FBP - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the First BanCorp Second Quarter 2019 Results Conference Call and Webcast. [Operator Instructions]. Please note, this event is being recorded. I'd now like to turn the conference over to Investor Relations officer, John Pelling. Please go ahead.

John Pelling

Ian. you, Thank thank and and for joining BanCorp's First second Good to you discuss call webcast XXXX. results the conference quarter morning, for company's the financial

Executive Aurelio Joining FBP Financial Officer. Vice Alemán, Officer; Chief and President President today and Orlando are and from Executive Berges, Chief

plans Before today's to no at call. capital statements does issued projections as not due can latest of statements assumes is earnings and call, objectives obligation company's to my of you as to the inform and already such have we this update forward-looking call access company's you If made them differ anyone a the company's statements Xfirstbank.com. described statements webcast release as important the website, begin structure the on well press the results copy or that any actual the forward-looking in may during by materially it company SEC business. filings. responsibility the BanCorp, The involve forward-looking our First of certain revenue, the from The could factors made

this Aurelio? At to I'd over the Aurelio CEO, time, to our call like Alemán. turn

Aurelio Alemán

Good thank joining today. highlights. you let's everyone, you, us the morning, begin for with Thank Please, John. and

presentation. Let's to X move of Slide the

we of a were quarter $X.XX we results reported As this morning, earnings. core or share. reported per Financial really strong at million $XX.X

back by when grown of areas. losing The the this it achieving income million metrics fourth $X.X $XX almost this strategically core the pre-provision to over Net X%, franchise loan we this year-over-year the XX% growth trend move different by income time. in while the XXXX. in to quarter portfolio the in a has the X%. consumer, $X.X to increased and X% and importantly, loan in portfolio around million continued consecutive most think and increase I compare commercial by loan same our $XX quarter, residential portfolio Pretax interest million first million in increase construction, Year-over-year, positive grew reflecting across $XXX billion represents quarter-over-quarter reached for portfolio. quarter a

the Originations our know and a remained similar the of $XXX of there's reduction to for the represent but at now pay predict the only year. million the healthy organic achieved to and NPAs NPL downs $XXX that renewals and larger million, say pipeline meaningful XX% are quarter. were strong that million. is the remainder quarter origination They timing reissue on Obviously, from down X.XX%. quarter or at assets. assets, progress X.XX% some on in nonperforming difficult pace another deals seasonality standpoint, we ratio to trajectory We this of were $XX our for of X% to continue down

to value continues grow, Capital Tangible at at grow. at $X.X $X.XX. billion. now to book also CETX continues now XX.X%. X.XX, It's

on additional the Some highlights franchise the for quarter.

We priority investments. continue to place on technology a lot of

the I functionality were during communicate quarter, new banking it's Rico. digital that think platform Puerto important with expanded allowed we in state-of-the-art our to

to deposit the with expanding of core the brand. these continue contribute strength capabilities. Obviously, functionalities rollout continued also We new and ATMs remote the to franchise the deposit of capture

to with unfortunate and the to concerned economic impact could is regard and it that disappointing much government the we activity have With so say to recent potential we short events headlines that and have disruption. I Definitely, economy on are with deal of the negative have Puerto the that in Rico headlines. term. some these political

of continue with short ultimately, to we progress ahead level the of economy the recovery hand, have remain other the term hopeful will long do the remain from greater in that us. to term, should and this the optimistic of transparency resolve From lead and the we local On the that government. we

deployment. capital to regard With

during announcement mentioned, of second have this previously we half capital any today. other the for a in regarding the on call information As we capital We remain don't year. track

to call will to I the over financials all. detail. turn like Orlando the cover in more to Now Thanks

Orlando Berges

Good morning, everyone.

provision however, So quarter. posted $X.XX of as which with income quarter higher, was $X.XX which result Adjusted, insurance $XXX,XXX a release a we million net higher net quarter, last the of straightforward of was reversal I really had share, reserves $XXX,XXX. mostly quarter, of not $XX.X and million income, of a non-GAAP which last than we hurricane that for the Net had slightly We had about but we is necessarily quarter a quarter we compared good, The $XX.X -- a remained every $X.X in million, compared pre-provision achieved some after-tax Aurelio the a recovery call, reserve strong a that million which what this at quarter in had quarter, the does had to last eliminates quarter. an of million mentioned, million, $XX.X which the first income quarter. XXXX. compare share those million first a items the last Pretax $XX.X for hurricane quarter. was net $XX.X or to recovery recur impact is $XX million $XX very we such

interest We in $XXX,XXX Net at was the It's which relatively loading day of reflects the based grew income. in number we rate from one of The on also including of flat the growth loans in changes. but repricing did Margin quarter, was an loans, in a had interest X.XX% commercial things, million Margin balance some to impact reduction $X.X loans. rate there the and have compared impact income commercial extra X.XX%. approximately remained this really mostly in by million average driven $XX $XX impact strong, remains quarter. consumer million LIBOR.

hand, points a preferred reduction a reduction in in of XX the result the repose of also and the other basis had LIBOR. cost floating we of securities, the approximately On is trust which the

numbers. But went higher-yielding those the mentioned, mix while long-term deposit assets. consumer we the on deposits on part of increase, mortgage did points. I loans some our basis of the We've change we so lagging strategy of benefit, is cost X loans it as of been of increasing by showing decreased Average reducing as some up from in

at decrease to LIBOR With by consumer near will higher-yielding source to NIM has the margin be levels which under pressure, expect in of see some portfolios in reductions. is will going assuming we a the quarters. and the few which the In term, further, levels believe more current remain been the growth compensated projected of last NPA we composition, slightly no stable changes kind deposit over

for Our quarter was similar. very noninterest income the

at claims in quarter, last in fees the we once in showed $XXX,XXX versus quarter, we it service mortgage However, banking credit collected improvements quarter, as it card last that and million a contingent and fees commissions which combined. offset $XXX,XXX that before. of seasonal When is collected look deposit had of increases insurance mentioned I were revenues in month, $X.X insurance is by quarter, this we done $XXX,XXX partially

is Relief show about Maria the last million, the compensation that Disaster and had expenses the which a is $X.X from quarter. carried for But employee of that being available affected million, taxes $X.X $XX.X payroll reached quarter, Act basically virtue quarter were million, employers increase Tax were that nonperforming. of to of was Expenses on an this benefit however, Irma by last as retention remember part we of lower all, are people by mostly look increased components, growth we to OREO a of quarter, Employee $X.X efforts of to in some reduce When hand, revised million other a valuations $X.X seems which that by the first XXXX. at and million received recoveries Hurricane have we property limits.

million $X.X mostly higher. is high consulting Professional $XXX,XXX quarter, fees of were fees. this that

We reference to continue -- of made the projects. Aurelio some

number in as well our We the all ERP as continue to CECL resulted that expenses. some implementation, of consultants third-party completing additional the some process work has rollouts required have through consultant in which a of

costs seen and other general. the costs supervisory lower in hand, we On fee have ABHC lower

at and If which we exclude REO, expenses the $XX.X expenses compares $XX.X were million, the with we million. well look

been some still range. the between are $XX million As is on quarter. We including be end that expenses, that, the were range. But of in while will that the mentioned, will go those as that significantly, REOs, guidance some it range components. some have of complete expectations. reduce fees, will remember, so components away this Otherwise, higher I the there expenses you were feel implementation, line we We by as or compensated which $XX of components the be professional it of other our of some CECL to million our with the of

by slightly above to $XX almost the quality. is which Aurelio down assets as $XXX of our just while. target or to million for the reference been that have a came X% Nonperforming made June, of down asset million

as the they the throughout for X%, reduce to we've we in includes is efforts also. $XX and reserves. quite be sorry, the way and $XXX We of have established while been year. which region decreased completed will Nonperforming decrease continue a working commercial about of -- in believe million, are that under Nonaccrual charge quarter, through $XX a had been loan large number on million loans deployed X% now that million a of they organically, and loans under the loans, previously of talking that we've to

that $X a collections, achieved some that in saw brought in million we current, in combination nonaccrual consumer is the And loans million of construction completed nonaccrual, of were loans. and also quarter. decreases of which We collections $X.X foreclosures and residential were commercial charge-offs

$XX.X by driven down million, from million, that in nonperforming, by were is the $XX.X $XX last were mostly $X came sales important quarter. OREOs, owned, estate real which Inflows, million completed decrease Other million quarter. in almost

quarters, continue in assets to by end remained $XX prior that have decreased the quarter. of the adversely compared as they lower Commercial we at million work and also the So with through spectrum classified process.

has but of in is mentioned, hand, $XX increase is about net other with saw I $X.XX XX% But metrics. to saw nonperforming fairly and we commercial the lower, the at overall, last loans. driven The $XX for had was on charge-off to about the is on prior it's to allowance $X.X of those allowance in we see increased on million, loans, similar consumer in quarter which and million, of quarter. $XXX Commercial carried of by to the and very We Our reductions the charge-offs million line nonperforming which quarters. we the million continue ratio what X.XX% in residential were improvements charge-offs. which an

the With questions. for that, call open will I

believe fairly results, of still I but -- we questions. your it's was it straightforward mentioned, all so terms in better Thanks. I address As

Operator

[Operator Instructions].

question first O'Neill. come from Sandler Alex Our Twerdahl,

Alexander Twerdahl

progress year have continue lot hovering X% where last First off, NPAs made obviously, point and the X% to of NPL of those can for of on over they meaningfully reductions kind for period better? Or and time? we it's get of of a NPA and there stay kind around Are at where tail between years. the a a kind level -- kind of and tail or natural point longer NPAs X% or is off of a some would now

Aurelio Alemán

Well, we're in activity improving And do there we working be continue metric. There's the quarter-after-quarter we these assets the towards to number. some progress of this in interest that and continue pipeline. showing to some to on have expect deals continues in investor market,

Alexander Twerdahl

to the And Okay. quarter me was growth little stuff. ticket then, loan lot Great. a larger this it commercial seems of bit like a

of or in is little granular we larger and kind commented quarter? year, kind the close the stuff pipeline at more one ticket other still go a or was what the can is full, you look As the bit for commercial or saw you second way to I of relative of a of remainder lot that still pipeline pretty the it know it the that

Aurelio Alemán

I above. the think it's all of

the I think the what the and middle small, three on segments: the which Again, close large market depends corporates. have quarter. the we mix

the segments. target to three continue We

have quarter, mix, than more you the that obviously, calls do is But some smaller the of going which to less So It's Obviously, in which of very portfolio. ones. the the attention the a portfolio. quarter. them concentration goal to close more be concentration our a predict, it's on which difficult the large when to to on have timing bunch deal of not

sides also, yes. for borrower we're of So looking diversification

Alexander Twerdahl

of this look where of Okay. LIBOR, margin kind the it's July? couple forward curve then mean, Orlando, if a your the I go more guidance? modestly by a suggesting of out, Is the on little not, Appreciate final that by we the a cuts question. I is et to that end margin the of pressure next I and And down expect mean term. the and guess in rate in kind couple it couple and Or trajectory is the is That's see that rate cut in the cut as you of you near assuming quarters? you of bit of cetera. kind -- helpful. But a year, incorporated assuming a comments, kind how by do rate now looking end do year. of the get Or over

Orlando Berges

using it where the rates much based we curve Basically, Bloomberg do at changes portfolio, of by have floating see We we're and guidance an in these on commercial consumer as affected forward especially impact that that of The a is amount not them. this point, on comes one as LIBOR. the portfolio out the on rates. is

get some the do of of liability it troughs. we side, floating and Although on specifically, on you the the benefits which some components the saw repos

And come hand. of rates have down on that made other some are terms renewals in the

sheet. generation the we're this the that seeing year point curve of of are and the expecting forward-looking asset balance what on So the at incorporates that mix that the through of side end we

Operator

Brett next question from comes Jaffray. of Piper Our Rabatin

Brett Rabatin

first on a been up just know lowered second the bit they were of some they expenses. et quarter start And base first flat and to view -- -- back can I a similar about things the change year? things maybe there that we move mean, I you on They've in bit you some from last the year. obvious half how give you path little wanted up are can last or just expenses, Should expense just the in there a or levels thinking but where assume the of playing off out thoughts cetera, year I XXXX, half past, expenses to year. the little this

Orlando Berges

made of going. on the some it large the you million we under some that it's Aurelio Well, the expect where to $XX have the $XX we at. of mentioned, to Part REO, with of reference reason million been what it's projects related investments to of that

in have So different things and you coming out.

of of lot RFP work some we're a completing mentioned, the spending I on rollout. and CECL the As money completing

expenses which Then, to year, like things on some undergoing the down. branch some we is automation of new that. are As to will a related front, happen, complete specifically to with we and technology continue those, systems like that those going during extent, large come the projects things

million So $XX feel still be in that's the that on to should that million I we why $XX average, range.

the by affected to those a still it's some seen quarter, feel appraisals, in appraisals happen updated property little appraisal we challenging which do stabilized, more are expect this the We The because market, number. OREO side, every bit but of valuations on revised the all saw we it we It year. probably we quarter. up some doesn't like now, in the have of once for those -- that so depends some It reappraisal. a the properties have

range in to very expenses on to So am other on -- $XX of reluctant OREO indication. the down But we come $XX expense. the that Obviously, expect we But clear others, down. to that million. I come give those than kind of stay portfolio, of you one, more should the volatility more that, size as there's our that million

Brett Rabatin

talk sort another total and question Can obviously of back has a play capital decision year. the in And of give XX% over -- of risk-based, how you the out should half have been just is nothing That's to and things time maybe you big their helpful. us Okay. want announced. about this line then are

a buyback? you do And do line capital something Does time on make decision should on? into how a XXXX? you If think to go what able nonorganic be capital, the with do you been we kind And the haven't of actions? that about

Aurelio Alemán

making the our decisions announcement year, the do that end. previously mentioned action capital second year's before this Brett, half sort have on today, mentioned before track. I we remain on and it of the We're means think of during some we I

can as now. much that's So right you I tell

Brett Rabatin

Okay. just wanted And lastly, to then comment.

going mentioned on that just do like, you you the and turmoil? Aurelio, you given going funds restructured? terms -- current this outcome what all all the There's that remaining result is obviously of noise You be of on. the things some just to early you about impacts this think What -- environment. can the how that of in the recovery the call, think this Could island do -- talking is political in

Aurelio Alemán

obviously, So of obviously, a rollout being of finally administration, but the can we think the the still delay There's towards I in that could the that, because have recovery efforts it think in actions could disruption implemented. be delay. a ongoing

other the positive of it's the long will On hand, on towards level lead which think of the I any any for of the is players the I it -- this -- Puerto government, in to think whoever of working greater Rico the term, recovery. investors, transparency

and predict difficult island cannot continue what's in resolve happen, that to administration any And a The hopeful that ahead, move to and term. description we're ignore. move very government it's efforts continues of to the attentive near move have in lot this a to continues ahead but clear forward. to going the to So there's that we of we be

Operator

next of Securities. comes Our Alden from Joe question Gladue

Joseph Gladue

bit I'll to a margin. side. the Orlando, bit -- about little detail more the on in I a net And wanted guess first, talked little loan Just touch interest you

on as the rising. than went lot though, in Rico, rates slowly deposit mainland a side they more deposit Just the Puerto were up interest did the rates

down they're you constraint as more deposit that in advantage going that of declining slowly? terms back taking of Now rates see rates, a do that will down, go

Orlando Berges

adjustment, obviously, so on was market seeing rate going happening bit. some delay when to the slow pressure less, we're a and do I is if Joe, to happen a components increase be don't in move for still in Clearly, but especially was expect bit. up in on has market. the kind small of components, components. a still a things it's side see market. will bit. Not go increase the that a sharp down deposits. in deposit and some which of part do on believe, like foresee I was that to those to on that rates been of of it went how behaves a going question is Obviously, lower believe The little time a That cost but to is I on quarters. the going that, X we think market. interest-bearing an little deposits noninterest-bearing up of I continue we should interest-bearing the the catching didn't or -- how still the Pressure of little decline the coming we're fast, And the going is as X there But U.S. deposits adjustment bit average up. a again, lot, front, those, there

Joseph Gladue

guess opportunities wanted with Okay. advantage industry, to any the All you I of a the also right. guys in further disruptions? Islands' see consolidation banking And view do take

Aurelio Alemán

I growth through Well, we happens the in achieved have organic historically, what think market.

that's We XXXX the recent from a side with on years, benefit. years, the XX we participate, we're consolidation. demonstrated participated been recent equation, auto we lending have think consolidation And benefiting significant to recent, don't from most over the The When consolidation. XXXX. I past of the also most in

offering. yes. continue consolidates, And market. have our market execute, of Whenever share natural a We we part sector. opportunity solidify to our in it's to continued the It's that to grow market a

Operator

Instructions]. [Operator

Keefe, Our Bruyette, Manna next question comes of from & Glen Woods.

Glen Manna

expect to sheet, with those and maybe the MBS of of on of might At And expect some down, the you head look that investments cash there. looks some sense market of considering higher-cost make Can kind some the roll pressure spot there some it funding? wholesale point down yields balances, to money what be cash? let like there it would kind was the of deployment expected does pay kind period-end off and rates we that maybe we a balance it. of build-up I When in at

there? So of what could expect we kind

Orlando Berges

and Well, -- of market all of moves. a you based to was it the funding said. the the quarter. It's not down did accelerated expectations. that downs it's in reason. end Part wholesale the where a -- obviously, exactly of that pay we of saw the on and pay how first in the some bit the mature was We're did We same some what monitoring, immediately reinvest going repayments MBS repo we probably of

it's really rates So I monitoring it's rates, it's of a -- a but wish magical of daily function And rates kind constant that it's answer, I -- a reinvestment had be see thing. the move. versus expect At borrowing is line. the rate how bottom has end, we of we is to to the what better moving and some things result whichever it for going

benefits keep that's from investments, than sometimes could that effective there rate. obviously, and So It's something tax [indiscernible]. bit that reported at when we be That that mind a in the we yield. do have some implications, what's consider look we better still changed

companies that quarter like we capital all effective consider grown taxable because up tax as where everything, in the the XX% loans is some So have And rate have from XX% are we're our to it of companies, went you nondeductible. part to of seeing when meaning some including losses kind revenues. shift nontaxable from

of into of formula it's where benefit, paying main the borrowings. down function maturing reinvesting of comes the than the see or that analysis more not what we sense. So a makes clearly, But

Glen Manna

OREO? taxes core have lower real the the maintain in does maintain it to pay you that seeing property? are you. correctly, Thank there. was on workers you job I good kind on a touch this own? the Puerto was unemployment, you expenses have that of expansions there OREO seeing in OREO just that Are your in within more it properties, I on that are in the of What of When in any when down Rico, What keeping range. kind kind OREO you Orlando, at to the said change of wanted you again. because if your level was kind you core to heard quarter. estate seeing of revaluation cost wondering core Okay. And I you that look

Orlando Berges

we more as have of amount on are a mentioned in amount have that Net, we the it core I positive of inflows the matter quarter. It's outflows sales still fact with, but a that those of in perspective could as And operate the was those the properties, balances. And fairly quarter we impact. have are been real there the have of reduction some a others. it's some volume. coming you expenses the owned we from where seeing we The year. other outstanding once of estate by consistent. are we are held better good have volatility, have as comes really saw OREO that that The that from some deal to a than properties

This significantly where properties at reduce reality, yet But a Not the good rather we base feel those there that quarter, Eventually, point have we can out. have people say into doing can none bad feel back a X expense we of them change did is than production is good affect that that with still longer have group things did dealing that, And would move can be any we X longer very front. on that department. been for or that thing in a the we the properties. in control. job moving the numbers. we our much very But of that

Operator

Our next question comes from Arren Cyganovich Citi. of

Arren Cyganovich

relative run kind we've do charge-offs, of there I had charge do touch quality up the to I you just recently. on What And you rate, like charge-offs kind the been a a the expect guess in credit under-provisioning of of near of It for charge-offs looks you terms bit. think, related, in over little properties. term? cleaning from wanted the more kind the to provision,

Orlando Berges

With year. with it a that's large while. quarter, to Hopefully, been quarters, one Have fairly of previously not a consistent That deterioration property quite you're that delinquency. the early not seeing we one get that can for last seeing that was sense. of a down, finish inflows had so over point remained coming we've in seeing the difference. and reasons reserved changes Well, few we're charge-off on during this we're working the

specific because we charge-offs the legacy depending because -- the higher a we to assets required, up, previously. should work to if with. is working through we question, a of been are have on properly want nonperforming. property. some not we it of that if that, expect charged than we're we still provisioning sure And has try And reserved, reserved those will We And charge-off make

the will see me, -- still -- I to to in see term, it's towards on three going those but on So that charge-offs, we'll to had based provisioning million $XX mentioned in range we quarters large that next $XX -- volatility the ago, -- ones. be feel short million I we and

this the have you quarter. excluded levels we have that, of in still would been been in past. million, have could that lower charge-offs it have $XX If reserved like significantly But the properties see some that

Operator

This I turn Instructions]. conference closing back concludes our to John Pelling to the would [Operator now like session. question-and-answer any over for remarks.

John Pelling

Thank And the you. conclude call. we At we'll this your time, greatly support. continued appreciate

Operator

The attending conference is now concluded. presentation. Thank for you today's

You disconnect. may now

First BanCorp. (FBP) 23 Jul 192019 Q2 Earnings call transcript