Q3 2024 First BanCorp Earnings Call
Okay.
breaker: Good morning, and thank you all for attending the first Bancorp Q3, 2024 financial results Conference call. My name is breaker and I will be your moderator for today.
breaker: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers.
At the end.
Speaker Change: I would now like to pass the conference over to your highest remain whatever you guys' investment Relations officer first Bancorp. Thank you you May proceed.
Speaker Change: Thank you break up good morning, everyone and thank you for joining first Bancorp's conference call and webcast to discuss the company's financial results for the third quarter of 2024.
Speaker Change: Joining you today from first Bancorp are aurelio.
Speaker Change: President and Chief Executive Officer, and Orlando way to his executive Vice President and Chief Financial Officer.
Speaker Change: 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 differ materially from the forward looking statements made due to the important factors described in the Companys latest SEC filings.
Speaker Change: The company assumes no obligation to update any forward 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 Investor Dot Com.
Speaker Change: This time I would like to turn the call over to our CEO Rodrigo demand.
Rodrigo Demand: Thank you Ramon and good morning, good morning, everyone and thank you for joining our call today.
Rodrigo Demand: This morning, we reported another strong quarter for our franchise.
Rodrigo Demand: The remaining $73 7 million and net income.
Rodrigo Demand: <unk> 45 per share.
Rodrigo Demand: It resulted in a solid return on assets of 155%.
Rodrigo Demand: Adjusted pre tax pre provision was slightly down to 112, mostly due to an increase in expenses as we have before.
Rodrigo Demand: Is there any other additional continues to operate in in the 52% efficiency ratio range in line with our guidance.
Credit demand continues to be healthy and our environment leasehold dealing in Australia, our strongest quarter of commercial loan originations for the year.
Rodrigo Demand: While our loan portfolio grew by 63 million despite higher levels of unexpected commercial prepayments.
Rodrigo Demand: That amounted to approximately $122 million.
Rodrigo Demand: In the third quarter.
Even though we continue to see a very strong pipeline.
Rodrigo Demand: And we continue to work towards our 5% loan growth guidance.
Rodrigo Demand: We now expect our loan portfolio to grow closer to 40% in 2024 actually primarily driven by the higher than forecasted prepayment that ideal.
Rodrigo Demand: <unk>.
Rodrigo Demand: In terms of deposit Mike Garrett micro dynamics.
Rodrigo Demand: Seems to be behaving as expected at the start of this easing cycle.
Rodrigo Demand: Core deposits or broker and government deposit remain at what point.
Rodrigo Demand: <unk> deep rebase on brokerage Cds.
Rodrigo Demand: A.
Rodrigo Demand: Multiple daily decline coming from noninterest bearing deposits.
Rodrigo Demand: We were broadly monitoring deposit flows and potential deposit repricing opportunities as we capitalize on the expected rate environment.
Rodrigo Demand: Which started and will continue into and identify with our target of achieving NII improvement.
Rodrigo Demand: Over the period.
Rodrigo Demand: Asset quality at all.
Rodrigo Demand: Also improved during the quarter with nonperforming asset coming down to <unk> 63 basis point of total assets.
Rodrigo Demand: We think they are coming rate environment should be favorable to commercial cost momentum bodes well for the general asset quality improvement.
Rodrigo Demand: Finally, our liquidity and capital.
Rodrigo Demand: <unk> remains quite strong this quarter, we were able to sustain our commitment to deliver 100% of earnings in the form of some capital actions by redeeming 50 million of outstanding debentures.
Rodrigo Demand: Debentures in and paid $26 3 million in common dividends.
Rodrigo Demand: Even accounting for these actions our capital ratios improved during the quarter and our tangible book value per share grew by 50% benefitting from the <unk> and the short duration of our book.
Rodrigo Demand: We enjoy a nice degree of capital flexibility.
Rodrigo Demand: To to deploy it in the amount of divestments, the long term incentive for the franchise.
Rodrigo Demand: Turn to page five to talk a little bit about the environment.
Rodrigo Demand: We continue to experience, while we can see a stable and positive economic backdrop is.
Rodrigo Demand: Reflected in it.
Rodrigo Demand: Good quarter of originations and also in the transfer of asset quality.
Rodrigo Demand: September unemployment in Puerto Rico, just came out at five 5%.
Rodrigo Demand: Actually historical always seen 1976.
Rodrigo Demand: Also reflecting.
Rodrigo Demand: Year over year.
Rodrigo Demand: Payroll employment improvement of one 6%.
Speaker Change: Our team remained focus on expanding existing relationship building commercial loan pipeline on opening new platform technology. We did launch in September our Encino platform, which actually provides it completely the dot expedient.
Speaker Change: In the commercial lending workflow.
Speaker Change: We continue to generate a lot of organic capital and we continue to our priority is to fund loan growth.
Speaker Change: And continue franchisee invested in technology to better serve our customers.
Speaker Change: While deploying any excess capital into ongoing equity balance sheet managing opportunities.
Speaker Change: We are proud of our third quarter results. We think we're all of our employees and we look forward to updating you in January.
Speaker Change: On what to expect.
Speaker Change: In 2025.
Speaker Change: I will now turn the call over to Orlando and we'll be back to take some questions. Thank you.
Speaker Change: Good morning, everyone.
Speaker Change: I would also mention we reported 74 million net income for the quarter 40, 45 a share.
Speaker Change: Bears to $76 million 46, a share last quarter.
Speaker Change: The provision for the quarter increased $3 6 million to provide for increases require in the allowance for credit losses on the consumer loan portfolio's base.
Speaker Change: On the charge off trends.
Speaker Change: The portfolios.
Speaker Change: We also had some some reductions lagged the reactions on the effective tax rate to the relationship.
<unk> versus <unk>.
Speaker Change: Income change debate.
Speaker Change: From what we had before.
Speaker Change: Net interest income for the quarter was $202 1 million, which increased two 1 million and that's compared to last quarter.
Speaker Change: This quarter, we did have one additional day, which is approximately $1 2 million improvement in net interest income.
Speaker Change: And we also had increases of $3 8 million in interest income on loans.
Speaker Change: On the other hand, the investment portfolio income was down $1 billion as we continue to see repayments.
Speaker Change: Im not sure it is coming in.
Speaker Change: Loan yields were down one basis points.
Speaker Change: Did have small impact on the 50 basis point reduction in September.
Speaker Change: Obviously, the lower yields that are are going to affect.
Speaker Change: The yields on the floating rate component of the portfolio.
Speaker Change: Overall cost of funds or stayed flat in the quarter.
Speaker Change: Our net interest margin expanded three basis points to 425.
Mostly reflecting the changing the asset mix strong from the deployment of the cash flows.
Speaker Change: From the lower yielding investment securities.
Speaker Change: To fund higher yielding loans.
Speaker Change: Bringing down the wholesale funding cost.
Speaker Change: Regarding net interest margin going forward.
Speaker Change: What we expect to see that margin to be flat.
Speaker Change: Similar to this quarter.
Speaker Change: In the fourth quarter of 'twenty four with <unk>.
Speaker Change: <unk> going into 'twenty five or.
Speaker Change: Our expectation is that rates will come down an additional 50 basis points this year, and probably 125 basis points in 2025.
But the impact on the downward repricing of the commercial floating rate portfolio.
Speaker Change: It's going to be compensated by the repricing of the cash flows from the lower yielding investment portfolio and the repricing of deposits, which typically have a lag in the repricing component.
Speaker Change: Also.
Speaker Change: We have been repurchasing that subordinated debentures, which have higher cost.
Speaker Change: And we have led some.
Speaker Change: Broker Cds maturities.
Speaker Change: Green Dot with them those are higher cost funding as well as any any new renewables would be we'd be done at <unk>.
Speaker Change: At a lower cost that will improve the margin.
Speaker Change: In terms of the securities that are winning.
Speaker Change: And perspective.
Speaker Change: Our estimates are that we'll see another $480 million of repayments and maturities in the portfolio in the fourth quarter of 'twenty four.
Approximately $350 million in the first quarter of 'twenty five.
Speaker Change: And is that repricing of this cash flows.
Speaker Change: Either through loans or securities will be seen in the first half of 2025.
Speaker Change: Other income was fairly flat in the in the quarter.
We had we had deep collect and all the older insurance claim for $100000.
Speaker Change: Enter into into other income, but otherwise.
Speaker Change: Fairly stable.
Speaker Change: Expenses.
Speaker Change: Expenses.
$122 9 million, which is $4 3 million.
Speaker Change: Higher than last quarter.
Speaker Change: Oreo gains this quarter were $1 3 million.
Speaker Change: As compared to $3.
Speaker Change: $6 million last quarter, we had last quarter, we sold a large commercial Oreo.
That had been on the books for a while and we realized $2 $3 million gain on that sale, which.
Speaker Change: What's not.
Speaker Change: Similar this quarter.
Speaker Change: If we exclude Oreo expenses for the quarter were $124 3 million, which compares to $122 3 million last quarter.
Speaker Change: This increase includes about a $1 6 million in higher personnel costs.
Speaker Change: Related to merit increases as well as an additional day.
Speaker Change: Payroll day in the quarter.
Speaker Change: We also saw increases in consulting costs related to solve the technology projects like the Encino project Aurelio has mentioned.
Speaker Change: We had higher electricity costs.
Speaker Change: And higher rental expenses expenses, because we're charging to expense over the last four months of the year. The remaining rental agreement of one branch that will be closed at the end of December.
Speaker Change: I would also mention our efficiency ratio continues to be around 52%.
Speaker Change: Based on the current stage of several technology of several ongoing technology projects.
Speaker Change: We estimate that our expense base for the next couple of quarters would be in the $123 million to $124 million range slightly higher than than before.
Speaker Change: We will provide more guidance for 2025 us the year ends and we reported full year results.
Speaker Change: In terms of asset quality.
Speaker Change: We had a reduction in nonperforming of $7 8 million.
Which is 63 basis points.
Speaker Change: Nonperforming represent down 63 basis points of total assets.
Speaker Change: The reduction was mostly on the sale of an $8 2 million nonaccrual commercial loan that we had in Puerto Rico.
Speaker Change: Inflows to nonperforming were down $5 3 million.
Speaker Change: Commercial loan inflows were $17 million, lower but consumer loans increased $10 5 million.
Speaker Change: You might remember that second quarter inflows included a $16 5 million commercial relationship in Puerto Rico, but what's migrated to nonperforming.
Speaker Change: The other hand launched in early delinquency rates.
Speaker Change: $4 million.
Speaker Change: The decrease in the consumer loan portfolios with almost 8 million $7 9 million exactly while the commercial portfolio increased $4 million.
Speaker Change: However, it is this commercial increase was really a case at mature at the end of the quarter and was in the process of renewal.
Speaker Change: But it is up today and payments so it will come out from from early delinquency.
Speaker Change: Sure.
In terms of the allowance for credit losses.
Speaker Change: It's down 79 million to $247 million with most of that reduction coming from the residential and commercial allowances that declined $12 9 million due to improvements in the macroeconomic forecasts and also.
Speaker Change: Improved financial conditions of several of the commercial borrowers that we have.
Speaker Change: On the other hand, the allowance on the consumer portfolio did increase by $5 4 million due to the recent loss trends.
Speaker Change: The ACL ratio overall NPL ratio is down to 198 from <unk> on the quarter as we continue to see good credit trends in the commercial and the residential mortgage portfolios.
Speaker Change: Net charge off for the quarter were $24 million or 78 basis points of average loans, which compares to 69 basis points last quarter.
Speaker Change: Included in the charge off rates of $1 2 million on the sale of the commercial non accrual loan I just mentioned I just mentioned that represent approximately four basis points of the increase.
Speaker Change: Consumer net charge off increased $1 million in the quarter as compared to the third quarter.
Speaker Change: Sure.
Speaker Change: On the capital front, our regulatory ratios increase as we continue to and continue to be significantly above well capitalized.
Speaker Change: We did deploy as Aurelio mentioned.
Speaker Change: 100% of the earnings into into the junior subordinated debenture repurchase we did in the quarter as well as the payment of the common dividend.
Speaker Change: Capital did increase.
Speaker Change: Based on the excess of earnings over the year.
Speaker Change: With the dividend.
Speaker Change: The tangible book value per share increased by 15% to $10 nine.
Speaker Change: And the TCE ratio reached 879.
Speaker Change: Mostly a combination of the $160 million increase in their fair value.
Speaker Change: The securities.
Speaker Change: As well as the earnings for the quarter.
Speaker Change: Still we have remaining <unk> on the books, which represent around $2, 90% of tangible book value and over 300 230 basis points of the TCE ratio.
Speaker Change: We will continue with our capital deployment.
Speaker Change: In a way that it's as Aurelio mentioned, the best interest of the other franchise on our shareholders and according in accordance with our capital plan.
Speaker Change: This concludes our prepared remarks, operator would you. Please open the call for questions.
Speaker Change: Okay.
Speaker Change: Thank you Nancy Murdo ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: If you change your mind any time, please press Star then Keith.
Speaker Change: And as a reminder, lifestyle flip I wanted to ask any questions.
Speaker Change: We have the first question on the line on the line from Timur <unk> with Wells Fargo.
Speaker Change: Thank you.
Speaker Change: Hi, good morning.
My first question is around the balance sheet, just wondering what your thoughts are around when the balance sheet can actually start increasing year and then as it relates to NII in the release it sounded a little hopeful for NII growth in 'twenty, five being driven by bond cash.
Speaker Change: Low reinvestment I'm just wondering what the correlation is between the ability to grow the balance sheet and grow NII in 25 years.
Speaker Change: B E.
Speaker Change: There are two things there the cash flows will continue to come from the investment portfolio and we will continue to reprice.
Speaker Change: As of now most of that cash flow has been reinvested in loans.
Speaker Change: And.
Speaker Change: Either that or say any cash thats why <unk>, our balance sheet is not necessarily growing.
Speaker Change: We will continue to put money into loans.
Speaker Change: And as Aurelio mentioned, we're expecting like a 4%.
Speaker Change: Our growth this year.
Speaker Change: And that that will continue to be a stable balance sheet until we feel that the investment portfolio size. It's at the level that that is on average what we would like to maintain for liquidity needs.
Speaker Change: After all the public funds.
Speaker Change: That point, we will start reinvesting some of the money on there will be some growth on the balance sheet.
Speaker Change: As I mentioned, Tim where some of the broker Cds that we had on the books.
Speaker Change: That mature we are letting them go their high cost of funds and at this point, we still have good liquidity coming in from the investment portfolio. So none of us really we need to increase our balance sheet to maximize earnings.
Speaker Change: But clearly.
Speaker Change: Clearly that's something that we should start seeing later part of latter part of 2025.
Speaker Change: Okay. So that latter part of 2025 is that kind of corollary to what youre expecting net deposit growth as well or could we see some incremental deposit growth here in the near term.
Speaker Change: Yes deposit growth have been.
Speaker Change: Sort of flat, it's a little bit upward a little bit down.
Speaker Change: When I talk about deposit flow typically exclude I'm, sorry deposit growth I typically exclude.
Speaker Change: For this discussion brokers on government brokers, we brought our <unk> side.
Speaker Change: When we won a little bit more a little bit less so all of it is being used to fund the Florida, Our Florida operations.
Speaker Change: So we manage that.
Speaker Change: Lower amendment, it's sort of a stable kind of base, what we have so it comes up or down on EBIT. So so looking at the other deposits you saw there were just slightly down this quarter at 36 $37 million.
Speaker Change: We had a little bit of a shift between interest and noninterest bearing and.
Speaker Change: We feel that the market in general will stay sort of that and maybe grow a little bit.
Speaker Change: But we don't expect to see significant growth on the on the deposit portfolios.
Speaker Change: But.
Speaker Change: Only that reimbursement will be of the interest component increases the portfolios typically in the market.
But obviously the market is coming from a humongous amount of liquidity from older funds that were allocated and most of that it's.
Speaker Change: Gone by now so what's what.
Speaker Change: What's coming in at some of the other programs that we have discussed.
Speaker Change: In terms of steel remaining of FEMA.
Speaker Change: And some of the of the pandemic kind of infra.
Speaker Change: Infrastructure funds that are coming into the market and construction related.
Speaker Change: Funds that are coming into the market.
Speaker Change: Got it and then just last for me it looks like although the Puerto Rican banks this quarter had a uptick in.
Speaker Change: Some consumer credit I'm, just wondering the broader health of the.
Speaker Change: But the consumer there.
Speaker Change: Have we kind of trough out.
Speaker Change: From some of the pandemic benefits and I guess.
Speaker Change: What are we looking at now for for general consumer trends on the island.
Speaker Change: I think we talk about normalization early in the year with about 2020, we actually started talking about this in 2020.
Speaker Change: The polls liquidity lease on the.
Speaker Change: Similar bucket by the pandemic primarily.
At <unk>, we were expecting some normalization on the behavior of the consumer portfolio started for the <unk>.
Speaker Change: Regarding 2023 continues in 2024, and then what we see now is that.
Speaker Change: We're reaching reaching a peak and we should going forward as we've seen today and some of the.
Speaker Change: While the delay early delinquency metrics.
Speaker Change: We show some slight improvement.
Speaker Change: That is that is coupled with.
Speaker Change: Whatever happens with the demand so we're not we're not increasing risk appetite.
Speaker Change: We have been very firm.
Speaker Change: That we have metrics for each portfolio.
Speaker Change: That's the.
Speaker Change: Goals of tolerance of delinquency and losses.
And I will say, we expect stability.
Speaker Change: That portfolio lease with films.
Speaker Change: Delinquency and loss improvement over 2025.
Speaker Change: Yeah.
Speaker Change: Great. Thanks for all the color.
Speaker Change: Okay.
Speaker Change: Your next question comes from Steve Moss with Raymond James You May proceed.
Speaker Change: Good morning.
Speaker Change: Maybe just starting where.
Speaker Change: On the.
Steve Moss: Good morning, maybe just starting here on the following up on the securities portfolio here.
Steve Moss: I heard you Orlando on the $350 million maturing in the first quarter of 2025, just wondering kind of what are the expected cash flows beyond the first quarter.
Steve Moss: Good morning.
Steve Moss: Yes.
Steve Moss: The $4 80, this quarter and $3 50 in the first quarter.
Steve Moss: For 2025, 2025, including the $3 50.
Steve Moss: We're estimating that it's going to be somewhere between 1 billion and $1 1 billion.
Steve Moss: Based on maturities.
Steve Moss: And repayments.
Steve Moss: That full 25, including the $3 50 on the first quarter.
Steve Moss: And the coupon on that I'm, assuming around 2% plus or minus.
Speaker Change: It's minus it's really about.
Steve Moss: Okay.
Steve Moss: They're maturing component, it's probably going to be somewhere between $1 50, and $1 60.
Steve Moss: So it's a loop.
Steve Moss: The overall deal it's about 190.
Steve Moss: 180, something but but some of it. It's also things that don't mature until later in 2006 and 2007.
Speaker Change: Okay great.
Speaker Change: Great I appreciate that and then in terms of just curious here with the fed rate cut.
Speaker Change: Kind of want to get a sense as to how youre thinking about deposit the pace of deposit repricing and kind of what youre seeing here with the 50 basis point cut.
Speaker Change: So.
Speaker Change: Deposit re pricing, obviously have to be divided in three components.
Speaker Change: The typical non interest bearing account.
Speaker Change: Those had a beta gumming up of our 13% to 14%.
Speaker Change: So we're assuming that's going to be following that same bye.
Speaker Change: <unk>.
Speaker Change: In the case of the government side betas were about 78%, we feel those are going to come down.
Speaker Change: Maybe slightly lower beta than that 78% that we had.
Speaker Change: Up.
Speaker Change: But clearly those are the ones that do have some components that will reprice faster.
Speaker Change: Then on in terms of time deposits.
Speaker Change: We have already started adjusting some some rates.
Speaker Change: New each one.
Speaker Change: But obviously the repricing.
Speaker Change: Ill follow whatever terms, well clearly people were not making.
Speaker Change: The average.
Speaker Change: Time deposit it was mostly one one to one five years.
We didn't have much in terms of longer things being originated.
Speaker Change: So it doesn't take that long to start repricing, but but we've already repriced.
Speaker Change: Some of our table rates for for those terms going forward.
Speaker Change: So.
Speaker Change: I mean again I always see a lag on the typical.
Speaker Change: Portfolios repricing, that's why I mentioned that.
Speaker Change: We are expecting margin for the fourth quarter to be sort of that same line of the third quarter because some of the repricing on the on the lending side on the floating rate portfolio will be faster, but some of that on the deposit.
Speaker Change: But also on the other hand, obviously, we're eliminating some of those higher cost brokered Cds.
Speaker Change: That are not long term.
That are being.
Either repriced lower or eliminate it at full benefit.
Speaker Change: Okay great.
Speaker Change: Appreciate all that color and.
Speaker Change: In terms of just kind of.
Speaker Change: Commercial originations remained quite strong.
Curious.
Where are you seeing.
Speaker Change: The most demand there and.
Speaker Change: It sounds like the pipeline has improved so poly and uptick in common in terms of total originations for the fourth quarter.
Speaker Change: But.
Speaker Change: On the commercial side, there is a combination of well construction deals.
Speaker Change: That continues to moving into the book.
Speaker Change: Some of them related to the <unk> projects.
Speaker Change: There is auto industry deals transfer.
Speaker Change: Transactions that are.
Speaker Change: Coming into the Bill also us of new deals that are being happening.
Speaker Change: There is also a CNI components on the commercial side.
Speaker Change: We're very active on the street.
Speaker Change: It will be for new clients.
Speaker Change: There is some distribution industry supermarkets.
Speaker Change: It's a combination of.
Speaker Change: Got it and not necessarily a concentration in any asset class itself.
Speaker Change: A.
Speaker Change: And there are some some government at DB deal so that we expect during.
During the quarter and Florida actually continue to be.
Speaker Change: The contributors to that to that commercial commercial pipeline.
Speaker Change: The consumer we greatly will say, it's stable more than that.
Speaker Change: A growing market right now.
Speaker Change: Alright, okay great.
Speaker Change: Earlier in the Orlando enrollment really appreciate it. Thank you very much for all the color.
Speaker Change: Thank you Steve.
Thank you, Steve we now have schabowski.
Speaker Change: Sandler you May proceed.
Speaker Change: Good morning.
Im wondering if you guys can just remind us on Orlando I know you talked about the lag generally on the deposit side.
Speaker Change: Specifically on the public sector deposits as far as.
Speaker Change: I guess, a large portion of that is indexed.
Speaker Change: What or is it still reasonable to think a one quarter lag.
Speaker Change: In terms of.
Speaker Change: Those public sector deposits coming down in cost.
Speaker Change: Yes.
Speaker Change: On average clearly, yes, you have some that will reprice faster.
Speaker Change: But others have longer lags, because they didn't necessarily reprice up the same way.
Speaker Change: Some some depending on the type of account.
Speaker Change: So the average of one quarter lag it's good.
Speaker Change: Good proxy Frank.
Speaker Change: Okay.
Speaker Change: And then just in terms of another question on loan growth you mentioned the prepayments in the quarter.
Speaker Change: So.
Speaker Change: Closer to 4% this year.
Speaker Change: I guess with the stronger.
Speaker Change: Continued strong pipeline.
Mid single digits is still a reasonable place to expect.
Speaker Change: Future loan growth in coming quarters.
Speaker Change: Yeah.
Speaker Change: Yes, I will say I will tell you this.
Speaker Change: Obviously that was the only goal. This year is we did have been hampered by.
Speaker Change: But decided unexpected prepayments or.
Speaker Change: But when you look at the origination volumes they are in line with what we what we targeted.
Speaker Change: In terms of.
Speaker Change: Well early to anticipate next year Budd.
Speaker Change: Based on what we see.
Speaker Change: And what the economic activities, bringing.
Speaker Change: It's a good number for next year too.
Speaker Change: Okay.
Speaker Change: Mid single digit for now yes.
Speaker Change: Okay.
Speaker Change: And then just lastly on <unk>.
Speaker Change: Orlando you mentioned <unk>.
Speaker Change: <unk>.
Speaker Change: Expectations on the expenses over the next couple of quarters.
Speaker Change: So I just want to make sure I heard that correctly about 123 to 120 for that.
Speaker Change: <unk> and beyond was that just for Q and then and then as we think about.
You guys are targeting an efficiency ratio of 52% as it kind of reasonable to assume maybe that ticks up a little bit in the near term just given the expense guide and then when you get back to about 52% over time.
Speaker Change: Is that reasonable.
When thinking about.
Speaker Change: Trends into 2025.
Speaker Change: The $1 23 124.
Speaker Change: We estimate based on the stage of some of these projects I mentioned between.
Speaker Change: Fourth quarter <unk> 24 in fourth quarter of 'twenty five.
Speaker Change: That obviously excludes any any kind of Oreo, we are still seeing some positive numbers coming out of the Oreo portfolio that would offset some of it is as you saw this quarter, we had $1 3 million in Oreo gains.
Speaker Change: So that would be on the numbers and thats part of the 52%.
Speaker Change: That's why we feel that with the.
Speaker Change: With the pick up through the year.
Speaker Change: The earnings.
Speaker Change: From from.
Speaker Change: The repricing.
Speaker Change: Dynamics of investment and loan portfolios and so.
Speaker Change: With those levels of expenses, 52% sort of holds on a GAAP basis, including the Oreo component.
Speaker Change: If you exclude Oreo it would be clearly a bit higher in the first couple of quarters definitely.
Speaker Change: Okay, Alright got you. Thank you.
Speaker Change: Thank you Frank we have our final question on the line from Kelly Motta with <unk>.
You May proceed.
Kelly Motta: Hi, good morning, Thanks for the question.
Speaker Change: I would now.
Speaker Change: Maybe you could.
Kelly Motta: Expand a bit more on capital return I know you did the sub debt repurchase this quarter.
Kelly Motta: Historically, you've paid out about 100% of earnings.
Kelly Motta: Wondering thoughts on stepping back in here with the buyback as well as it.
Kelly Motta: Is that a.
Kelly Motta: Paying out earnings given 16% CET, one if that's a reasonable expectation as we look out to next year.
Kelly Motta: Well.
Speaker Change: As I said before Kelly, we'd like to give optionality. So we can have.
Kelly Motta: The capital plan that has plenty.
Kelly Motta: Space approved for execution.
Kelly Motta: We decided to focus on the last quarter.
Kelly Motta: Okay.
Kelly Motta: On pain of drops in in this.
Kelly Motta: This quarter, we'll see what happens, but put differently, we give the optionality I think to keep in mind, the 100% goal.
Kelly Motta: <unk>.
Kelly Motta: For now and through 2025 is that that is our position today.
Kelly Motta: That obviously could change as we move into 2025.
Understood that's really helpful and then.
Speaker Change: Can you remind us what happened with the Virgin Islands, I know there were some deposit outflow and Thats where the.
Speaker Change: Prepayment was just wondering if there was anything.
Speaker Change: You mean going on that that drove kind of that variance on both sides of the balance sheet this quarter and how we should be thinking about that.
Speaker Change: Yes, the Virgin Island.
Speaker Change: It's two things.
Speaker Change: We did have a repayment on the government side. The use of our funds are 11 funds to rebate. Some lines. So that came down off the book from deposits. They had on the bank.
Speaker Change: But the other thing is that you have to if you go back typically the third quarter.
Speaker Change: There is a seasonality component in the Virgin Islands.
Speaker Change: It's low season, if you go back to third quarter of last year.
Speaker Change: We had about a $60 million dollar reduction in the quarter from June to September.
Speaker Change: Which compares with a $50 million or so reduction we had this quarter.
Speaker Change: At the island has.
Speaker Change: A big Big component is tourism and it comes down this quarter.
Speaker Change: See deposit movements.
Speaker Change: There was nothing.
Speaker Change: Unusual it was not like one account or one one sector it was sort of across the different.
Speaker Change: And retail components.
Speaker Change: And again similar to what we saw in last year.
Speaker Change: Okay.
Speaker Change: Got it.
Speaker Change: Got it.
Speaker Change: Really helpful.
Speaker Change: Most of my questions have been asked and answered at this point I guess.
Speaker Change: Banking with.
Speaker Change: But the move in rates.
Speaker Change: Any expectation that that revenue line could pick up here as we look ahead.
Speaker Change: Yes, I think.
Speaker Change: The monthly obligations reported in the in the market is really is related with the proxy.
Speaker Change: The industry move with rates and we move us well.
Speaker Change: We have.
Politically micro share of the overall origination market.
Speaker Change: And so some shifting from.
Speaker Change: From conforming and nonconforming takes place based on where the rates are and so I would consider the portfolio has stabilized.
Speaker Change: At a twofold growth this year.
Driven by more nonconforming paper.
Speaker Change: Based on the <unk> 10 that could change that would bring more non interest income into the employment picture. So if rates go lower in the nonconforming side in the conforming site you definitely will see that piece increase or or then youll see it in the portfolio and the rates.
Speaker Change: Go to the other side of the portfolio is very healthy.
Speaker Change: We are achieving.
Speaker Change: The best asset quality that we ever had in that portfolio.
Speaker Change: We were very pleased with the performance of their base since then.
Speaker Change: And any opportunities that we see growing.
Speaker Change: We think of next year.
Speaker Change: Okay.
Speaker Change: Got it and then last question from me.
Your commentary around NII and margin.
Speaker Change: No one one factor and it is the repricing of some of these loans down.
Speaker Change: And in response to the rate cuts can you remind us how much of the book floats.
Yes, we have a 54% of the commercial book the consumer book is at a fixed rate portfolio auto and credit card.
Speaker Change: Some repricing with with.
Speaker Change: Brian.
Speaker Change: The commercial side, it's 54%.
Speaker Change: Floating.
Speaker Change: Mostly on the C&I CRE, it's basically fixed.
Speaker Change: And that 54%, it's about a 33% its software base.
Speaker Change: We have our 12% Brian base.
Speaker Change: 9%.
Speaker Change: Basically directory based.
Speaker Change: So we got it obviously the prime based loans.
Up impact.
Speaker Change: So.
Speaker Change: The second half of September.
Speaker Change: Some of the other software base, we've had some movement already.
Speaker Change: Our software has come down through the quarter.
Speaker Change: Thank you.
Speaker Change: Thank you Kelly I can sometimes that has now conclude todays question and answer session and I would like to hand, it back to remain Rodriguez for final remarks.
Rodrigo Demand: Thanks to everyone for participating in today's call, we will be attending <unk> financial services conference in Miami on November seven and <unk> conference in Naples on November 14th we look forward to seeing a number of you at these events and we greatly appreciate your continued support of a great day.
Speaker Change: Sure.
Thank you all for joining today's conference call with SaaS.
Speaker Change: Please go ahead now complete please enjoy the rest of your day and you may now disconnect from Nicole.
Speaker Change: [music].