: Hey.

Speaker Change: Low income housing.

Aurelio Aleman: You know, we have some of those in the books, you know, obviously, they're being approved and, you know, initial disbursement, but we expect that to show in the second half of the year as we ordinarily have planned. We continue to see, you know, foreign investors, you know, bringing capital to Puerto Rico. Of our incorporations, more and more deals of those, some of them are being published in newspapers, some of them are required financing. There are, you know, more projects in the pipeline regarding the IPG funds. They include, you know, additional hotels; they include, you know, additional housing, which, you know, when you look at the middle income segment, there's still, you know, high demand for that.

We have some of those in the books, obviously there've been a proven.

Speaker Change: Initial disbursement, but we expect that to.

Speaker Change: We show in the second half of the year.

Speaker Change: We are in the health plan.

Speaker Change: We continue to see foreign investors, bringing capital to Puerto Rico Incorporations.

Speaker Change: More on more diesel dose, okay. So Morgan marketing bullish in any state.

Speaker Change: So all of them have require financing.

Aurelio Aleman: There are, you know, more projects in the pipeline regarding the IPG funds. They include, you know, additional hotels; they include, you know, additional housing, which, you know, when you look at the middle-income segment, there's still, you know, high demand for that. Unemployment continues to be stable, and labor participation is better, so we do not expect any decrease; we actually see more opportunities for improvement, taking into consideration that the excess liquidity that was brought by the pandemic has already been utilized.

They are projecting.

Speaker Change: Brian Youre hitting that five nine regarding the IPD fonts.

Speaker Change: Hey.

Speaker Change: They include additional hotels include additional housing, which when you look at the Middle income segment.

Speaker Change: There's still high demand for that.

Aurelio Aleman: You know, employment continues table and labor, you know, and labor participation better. So, you know, we do not expect any decrease; we actually see more opportunities for improvement, obviously. He's taking into consideration that the excess liquidity that was brought by the pandemic was already utilized, and obviously there is an impact when you look at self-stacks; it's not really shown there. It's probably in some other type of consumption.

Speaker Change: Unemployment continued stable and labor.

Speaker Change: And the labor participation better so we do not expect any any decrease we actually see more opportunities for improvement obviously.

Speaker Change: Taking into consideration that the excess liquidity that was brought by the pandemic.

Speaker Change: Both already utilized.

Aurelio Aleman: And obviously, there is an impact, but when you look at sales tax, it's not really shown there. It's probably, you know, in some other type of consumption. So we do expect, you know, when you look at the fiscal plan that was recently published, there is, you know, positive GDP growth in the scenarios. So I think when we add all that together, actually, Ramon, you could comment on the specific analysis of the indicator, the economic activity indicator, which is volatile and, you know, and has some quarterly variances historically. Yeah, right. Most of the...

Speaker Change: And obviously there is an.

Speaker Change: An impact when you look at sales tax it's not really shown there is probably some other type of consumption. So so we do expect when you look at the fiscal plan that was recently published.

Ramon Rodriguez: So we will respect when you look at the fiscal plan that was recently published, there are positive GDP growths in the scenarios. So I think when we are all that, actually Ramon, you could comment on the specific analysis of the indicator of the indicator, which is volatile and has some quite deliverance historically. Yeah, Brett, most of the reduction that you mentioned with regards to the economic activity index is related to gas consumption, which has been trending down over the last few quarters. But when you look at the other three components, payroll employment in particularly is reaching, you know, decking dice in April, I believe 2% up year over year.

Speaker Change: There is positive GDP growth in the scenarios.

So I think when I when we add all of that is really around you could comment on the specific analyses of the indicators.

Speaker Change: The economic indicator, which is volatile.

Speaker Change: Adam quarterly variances.

Ramon Rodriguez: Yeah, Brett, most of the reduction that you mentioned with regard to the Economic Activity Index is related to gas consumption, which has been trending down over the last few quarters. But when you look at, you know, the other three components, payroll employment, in particular, is reaching, you know, decade highs in April, I believe 2% up year over year. So when you look at the other components, you know, we remain pretty encouraged with the Economic Activity Index going forward.

Speaker Change: Directly yes, Brett most of the of the reduction that you mentioned with regards to the economic activity index is related to gas consumption, which has been trending down over the last few quarters.

Speaker Change: But when you look at the other three components payroll employment in particularly.

Speaker Change: Reaching taking ice.

Speaker Change: April.

Speaker Change: Eight 2% up year over year. So when you look at the other components, we remained putting encouraged with economic activity index going forward.

Brett Rabatin: So when you look at the other components, you know, we remain fully encouraged with the Economic Activity Index going forward. Okay, that's great color on that.

Speaker Change: Okay.

Brett D. Rabatin: That's great color on that. And then maybe Orlando on the margin. You know, it would seem like with what you have coming with the securities portfolio and kind of your stabilization of funding costs in the second quarter that the margin should continue to move higher at a sub-magnitude. Any thoughts on the pace of the margin from here and just how you see that playing out?

Speaker Change: That's great color on that and then.

Orlando Berges: And then maybe Orlando on the margin, you know, it seemed like with what you have coming with securities portfolio and kind of your stabilization of funding costs in the second quarter that the margins should continue to move higher sub magnitude.

Orlando: Maybe orlando on the margin.

Orlando: It would seem like with what you have coming with securities portfolio.

Orlando: And kind of your stabilization of funding costs in the second quarter that the margin should continue to.

Orlando: Move higher at sort of magnitude.

Orlando Berges: You know, any thoughts on the pace of the margin from here in just how you see that playing out. Well, we, I mean, we haven't provided a very specific margin number, but clearly we have said that a margin will continue to go up. Again, if you only think about the 700 million or so, or some 720 of cash flows that are now dealing with 1.5% on a gap basis, that number would be replaced with something. And, you know, it would be close to loan deals, average loan deals, or at worst, investment portfolio deal. So, you know, we would be picking up 4 to 5 basis points easily on that portfolio.

Speaker Change: Any thoughts on the pace of the margin from here and just how you see that playing out.

Orlando Berges: Well, we, I mean, we haven't provided a very specific margin number, but clearly, we have said that our margin will continue to go up. Again, if you only think about the $700 million or so, or $720 million of cash flows that are now yielding about 1.5% on a gap basis, that number would be replaced by something that would be close to loan yields, average loan yields, or, at worst, investment portfolio yields. We would be picking up four to five basis points easily on that portfolio.

Speaker Change: Well, we I.

Speaker Change: I mean, we haven't provided any various specific margin number but clearly we have said that our margins will continue to go up.

Speaker Change: Again.

Speaker Change: If you only think about 700 million or so or some.

Speaker Change: <unk> of cash flows that are now yielding one 5%.

Speaker Change: On a GAAP basis.

Speaker Change: That number would be replaced with something would be close.

Speaker Change: Close to loan yields average loan yields or ore at.

Speaker Change: At worst of investment portfolio yield so.

Speaker Change: We would be peaking picking up four to five basis points easily on that portfolio.

Orlando Berges: So that that should start to translate into a higher margin coming next year. The funding cost side has seen the stability. We're starting to see the stability. The increase, as I mentioned, on the time the boss is that's a lot to do with all the things, my children and being renewed at a current rate. But, but the Puerto Rico market is not as high as the U.S. market. We still continue to see some pressure in Florida. You know, we're seeing less pressure in Puerto Rico, and an exception for icing would be low force, but a reality mostly of the time the Boston numbers are not generated at those rates in Puerto Rico.

Orlando Berges: So that should start to translate into a higher margin coming next year. The funding cost side has seen stability. We're starting to see stability. The increase, as I mentioned, on the time deposit, that has a lot to do with all the things maturing and being renewed at a current rate. But the Puerto Rico market is not as high as the U.S. market. We still continue to see some pressure in Florida.

Speaker Change: So that should start to translating into a higher margin coming next year.

Cynthia: The funding cost side us Cynthia stability, we're starting to see the stability.

Cynthia: The increase as I mentioned on the time deposits us a lot to do with all of the things maturing and being renewed at current rates.

Cynthia: But but the Puerto Rico market is not as high as the U S market, we still continue to see some pressure in Florida.

Orlando Berges: We are seeing less pressure in Puerto Rico, and exception pricing would be low for us, but in reality, most of the time, deposit numbers are not generated at those rates in Puerto Rico. So that's going to slowly sort of pick up, and again, you know, some of the loan portfolios, as we originate new things, are also coming in at current rates, which are slightly higher. That's why we ended up with, you know, five basis points pick up on the yields on the loan portfolios on average. So, you know, the expectation and our numbers are for continual trend increases on time deposits. I'm sorry about the net interest margin for the next few quarters.

Cynthia: We are seeing less.

Cynthia: <unk> pressure in Puerto Rico and <unk>.

Cynthia: Exception pricing.

Cynthia: It would be low for us but.

Cynthia: But in reality, mostly of the of the time deposit numbers are not generate out of those rates importantly equal.

Orlando Berges: So, that's going to slowly sort of pick up and again, you know, some of the best the loan portfolios as we are regenerating new things are also coming in at a current rate which are slightly higher. That's why we ended up with that, you know, 5 basis points pick up on the deals on the loan portfolios, on average.

Cynthia: So that's going to slowly start to pick up.

Cynthia: And again.

Cynthia: Some of the.

Cynthia: Loan portfolios as we originate new things are also coming in at.

Cynthia: Current rates, which are slightly higher but that's why we ended up with that five basis points pickup on the yields on the loan portfolio on average.

Orlando Berges: So the expectation and our numbers is continuing, trending increases on time deposits, I'm sorry on net interest margin for the next few quarters.

Cynthia: Yes.

Cynthia: The expectation in our numbers is continue training upfront increases on time deposits I'm sorry.

Cynthia: Net interest margin for the next few quarters.

Brett Rabatin: Okay. Fair enough.

Brett D. Rabatin: Okay, fair enough. And then, if I could speak on one last one, just on the reduction of the commercial real estate reserve due to macro factors, would that be mostly or entirely just the term structure of interest rates? Or would there be other factors that would have reduced your commercial real estate or improved your commercial real estate outlook?

Cynthia: Okay.

Speaker Change: Fair enough and then if I can sneak in one last one just on the reduction of the commercial real estate reserve due to macro factors would that be mostly or entirely just the term structure of interest rates or would there be other factors.

Brett Rabatin: And then, if I could stick in one last one, just on the reduction of the commercial real estate reserve due to macro factors.

Orlando Berges: Would that be mostly or entirely just the term structured interest rates, or would there be other factors that would have reduced your commercial real estate or improved your commercial real estate outlook? It's a bit of, I mean, the CRP price index, the duration that, you know, we to some extent, all modeling, all modeling in space on national information and the reality is for the recoil, it's behaving significantly better. So what we are seeing, as we have just for the market on those numbers, the CRP price index, it's not suffering the impact that some markets in the States have suffered.

Speaker Change: Reduced your commercial real estate or improved your commercial real estate outlook.

Orlando Berges: It's a bit of a CRE price index deterioration that, you know, we, to some extent, our modeling is based on national information, and the reality is, Puerto Rico is behaving significantly better. So what we are seeing as we adjust for the market on those numbers, the CRE price index, it's not suffering the impact that some markets in the States have suffered. And that has been adjusting the projection going forward for the Puerto Rico market. So that's part of the reason we're seeing those improvements on the macro on the CRE side. Okay, great.

Speaker Change: Hi.

Speaker Change: It's a beta.

Speaker Change: CRB price index deterioration.

Speaker Change: We to some extent our model in our model and it's based on National information under realities, Puerto Rico, It's behaving significantly better so what we're seeing as we adjust for the market on those numbers that CRE pricing.

Speaker Change: Price index.

Speaker Change: It's not suffering the impact that at some markets in the states up suffered.

Brett Rabatin: And that has been adjusting the projection going forward for the political market. So that's part of the reason we're seeing those improvements on the market on the CRP side. Okay. Great. Very helpful. Thanks for all the teller. Thank you.

Speaker Change: And that has been adjusting their projections going forward for the Puerto Rico market. So that's part of the reason we are seeing those improvements on the macro on the CRE side.

Brett D. Rabatin: Okay, great. Very helpful. Thanks for the color. Thank you.

Speaker Change: Okay, great very helpful. Thanks for all the color.

Brett Rabatin: Thanks, Brett.

Brett: Thank you thanks Brett.

Unknown Executive: The next question we've got is these mods from Ramon Jane states, your line is now open. Please go ahead.

Operator: The next question we've got is from Steve Mott from Ramon James. Please, your line is now open.

Speaker Change: The next question please Scott.

Speaker Change: Steve Motz from Raymond James.

Speaker Change: Your line is now open. Please go ahead.

Steve Motz: Good morning.

Unknown Executive: Good morning, Steve, and welcome to the call. Thank you. I appreciate it.

Steve Motz: Good morning, Steve and welcome to the call maybe just start.

Unknown Executive: Maybe just starting with the continuing with the loan loss reserve, I was just curious here with regard to the decline in the residential mortgage reserve quarter of a quarter. You know, was that just kind of a component of historical charge offs have declined with the primary driver and, you know, can we see a further maybe reduction in that reserve here over time? It is driven by the updated information on charge offs on that portfolio. We've seen significantly low trends that the mortgage portfolio is longer live portfolio. Therefore, we use longer lives and in estimating some of the factors.

Anna: Thank you Anna.

Speaker Change: Get it.

Unknown Executive: But maybe just starting with the or continuing with the loan loss reserve. I was just curious here with regard to the decline in the residential mortgage reserve quarter over quarter, you know, was that just kind of a component of historical charge-offs that declined with the primary driver? And you know, could we see a further, maybe reduction in that reserve here over time?

Speaker Change: Maybe just starting with the continuing with the loan loss Reserve I was just curious here with regard to the decline in the residential mortgage.

Reserve quarter over quarter.

Speaker Change: Was that just kind of a component of historical charge offs have declined was the primary driver and could we see a further maybe reduction in that reserve here.

Speaker Change: Overtime.

Orlando Berges: It is driven by the updated information on charge-offs on that portfolio. We've seen significantly low trends. The mortgage portfolio is a longer-lived portfolio. Therefore, we use longer lives in estimating some of the factors.

Speaker Change: It is driven by the updated.

Speaker Change: Information on on on charge offs on that portfolio.

Speaker Change: We've seen significantly low trends.

Speaker Change: Mortgage portfolios longer longer lift portfolio. Therefore, we use longer lives and estimating some of the factors and.

Unknown Executive: And as you have seen, the last reaches on the recent years have been very low, and that has continued to replace older information on charge of branches. So we have continued to see some improvements, and assuming we see which day where we are now. I do expect that eventually we will see some additional improvements in that reserve, assuming that the current size of the portfolio. Obviously, you know, we the portfolio for quite a while also was coming down. It's been more stable recently as the mix of conforming and non-conforming has changed a bit based on market rates.

Orlando Berges: And as you have seen, the loss ratios in recent years have been very low, and that has continued to replace older information on charge-off rates. So we have continued to see some improvements, and assuming we stay where we are now, I do expect that, assuming the current size of the portfolio, obviously, the portfolio for quite a while also was coming down. It's been more stable recently as the mix of conforming and non-conforming has changed a bit based on the market, but clearly, the losses on the portfolio have been much lower.

Speaker Change: As you have.

Speaker Change: I've seen the loss ratios on the recent years.

Speaker Change: Been very low and that has continued to replace older.

Speaker Change: Information on charge off ratios.

Speaker Change: So we have continued to see some improvements on.

Speaker Change: Assuming we see we stay where we are now.

Speaker Change: I do expect that eventually we'll see some additional improvements in that reserve assuming the current size of the portfolio obviously.

Speaker Change: We the portfolio for quite a while also was coming down.

Speaker Change: It's been more stable recently is the mix of conforming and nonconforming has changed based on market rates.

Unknown Executive: Pete. But clearly, the losses on the portfolio have been much lower. We've seen values significantly more consistent in the market. They have stayed high. And that helps in any kind of this position of property. So that's why, you know, we have seen this trend of reduced losses, which it's not leading to lower reserve requirements.

Speaker Change: But clearly they will also.

Speaker Change: On the portfolio has been much lower than we've seen.

Orlando Berges: We've seen values significantly more consistent in the market. They have stayed high, and that helps in any kind of disposition of property. So that's why, you know, we have seen this trend of reduced losses, which is translating to lower reserve requirements.

Speaker Change: Values significantly more consistent in the market they have stayed high.

Speaker Change: And that helps in any kind of disposition of property.

Speaker Change: So thats why we have seen.

Speaker Change: <unk>.

Trend of reduced losses, which is translating into into lower reserve requirements.

Unknown Executive: Okay, appreciate that. And then just with regard to the long growth this quarter, I saw in the text that, you know, floor playing growth was one of the drivers. Just curious if that, if there's a seasonal dynamic or just any reasons for that growth and how to think about, you know, do we continue to see this pace of theory growth as well? Well, there's a couple of considerations. We did sign, you know, new relationships on the floor plan.

Unknown Executive: Okay, appreciate that. And then, just with regard to the loan growth this quarter, I saw in the text that, you know, floor plan growth was one of the drivers. Just curious if there's a seasonal dynamic or just any reasons for that growth and how to think about, you know, do we continue to see this pace of CRE growth as well?

Speaker Change: Okay I appreciate that and then just with regard to the loan growth this quarter I saw in the text that.

Speaker Change: <unk> growth was one of the drivers just curious if that if there is a seasonal dynamic or just any any reasons for that growth.

Speaker Change: How to think about.

Speaker Change: And we continue to see this pace of CRE growth as well.

Unknown Executive: Well, there are a couple of considerations. We did sign, you know, new relationships on the floor plan. So most part of the increase came from a large new relationship that was, you know, that was acquired by First Bank. There's also some seasonality, I will say. Autosales have contracted from the prior year as expected, but they are actually, they're a little better than we actually forecasted. So, you know, the market continues to be very active on that.

Speaker Change: Well there is a couple of those in Asia, we did sign new relationships on the floor plan. So.

Unknown Executive: So the most part of the increase came from a large new relationship that was, you know, that was acquired by First Bank. You know, there's also some seasonality, I will say. Auto sales have contracted from prior years, expected. But, you know, we actually worked at it. So, so, you know, Mike, it was very active in that sense. Yeah. Okay.

Speaker Change: Most part of the increase came from from a large new relationship levels.

Speaker Change: That was acquired by my first bank.

Speaker Change: There is also some seasonality I will say.

Budd: Auto sales have contracted from prior year as expected Budd.

Speaker Change: They are actually they are a little better than we actually forecasted. So so micah continues very active in that sense, yes.

Speaker Change: Yes.

Unknown Executive: Okay, and then on the commercial real estate side, you guys had another good quarter of growth here. Just kind of curious, you know, do we expect that cadence to continue? I know you guys don't have construction, but that would likely pick up in the second half. Just curious in theory.

Budd: Okay, and then on the on the commercial real estate side.

Unknown Executive: And then on the commercial stage side, you guys had another good quarter of growth here. Just kind of curious, you know, do we expect that getting to continue? I know you guys don't have a construction, but that would likely pick up in the second half; just curious on theory. Yeah. Actually, on the theory, some of the increase was conversion from construction. So, that, that's why the timing of reduction in construction is shown this quarter, because some of the cases were converted to permanent homes. Yes, we, and, and yes, we, we do have initial conversions coming through the end of the year, but we also have expected experiments on the construction loan to pick up with the projects, you know, normal cycle of construction project, you know, showing some delays.

Speaker Change: You guys had another good quarter of growth here, just kind of curious.

And we expect that.

Budd: To continue on I know you guys are on construction.

Speaker Change: We pick up in the.

Speaker Change: In the second half just curious on CRE.

Unknown Executive: Yeah, actually, in the CRE, some of the CREs were converted from construction. That's why the timing of reduction in construction is shown in this quarter because some of the cases were. [inaudible] Yes, we do have initial conversions coming through at the end of the year, but we also have, as expected, disbursements on the construction loan to pick up with the projects, you know, the normal cycle of a construction project, showing some delays. It's not a surprise.

Speaker Change: Yes actually on the CRD somewhat some of the increase was conversion from construction.

Speaker Change: A.

Speaker Change: That's why the timing of reduction in construction as shown in this quarter because of all the cases, where.

Speaker Change: Compared to the government approvals.

Speaker Change: Yes.

Speaker Change: And yes, we do it.

Speaker Change: We do have on each of the conversions coming to the end of the year.

Speaker Change: We also have as.

Speaker Change: The expected disbursement on the construction loan to pick up.

Speaker Change: With the projects you know normal cyclical construction project showing some delays is noticed with price.

Unknown Executive: It's not a surprise. Okay.

Unknown Executive: Okay, appreciate that. And one last one for me just on the non-forming commercial loan here in the restaurant or food sector. Just curious, any color you could give around that credit, whether it's a shared national credit or things along those lines.

Speaker Change: Okay.

Unknown Executive: Appreciate that.

Speaker Change: Appreciate that.

Unknown Executive: And one last one for me, just on the non-forming commercial loan here, in the restaurant or food sector. Just curious any color you could give around that credit, whether a shared national credit or things like that. No, no, it's a relationship that we have. We, we do expect, you know, resolution on that relationship, you know, so many initiatives in the development of relationships that have delayed, but we do expect, you know, that to, to recover some time in the future. Yeah. And that, that have two components: one in construction and the other in the commercial side.

Speaker Change: One last one for me just on the <unk>.

Speaker Change: Non performing commercial loan here in the restaurant or food sector just curious.

Any color you could give around that credit whether it's a shared national credit or.

Speaker Change: Thanks, along those lines.

Unknown Executive: No, no, it's a relationship that we have; we do expect, in a resolution to that relationship. You know, some initiatives in the development of relationships have been delayed, but we do expect, you know, that to recover, sometime in the future, and that that had to come.

Speaker Change: No no.

Speaker Change: It's a relationship that we have we do expect.

Speaker Change: Resolution of that relationship.

Speaker Change: Some initiatives in the development of relationships are delayed, but we do expect that.

Speaker Change: To recover.

Speaker Change: Sometime in the future.

Unknown Executive: And that had two components, one in construction and the other on the commercial side.

Speaker Change: And that has two components one in construction on the commercial side, yes.

Unknown Executive: Yeah. Okay.

Speaker Change: Okay.

Unknown Executive: Great. Appreciate all the color in this quarter.

Unknown Executive: Great. I appreciate all the color and nice quarter. Thank you. Thank you.

Speaker Change: Great I appreciate all the color and nice quarter. Thank you.

Speaker Change: Thank you.

Thank you.

Timur Braziler: The next question, we've got from Timur Braziler from Wells Fargo. Timur, your line is not open. Please go ahead.

Operator: The next question we've got is from Timur Braziler from Wells Fargo. Timur, your line is now open, please go ahead.

Speaker Change: The next question please.

Tmall <unk>: Tmall <unk> from Wells Fargo. Your line is now open. Please go ahead.

Timur Braziler: Hi, good morning. I'm just wondering on the securities cash flows. You know, it looks like it's accelerating in the back end of the year. Just your appetite for either putting that right back into the bond book, waiting to invest that into loans. I guess how quickly are you anticipating those bonds to be reinvested or that bond cash was to be reinvested? Well, reinvestment can be different ways. Obviously, we based on the pipelines on the lending portfolio and the liquidity composition of the institution; that's where that drives the decisions. Based on pipelines, we do see some amounts of the fair account, which obviously at this point, it's yielding 540, which is still significantly higher than the portfolio.

Speaker Change: Hi, good morning.

Mark: Hi, good morning, Mark.

Timur Felixovich Braziler: I'm just wondering, on the securities cash flows, you know, it looks like it's accelerating in the back end of the year, just your appetite for either putting that right back into the bond book, waiting to invest that into loans, I guess, how quickly are you anticipating those bonds to be reinvested, or those bond cash flows to be reinvested?

Speaker Change: I'm just wondering on the securities cash flows.

Mark: <unk>.

Speaker Change: It looks like it's accelerating in the back end of the year, just your appetite for either putting that right back into the bond book waiting to invest that into loans I.

Speaker Change: I guess, how quickly are you anticipating those bonds to be reinvested.

Speaker Change: Are those bond cash flows to be reinvested.

Speaker Change: Well.

Unknown Executive: [inaudible] Reinvestment can be different ways. Obviously, based on the pipelines in the lending portfolio and the liquidity composition of the institution, that's what drives the decisions. Based on pipelines, we do see some amounts in the Fed account, which, obviously, at this point, it's yielding 540, which is still significantly higher than the portfolio.

Speaker Change: Reimbursement can be different ways, obviously, we.

Speaker Change #100: Based on the pipelines on the lending portfolio and liquidity compensation of the institution Thats, where the right decisions.

Speaker Change #100: Based on pipelines, we do see some amounts of the fed account, which obviously at this point.

Speaker Change #100: <unk> 540.

Speaker Change #100: Which still significantly higher than the portfolio.

Orlando Berges: If we don't foresee that to be the case, we do two things: either we let some wholesale funding that mature go, or we go back to the investment portfolio. That would be the order. First, the lending and the lending; it's going to be the key factor here. And if we see it's longer term, we'll just move back to the market. So it's a mix, Tim, or it's going to be based on how we see the different components, mainly, you know, pipelines and liquidity, that we decide where to move the money to. But it's cash where it is today.

Unknown Executive: If we don't foresee that to be the case, we do two things. Either we let some wholesale funding that is maturing go, or we go back to the investment portfolio. That would be the order. But first, the lending, and the lending is going to be, you know, the key factor here. And if we see it's for the longer term, we'll just move back to the market. So it's a mix, Timur. It's going to be based on how we see the different components, mainly pipelines and liquidity, that we decide where.

Speaker Change #100: We don't foresee that to be the case, we do two things either we led some some wholesale funding that mature go.

Speaker Change #100: Or we go back to the investment portfolio that that would be the order about first the lending and the lending it's going to be the key factor here.

Speaker Change #100: And we see its longer term, we'll just move back to the market.

Speaker Change #100: So it is that makes us Tim or it's going to be based on on how we see the different components, mainly pipelines and liquidity that we decide where to move the money too.

Unknown Executive: The effect would be immediate, as it comes in; obviously, you're just leaving it for a while on the Fed account or eliminating some hotel funding while the loans come in. So some of that pickup won't go immediately to loan yields but clearly would go to some kind of market investment or cash-in-debt. Yep. Okay. That makes sense. And then just looking at the incremental board authorization at 250 for the reduction of some of the preferential rates, I guess, what does that portend for future buybacks? Is that a hindrance, maybe? Or do you kind of use the capital for the redemption, and then that puts buybacks on hold? Or can those go on kind of in line with one another?

Kash: Okay. Thank you kash thanks.

Orlando Berges: The effect would be immediate, you know, as it comes in. Obviously, you're just leaving it for a while at the fair account, or you're eliminating some wholesale funding while the loans come in. And so that's some of that pick up one go immediately to loan deals, but clearly would go to kind of market investment or cash yields.

Kash: The effect would be immediate Aaron.

Speaker Change #102: As as it comes in obviously, you're just leaving it for a while on the paragon or eliminating some wholesale funding while the loans come in so that's some.

Speaker Change #103: Some of that pickup.

Speaker Change #104: One go immediately to loan yields, but clearly would go to kind of a market investment or cash yields.

Timur Braziler: Yeah, okay, that makes sense.

Speaker Change #104: Yes.

Speaker Change #105: That makes sense and then just looking at the <unk>.

Orlando Berges: And then just looking at the incremental board authorization at 250 further reduction of some of the press. I guess what does that pretend to future buybacks? Is that a hindrance, maybe, or do you kind of use the capital for the redemption, and then that puts buybacks on hold, or can those go on kind of in line with one another? Well, right now, you know, this quarter, we will focus on exclusively on the debt securities, really mean the debt security, this quarter, starting with that, you know, we again, have the same, same, you know, number in mind in terms of the plan, achieving 100% capital returns, which it would be probably, you know, 50 million per quarter, similar to what we did in the first half of the year.

Speaker Change #105: Incremental board authorization at $2 50 further reduction of.

Speaker Change #106: Some of the press I guess, what does that portend to future buybacks.

Speaker Change #105: <unk>.

Speaker Change #107: Is that a endurance, maybe or do you kind of use the capital for the redemption and then buybacks on hold or can those go on kind of.

Speaker Change #107: In line with one another.

Aurelio Aleman: Well, right now, you know, this quarter, we will focus exclusively on the debt securities, redeeming the debt security this quarter. Starting with that, we again have the same same number in mind in terms of the plan, achieving 100% capital return, which would be probably 50 million per quarter, similar to what we did in the first half of the year.

Speaker Change #108: Well right now this quarter, we will focus on exclusively on the debt securities redeeming that executed this quarter, starting with that we again, we have the same.

Speaker Change #108: Number in mind in terms of the plan, achieving 100% capital return, which.

Speaker Change #108: It will be broadly 50 million per quarter and similar to what we have.

Speaker Change #108: What we did in the first half of the year so and.

Orlando Berges: So, and, you know, obviously, you know, obviously that gave us that it's an immediate creation. and immediate improvement on revenues, no EPS dilution. So we're going to prioritize that activity in this half of the year, but we always have the optionality. We're not, you know, we're keeping the optionality, and I think that is an important thing to do almost all by by any time, too. We're just sharing what is our priority right now. We've got it. So the priority near term is on the redemption, and then buybacks are still potentially on the table. That's there.

Aurelio Aleman: Obviously, that gave us an immediate accretion and immediate improvement in revenues, no EPS dilution. So we're going to prioritize that activity in this half of the year. But we always have the optionity. We're not, you know; we're keeping the optionity. I think that is important, to do commercial buybacks anytime. We're just sharing what our priority right now. Got it. So priority in the near term is on the redemption and

Speaker Change #108: Obviously, obviously that gave us that its had immediate accretion.

Speaker Change #108: And immediate improvement on revenues no EPS dilution, so we're going to prioritize prioritize that activity in this half of the year.

But we always have the optionality, we're not we're keeping the optionality I think that I think that it's important thing to do almost all bypass anytime too we just sharing what is our priority right now.

Aurelio Aleman: Got it. So priority in the near term is on the redemption, and then my backs are still potentially on the table.

Speaker Change #109: Got it so priority near term is on the redemption.

Speaker Change #110: Baxter's still potentially on the table.

Timur Braziler: That's great.

Speaker Change #110: That's correct.

Timur Braziler: Okay. Great. Thanks for the questions.

Speaker Change #110: Okay.

Great. Thanks for the questions.

Operator: Thanks, Timur.

AMR: Thanks AMR.

Operator: Thank you.

Speaker Change #112: Thank you.

Kelly Motta: As a reminder, if you would like to ask a question, please press star followed by one on your telephone keyboard now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally.

Operator: As a reminder, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. We've now got a question from Kelly Motta from KBW. Kelly, your line is now open, please go ahead.

Speaker Change #113: So a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad now.

Speaker Change #113: You changed your mind, Please press star followed by <unk>.

Speaker Change #113: One is the parent to ask a question. Please ensure your devices and new debt locally.

Kelly Motta: We've not got a question from Kelly Motor from KBW. Can you, your life is not open. Please go ahead.

Speaker Change #113: We've now got a question from Kelly Motta from <unk>. Your line is now open. Please go ahead.

Orlando Berges: Hi, good morning. Thanks for the question. You've continued to have like a pipeline of Aureo gains here that's really, you know, to the benefit of expenses. I think you reiterated your guide of 120 to 122 million XBs gains, but just wondering, based on the activity we've seen so far, what are you seeing in the pipeline in terms of the potential for further Aureo gains to reduce that overall expense number? We, this quarter, we had a large case, the commercial Aureo, that we had that works. We don't have too many of those that that was sold at a good profit for the quarter, but we, the commercial side, there is not that many.

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

Hi, good morning, Thanks for the question.

Kelly Ann Motta: You've continued to have like a pipeline of Oreo gains here that's really..., you know, to the benefit of expenses. I think you reiterated your guide of 120 to 122 million X fees gains. But just wondering, based on the activity we've seen so far, what are you seeing in the pipeline in terms of the potential for further Oreo gains to reduce that overall expense number?

Joe: Good morning, Joe.

Speaker Change #115: You continue to have like.

Speaker Change #115: Our pipeline of Oreo gains here that's really.

Speaker Change #116: Did the benefit of expenses I think you reiterated your guide of 120 to 122 million ex these gains but just wondering.

Speaker Change #117: Just on the activity we've seen so far.

Speaker Change #118: What are you seeing in the pipeline in terms of the potential for further Oreo gains to reduce that overall expense number.

Orlando Berges: We, this quarter, we had a large case of the commercial Oreo that we had, that was sold at a, you know, at a good profit for the quarter. But we On the commercial side, there are not that many. However, we continue to see residential mortgages being disposed of. Market prices have been steady, and that has allowed pricing on these OREOs on the residential side to continue to be there. At this point, I think we have mentioned this before.

Speaker Change #119: This quarter, we had a large case.

Speaker Change #119: There is commercial.

Speaker Change #120: Oreo that we had that we don't have too many of those that was sold.

Speaker Change #120: Good.

Speaker Change #120: <unk> for the quarter.

Speaker Change #120: But we are.

Speaker Change #120: On the commercial side there is not that many however, we continue to see residential mortgages being being disposed.

Orlando Berges: However, we continue to see residential more images being being disposed that market prices have been steady and that has allowed pricing on on these Aureos on the residential side to continue to be there. You know, what at this point, it's I think we have mentioned this before, it's been longer than we expected, but we'll take it. And our group continues to see better offers regarding as compared to Aureos based on what's out there. Again, as you know, some of the things we, we think it's a higher employment level than the island, you know, need for properties and so for a long time, we didn't have much in terms of construction of residential construction in Puerto Rico.

Speaker Change #120: Market prices have been steady and that has.

Speaker Change #120: Allowed pricing on these oreos on the residential side to continue to be there.

At this point.

Speaker Change #120: I think we have mentioned this before it's been longer than we expect that we will take it.

Orlando Berges: It's been longer than we expected, but we'll take it, and our group continues to see better offers as compared to appraisal. Based on what's out there, again, some of the things we think are higher employment levels on the island, need for properties, and so, for a long time, we didn't have much in terms of construction, residential construction in Puerto Rico, so all of that combined. In the near term, we still feel that the numbers won't be as large as what we saw this quarter.

Speaker Change #120: And our group continues to see better offers regarding as compared to two appraisals.

Speaker Change #120: Based on whats out there again.

Speaker Change #121: One of the things, we think it's a higher employment levels in the island.

Speaker Change #121: No need for properties and so for a long time, we didn't have much in terms of construction of residential construction in Puerto Rico, So all of that.

Orlando Berges: So all of that that combined, you know, in the near term, we still feel that the numbers won't be as large as what we saw this quarter, definitely. But, but we do expect that, you know, operating costs would be definitely offset by the sales, at least for the next couple of quarters. But it's very difficult to say, Kelly, how long it's going to be? I don't think it's going to last forever, definitely. I got it. I keep putting in zero there, and you guys keep beating me.

Speaker Change #121: Combined.

Speaker Change #121: In the near term, we still feel that the numbers won't be as large as what we saw this quarter definitely.

Orlando Berges: But we do expect that operating costs will definitely be offset by sales, at least for the next couple of quarters. But it's very difficult to say, Kelly, how long it's going to be. I don't think it's going to last forever, definitely.

Speaker Change #121: But we do expect that.

Speaker Change #121: Operating costs would be definitely offset bye bye.

Speaker Change #122: Baidu sales at least for the next couple of quarters.

Speaker Change #122: But it's very difficult to say Kelly, how long, it's going to be I don't think its going to last forever definitely.

Aurelio Aleman: Got it. I keep putting in zero there, and you guys are me. On the deposit side, it was really encouraging to see, you know, non-interest-bearing deposits actually up slightly this quarter. Just wondering, Provided we're obviously done with rate hikes, like what you guys are seeing on the deposit side and the pipeline for deposits, especially, you know, with the release money picking up year to year to date, fair to say that, you know, modest growth off this number. How are you guys thinking of that? What are you guys?

Kelly Ann Motta: Got it thank you for putting in zero, there and you guys keep me.

Speaker Change #124: I think the part.

Kelly Motta: I'm at the deposit side. It's really encouraging to see, you know, not interest bearing stabilized; that's actually up slightly this quarter. Just wondering, provided we're obviously done with rate heights, like what you guys are seeing on the deposit side and the pipeline for deposits, especially, you know, with the release money picking up year to date, fair to say that, you know, continued modest growth off this number.

Speaker Change #124: And the deposit side.

Speaker Change #125: It was really encouraging to see.

Speaker Change #126: Noninterest bearing stabilize actually up slightly this quarter just wondering.

Speaker Change #127: Provided we're obviously done with rate hikes like what you guys are seeing on the deposit side and the pipeline for deposits, especially.

Speaker Change #128: With the release money picking up.

Speaker Change #129: Year to date fair to say that.

Speaker Change #130: Continued modest growth off this number.

Aurelio Aleman: How are you guys thinking of that? What are you guys seeing? Well, you know, it's a number one priority of the franchise to continue growing the deposit. So, you know, it's a combination of products, data functionality, and I will say commercial activity. And the commercial products that we have focused on and made investments over the past year. So, it's really our main priority to continue growing that. It's very difficult to predict, you know, the trends in the market, market data; it's live, in terms of your own market data trends. Obviously, there's a lot of analytics behind how to execute, but our goal is really to continue to do that number.

Speaker Change #131: How are you guys thinking of that but have you guys seen.

Aurelio Aleman: Well, you know, it's the number one priority of the franchise to continue growing the core deposit. So you know, it's a combination of Digital Functionality, and I would say commercial activity, and the commercial products that we have focused on and made investments in over the past year. So it's really our main priority to continue growing. That is very difficult to predict, you know, the trends in the market. Market data is live, in terms of overall market data and trends.

Well it is the number one priority of the franchise to continue growing the core deposit. So it's a combination of broad oaks data functionality and I will say commercial.

Speaker Change #131: Activity.

Speaker Change #131: And the commercial products that we have focus on made investments over the past year or so so it's really our main priority to continue rolling that it's very difficult to predict.

Speaker Change #133: The trends in the market market data slide.

Speaker Change #131: Industrial dealer all market data trends.

Aurelio Aleman: Obviously, there's a lot of analytics behind how to execute, but our goal is really to continue to do that. Sustaining the 34% is a challenge, or non-intense variation, to continue to be the focus also. A government deposit is a different strategy, you know; it's more opportunistic and transactional, but we do have a core business, which is providing all types of transaction banking services to government entities, not only the large corporations but municipalities. So, you know, those two are at similar levels. We don't expect growth in that area. We, even what we do, we do expect to continue, you know, making progress on commercial and retail.

Speaker Change #131: Hey.

Speaker Change #131: There's a lot of analytics behind how to execute but our goal is really to continue to do.

Kelly Ann Motta: Got it. That's helpful.

Speaker Change #131: That number.

Aurelio Aleman: So, sustaining the 34% is a challenge, or knowing that it's varying, to continue to be the focus also.

Speaker Change #132: Sustaining the 34% is a challenge on it does vary.

Speaker Change #131: <unk> to be the focus also.

Aurelio Aleman: A government because it is a different strategy, you know, it's more opportunistic and transactional. But we do have a core business, which is providing all type of transaction banking services to the government entities, not only the large corporations, but the municipalities. So, you know, with those who state at similar levels, we don't expect growth in that area. Even what we do, we do expect to continue, you know, making progress on the commercial and retail side. Got it. That's helpful. Maybe last one for me.

Speaker Change #131: Government deposit is a different strategy.

Speaker Change #136: It's more opportunistic and transaction, but we do have a core business, which is providing a type of transaction banking services to the lower main entities.

Speaker Change #131: Not only the large corporations with biodiesel.

Those who stayed at similar levels, we don't expect.

Speaker Change #131: In that area, we even when we do we do expect to continue making progress on the commercial and retail side.

Aurelio Aleman: Maybe maybe last one for me, given your outlook for expenses to hold at this level and margin expansion, you know, you've been on the efficiency ratio consistently in the low 50s and kind of below the longer term mid 1950 range. Given that you expect margin expansion, would it be fair to expect that efficiency could continue to run? you know, potentially lower here, at least in the near term, based on your outlook for investment in the franchise and NII growth outstripping that.

Speaker Change #134: Got it that's helpful. Maybe maybe last one for me.

Aurelio Aleman: Given your outlook for expenses to hold into this level and margin expansion, you know, you've been on the efficiency ratio consistently in the low 50s and kind of below longer term mid 1950s range. Given that you expect margin expansion, would it be fair to expect that efficiency could continue to run, you know, potentially lower here at least in the near term based on kind of your outlook for investment in the franchise and kind of NII growth outstripping that? Or, you know, could you potentially up your expenses, you know, and reinvest some of those gains as you think about it?

Speaker Change #135: Given your outlook for expenses to hold into this level, one and margin expansion you know you've been you've been on the efficiency ratio consistently in the low fifty's and kind of blow.

Speaker Change #135: Longer term.

Speaker Change #134: Alright.

Speaker Change #134: Range.

Speaker Change #134:

Speaker Change #134: Given that you expect margin expansion.

Speaker Change #138: Would it be fair to expect that efficiency could continue to run.

Speaker Change #137: Potentially lower here at least in the near term based on.

Speaker Change #143: How does your outlook for them.

Speaker Change #139: Investment in the franchisee and kind of NII growth outstripping that just work.

Aurelio Aleman: Could you potentially increase your expenses and reinvest some of those gains as you think about it? I realize it's a little early to start talking about 2025, but just from a high level, how you guys are viewing that would be really helpful.

Speaker Change #140: Could you potentially up your expenses.

Speaker Change #145: And reinvest some of those gains as you think about it I realize it's a little early to start talking about 2025, but just from a high level.

Aurelio Aleman: I realize it's a little early to start talking about 2025, but just from a high level, how you guys are viewing that would be really helpful. Yeah, you know, investments will continue. You know, technologies is a key component of the investment, you know, priorities. Also, you know, facilities has been that we continue to invest. So it's really, I think, you know, we guided the 52% for 2024. And I think we should stay; we're going to stay around that very difficult. Sometimes it's hard to go lower, sometimes a little bit like these past two quarters. There's opportunities among timers that go into the question, but when you look at the overall, you know, I think 52% is probably the best number we can provide at this stage.

Speaker Change #141: That would be really helpful.

Aurelio Aleman: Yeah, you know, investments will continue, you know, technology is a key component of the of the investment, you know, priorities. Also, you know, facilities have been a key component that we continue to invest in. So, so it really, really I think, you know, we guided for 52% for 2024, and I think we're going to stay around that. It's very difficult. Sometimes you go lower, sometimes by a little bit, like these past two quarters. There are opportunities among timers that go into the equation. But when you look at the overall picture, I think 52% is probably the best number we can provide at this stage.

Speaker Change #141: Yes.

Speaker Change #142: Investments will continue.

Speaker Change #144: Technologies is a key component of the <unk>.

Speaker Change #142: Of the of the investment.

Speaker Change #146: Priorities also facilities has been in particular opponent.

Speaker Change #142: That we that we continue to industrial so it really it really I think we got.

Speaker Change #142: <unk>, 52% for 'twenty 'twenty four.

And I think we should state we're going to stay around that very difficult sometimes to go lowers on things a little bad like these past two quarters.

There is opportunity some one timers that are.

Speaker Change #142: Go into the equation, but Bob when you look at the overall I think 52%.

Bob: Probably the best number we can provide at this stage.

Kelly Ann Motta: Obviously, the margin expansion could help in terms of that relationship and offset any additional investments we might make. But, you know, the 52% is where we feel it's going to start, based on the level of investments we're currently making. Great. Thank you.

Aurelio Aleman: Obviously, the margin, the margin expansion could help in terms of that relationship, and I know I've said any additional investments we might make clearly, but you know, the 52% is where we feel it's going to start at a, at a, based on the level of investments we're currently doing.

Bob: Obviously.

Bob: The margin the margin expansion could help in terms of that relationship and.

Bob: Offset any any additional investments we might make.

Bob: Clearly, but.

52% is where we feel it's going to start.

Bob: Based on the level of investments we're currently doing.

Kelly Motta: Thank you. Thank you, Kelly.

Speaker Change #148: Great. Thank you.

Thank you Kelly.

Operator: Thank you. We currently have no further questions, so there's going to be today's conference call. You may not disconnect your lines. Thank you. Thank you very much.

Speaker Change #149: Thank you.

Operator: We currently have no further questions, so this concludes today's conference call. You may now disconnect your lines.

Speaker Change #150: We currently have no further questions. So this concludes today's conference call. You may now disconnect your lines. Thank you.

Unknown Executive: Thank you very much to all.

Speaker Change #150: Thank you very much thank you.

Speaker Change #150: [music].