FBP - Earnings call transcript Q4 2019

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Operator

Good morning. Welcome to the First BanCorp Fourth Quarter and Fiscal Year 2019 Results Conference Call [Operator Instructions]. After today's presentation, there'll be an opportunity to ask question. Please note that this event is being recorded.

I'll now turn the conference over to John Pelling, IR Officer. ahead. go Please

John Pelling

end Good First Kate. the And you and thank financial Thank conference morning, call joining year quarter fourth BanCorp's for discuss and for results you, the everyone. XXXX. webcast company's to

Joining and and Orlando Executive President Aurelio Chief Officer. Financial from in Vice Officer President First today Executive are Alemán, BanCorp Berges, Chief and

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

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

Aurelio Alemán

morning, of discuss in annual of corporation. impacted performance then the John. those to highlights hearts of year some to the recent out before our everyone. you the you, region and Portico. do us go of the just of go thank over the to X by southern that, Slide want that Good quarter earthquakes say we Thank will I results. Please joining to But going the on touch for the and move quarter And end let's presentation. I'm the I the to

area. impacted and impacted, we've efforts here the in business the in and those island of have the really we the been did earthquakes as we area humanitarian to supporting is it seen those remote more south minimal While regions disruptions, have visited metropolitan the usual with

supporting business our are clients have affected been a the in and and them very insurance From standpoint, processing few and of orientation supporting we moratoriums payment with claims.

have island this terms I XXXX the if we most and of problem. remember, telecommunications impacted of the a electricity quite we'll and event, big hurricane different think -- was compare where to magnitude in were to to its

Fortunately, earthquake. as and problem. this a not were time that a one was were Electricity normal very is operations back our and disrupted after recovered to the obviously, result day quickly not telecommunications

would the far, not So we I been really clients supported hundreds, say in thousands. have in

in we ones XX% X% mortgage and consumer monitoring far, on calls Our But continue to portfolios, so limited that impacted been have continue this, about support been have number and we the the other exposure will somehow by the portfolio and will supporting clients. to I the it's the them. and region, we are say receiving we

now moving restructuring our and results charges, the we into working. excluding on Meridian actively So quarterly the profitability are front,

to Pretax say this have over income year. pre-provision have million basis slightly past quarterly $XX.X strong $XX net at delivering that or than quarter consistently a third we was the $X.XX the adjusted Our $XX again and million at per share. diluted quarter lower was on over preparation million been I pretax

portfolio. this $X.X quarter and much portfolio, consumer exceeding $X million the $XX was from loan loan came our the billion quarter. the reach the originations, renewal The On grew strong we this portfolio of billion growth

portfolio. in are quality. which We organic asset had in NPAs low at to the the improvement decade continued that achieve we X.X%, is also now

$XX broker reduce quarter. which reliance up on CDs, $XXX in Core both continue decreased grew million segment a and Puerto nicely market. million, And we growth Rico in Florida the this deposits the to

Regarding is base, now $X.X over which capital our billion. to continue capital, earnings to upgrade

look also increase in XX% And pending get we pleased this as approval, the and capital are to the can use We acquisitions. we dividend quarter. close forward announce to the we last

performance. the Slide we review can so move X, Let's to full-year

we XX% the adjusted are On BanCorp, an portfolio, a graph year supporting when the it the we consumer really, very impact We grew Slide helps pretax a the definitely Loan adding look key year was and and the our increased all increased XX%. in look rate on provision compared First we improved monumental the last interest look increased On income the franchise pleased which to X, to for of announced year-over-year at basis portfolio numbers renewal XX%, environment. net really metrics. annual really really the that our quarter. minimizing XXXX you acquisition and at basis, by during originations XX% the graph, of we this at margin

NPAs are year. the down XX% during

we our million by the $XXX deposits by also year, million. X% During brokerage grew fees $XXX XX% reduced and or or

mix transformed represents below materially base have make of We over deposit bearing noninterest now to and brokerage our of deposit our X%. XX%

my to recognize team, of franchise and the hard have and call of will the the the executive the the Board want all to really you future know a drive positioned The I Before support faster earning XXXX franchise really the Orlando, well and achievement my officers for combined generation employees, capital pace. year for the of I work future. that at hand powers

be on preparing We customers look island. and the integration working a year to to competitor hard as the company. plans acquisition, our in of better for pending transformational a serve larger forward our We are XXXX

Thank will call cover the to more With quarter Orlando details. to the in that, I you. turn

Orlando Berges

Good morning, everyone.

saw the had included $XX the fourth voluntary earnings bit the mentioned, our and costs we December, quarter transaction separation But on of $XX.X quarter. program As in FirstBank at we Aurelio compares as recently those earnings in merger and with $XX.X we to offer release, restructuring you will which up in last in later. Santander, announced touch million generated of million million I including quarter, a

adjusted or at our of it's share, happened income and non-GAAP in and non-GAAP perspective, million pre-provision, quarter of to been necessarily items Aurelio our exclude $XX $X.XX the million for not these consistent net we a adjusted quarter. Pretax things from over to as of quarters. that million compares the be net some are also $XX If third other was income last $XX.X continues that few mentioned, the which strong core

includes quarter million, was that million by expect point on debt driven on new The that to taken $XX which have or that for is losses, the credit like is far corporation the the for famous -- sheet provision credit you quarter on all quarter, loans, we so out other items. in are loans an based increase during on for on that impairments. million quarter, maturity we standard I'd held the of losses first non-performing $X.X Also, of as credit than and $X.X charge-off adoption on the done -- what this evaluated migrated for mortgage release to and securities balance loan And CECL. saw last based for related higher on loans losses allowance mostly residential that approximately they're some

compared under interest before a Our million third interest as in net came $X.X result Net was mentioned had the of for as we pressure income down the income quarter decline quarter. to interest the rates.

accretion commercial quarter $X loans. variable on million in the that, last remember associated with of we we discount to item have one-time accelerated addition But an related $X.X you repricing commercial. the of rate had million did to the large about the if payoff of reduction However,

I which We do X.XX, commercials the about margin them. portfolio, and mentioned for with commercial of prime. is do function improved compared Margin in X.XX accretion discount quarter. another XX% LIBOR basis CRE calls, But have It's was we and quarter by prior points. XX last XX% have all that the mentioned floating with and all floating to the

So as adjust compared basis of would we to levels, this quarter we seen last normalized a last to quarter. if decline points quarter margin X have

expected end forecast. Going rate asset forward, the and rate cut the mix. rate might expected but would higher XXXX. The the not And the Under that on a than be is that we assumptions could movement additional depends be are on this high, depends forward not margin forward, expectation it movement these the impact little see was going prior a at additional in rates. reductions lot bit indications but slightly new not for on margins

that $X.X and held some was sale non-performing million. a was for this at had loan sale last loan at positive impact, have gain a of we taken this MBS Noninterest time quarter. million a didn't was that take on on last income related the had to but $X had $XX charges mortgage we the portfolio to commercial good a for also label we And private some from we the quarter non-performing on quarter of million in for held increased impact sale point. for

increase typical million separation our $X.X I voluntary as and FirstBank and transaction, merger upcoming $X.X the is last -- expenses capitalize that fees, of program related of $XX.X $XXX.XX related consultants possible, mentioned than to cost On financial the with efficiencies we quarter that for expected a Included the was well of fees, -- restructuring out the which total transaction. are to positioning quarter. from all the other to were was the as legal the use expenses, million during we initiated the before. consulting million to quickly But the there employees accelerate as try higher as increase million, and

some of and to the So that reduce started in during moving front we that's going year. expenses the

of XXXX all to and we if happened to and technology our services what's of XXXX, I projects are and mean look expense that increase improvements our end will say driven during would base. complete that we I that or -- [rate], tend towards the or expenses, have the have. at These we number increase of a toward products Overall are projects about completed XXXX expense

those So the the expenses levels that at transaction, forward, range million before. ongoing closer excludes to to if that to million $XX we $XX seen expect expense we that to going on to And complete we going look million expenses excluding the have million obviously, $XX continuing we the are that $XX be more with table. the the transaction have associated that OREO, any

million, million $XX.X decreased loans. million. quarter commercial construction in XXX nonaccrual for $X.X assets of Nonperforming Nonperforming $XX.X residential We $XX.X assets. the million nonperforming and in to and million $X.X decreased reductions mortgage loans saw total by

As held-for-sale, completed we nonperforming an portfolios. also and nonaccrual loan of $X.X commercial commercial I the mentioned, in or collected of addition million $X.X mortgage sale we million brought the

Island of reductions. construction $X migration the million the some see However, Virgin relationship offset a in that we of

continue migration. decrease OREO portfolios as slower to

last $XX were classified higher million $X.X $XX.X reductions if we a in adversely overall of than $X look case portfolio. the was million higher is case, million million, highly construction you saw inflows, which However, also assets bit quarter. one at quarter, by but that inflows the The quarter, driven

XX or $XX much has yield which on ratio basis wise points high quarter covered covered stayed to the been higher portfolio the and basis down that $XX.X fact on that almost was million, to has at you $XX allowance the with portfolio, that so from not our Net last And the that were can slightly dollar on charge we we necessarily compared loans million to of of dollar off do commercial XX had loans of XX.X% million percentage quarter. XX.X% portfolio was charge-off nonperforming the wise. carried from consumer growing, quarter the $X.XX loan, have nonaccrual about see The presentation. $X.X of would which as last lot increases in at mostly the million points a

all million institution. a already of We on briefly year there. wise an we components last believe $X.XX in were metrics. year, saw XXX was We net key XXXX year million saw our mentioned some that the income that compared listed Earnings was share excellent year. XXX or full the Just the in to for improvements Aurelio

non-GAAP $X.XX income last year non-core to which we the million, valuation of years, that a we for was $X.XX compares the partial net income If or both adjust million XXXX. the again net from remember on that $XXX.X XXXX However, million share benefit allowance. adjusted which reversal is items in $XXX $XX share, had BCA a are adjusted of

from with year, improvement was adjusted non-GAAP XX% the an of to also XXX ROA, Overall, institution. XXX improvement earnings ROA significant pretty in healthy last on basis. year, so up the this year-over-year components adjusted

items. With open will pending that, your I the think some that, for questions call and we attend of

Operator

now Go America will question-and-answer the first question [Operator ahead. of is session. Poonawala Ebrahim Bank We Our Instruction] from Securities. begin from

Ebrahim Poonawala

first would just it an activity little in terms be to the the a of bit guess on I Aurelio, of update, get Island. helpful So question,

slowing inflows your for sector as some core forward? events and think means loan we aids what quarters? on down because private over Just just of deposit the if growth a And going it of basis, the Fund and -- you activity about, Federal coming recent see the

Aurelio Alemán

Island, South the impact the actually at the compared where area, size overall region haven't the seen Puerto look to real which know tell areas outside the it's You most we place. the you of to economic of early that but is the nearby far, the so probably the the from of too When of Island, impacted really Rico. size Southwest population activity in takes region

portfolios, that's would Obviously when numbers there the in consider we we impact our exposure what why they in So low. look of at be total are that region. some

funds think of the I early continue timing, another additional compensating think we -- since reoccurrence which have have to earthquakes could Obviously been effect say have area. we in the to factors that to X, lower overall limited basically and are supporting is also, I that which too similar Island will that have January tourism, effort magnitude, which tell. it to other But how about is be time to to also reconstruction much the have continue the additional not of if the or that's severity. factor reconstruction the the the

on volumes which and do day every always a So for but have the we Considering what economy. XXXX. so far the terms January, other don't what in significant expect so to we business change a the any December January to of activity. a as in And not different experienced an slower month in quite seasonality regions example magnitude of the we we seen this general, than in impact -- month of is far

and that in the of to lack of was normal which think with be also -- the and has the have the that the conscious the or were was to very electricity telecommunications short the back electricity a and that I issues to were period majority created roots disruption of fact before, We of telecommunications. do

Ebrahim Poonawala

very were just period very, deposits end separate on note strong. a And non-interest bearing

the expect Just to Orlando, or do margin when the the compression? fourth if quarter wondering in sidelines the about you just should into we Fed saw the things you in expect in of, outflows do on expect of terms coming with think seasonality some what we And bank. outlook, additional you stabilize

Orlando Berges

of have and as On It's we and tends comes good in bit we Florida we a have little the Rico here. in volatile a those divided Florida. -- deposit, to bit more in growth Puerto be accounts both of lot money terms out.

of bit a that see could we So Puerto Rico.

always that are is the latter year some beginning the the at So the inflows there part during used of additional of year.

front we've far so Puerto consistent pretty But seen penetration on Rico. deposit in the

Regarding floating we, margins, decline rates. the the yes. the end portfolio portfolio commercial answer is affected again, in the been XX%-plus has the by At of by

LIBOR. Assuming LIBOR most it's recent we that the typically three-month use, component expectations,

the LIBOR the have no least limit of flat rate So a current would fund are levels, expectation it's up we there bit if stay staying margin. going that the and Prime that at it's cuts, down, or Fed additional on would exposures clearly slightly not our

if achieve of bit then from little investment portfolio flat, a was if deposit the volume and there achieve impact would interest to a with we income perspective, goes end, we rates mix small. growth to be the which and tied -- But growth the portfolio. would want clearly at continue margins net the Remember of say the it also, because

Operator

Instruction] Sandler. Alex next Piper from Twerdahl [Operator from Go ahead. Our is question

Alex Twerdahl

and help of should guess on just thinking I reserve loan CECL if just to and to what's sort provisioning Santander growth, First taking be etc.? for in XXXX. about kind happened how off, can any expectations us of account wondering you post give I'm we your pre

Orlando Berges

a question. $XX,XXX That's

we expected in scenarios such are economic losses. a factors. and of that home index are remember as losses. that mean unemployment, those and In correlation going market you in loss Lifetime lifetime expected, historical taking factors factors of as are end, adopt I So function CECL, there forward, critical essence our losses once at the price are

so of or would either quarter-to-quarter, terms would those growth stay volume your be in loss components reduction, Assuming implications from not on component. consistent then your much

reality, see I quarter-to-quarter, do typically which you change first will, not assumptions, have -- than portfolio quarter from are would that dramatically in with that So Alex, lot or the would how any a say economic to something moves. in significant other

I to wouldn't that provisioning difference I years of year. terms normalizing had growth the in be think expect I as a prior a CECL assuming huge of mentioned for to that compared

but obviously one-time would a a be The loan that on be by the achieve it more we of hit see revenues component, compensated depends in we'll the growth, some impact, large that but lot. If side. lot then would

So it's economic Rico, say volume assuming a that components again, Puerto movement. unemployment a and I concrete but hard very assumptions, related a -- give to it's in you stabilized one, it's assumptions very, would really

Alex Twerdahl

then, you or and anytime of been the the sort you trends, into shown go etc. guys in pipelines and on kind loan XXXX couple you've slowing? as have in heading -- especially growth loan know quarters? Island some look at the you probably loan about end the we now outlook growth foresee you the least next And two, One, since at run-off And residential as feel what then portfolio and of how think against to decent your XXXX, soon coming right jogging in over about reductions an reductions I of you do pretty some know kind do of residential NPA

Aurelio Alemán

sale on we're the reduction continue doing strategy, the at originations, side equation, the at to in in plan on itself, the income. We're which of the of the it how but look bit. is a on conforming time closer in accrete year. strong the point later get you reflected gain repayments. the non-interest and is Origination focused could view some mortgage how slow Probably If to going down we portfolio should our to loan rate

for last the continue over portfolio additional the as of did the consumer, we couple opportunities we On growing still see years.

commercial significantly we the on to loans less out. And move side, non-performing have

book So achieved because better prior if was see closings, some increase NPLs the years, we commercial prior we the rate of that reduction in should pipelines an the into in than offset achieved. translate that growth also by in at we the years

are have that but we large some NPLs do normalized -- for portfolio. So don't year really work targeted a we approaching this still we have there, to reduction we're because approaching

the see the So from commercial, should that is, perspective, we the if answer better on growth pipelines materialize. yeah,

environment the happen, We not indications change. that's going haven't seen that yet but to can

Orlando Berges

Yes.

Alex Twerdahl

question, a to And as sheet deal continue meaningful up do before then final just transaction, that foresee being closes? any balance you clean the move Santander to closing closer you as necessary

Aurelio Alemán

you deal. if have No, know look is we in optimization remember or back to in deposits October, the some with balance Obviously probably this that will you say stands. at and deal require at that more buying of sheet the any portfolio. deal will math point I there NPAs government not we're that securities do those shared numbers But

So -- and back more liquidity not other or done But is a to presented in make IRR be those October. there that that it and the lot income statement. looks for the than optimizing picture balance we sheet just like matters will sure

Alex Twerdahl

of the we -- of might date? timing the a actually terms the that for in And better deal when sense closing, do have exact

Aurelio Alemán

no is just dates a here. sequence It's exact of event. there No,

estimate what we on part we stand I We somewhere project, the the approval the near of continue second the last to think quarter. Presentation, propose October work in is our what we by and best

Operator

from is Go from Manna question KBW. next ahead. Our Glen

Glen Manna

interesting your missed XX I points see call look commentary of from moving on or some here, environment. I would trajectory basis quarter, expect the cost NIM. basis deterioration? XQ and from the interest parts if the late, most we in further jump was you Orlando know to of guess I last had expect rate you recoveries of NIM or you into points the so at on you X actual What stabilization do modest X 'XX kind could that maybe points basis the the for

Orlando Berges

margin to -- it's If expectation were we an impact, LIBOR. if that most there we some the -- with are opinion assume What it's do from happen, chunk going large cut probably recent that the scenario, have of rate now in be was that, expect the and my mentioning to small I is that was will that improvement stability is be some we commercial what the not a there another we the portfolio. since

XX% based. prime As LIBOR saw the and is you release, probably is based XX% in

down. So if components those two move quickly go rates

a assets. it's the of the be at So, where on could on with impact repriced a assumptions, margin those a of have things bit recently. much. shouldn't be not based bit, lot, little also mix been the end, It But but

Operator

like for our closing This session. Pelling John back turn conference now concludes remarks. the question-and-answer would to I to

John Pelling

Thank you, Kate.

the On have on the investor XXth. we KBW Conference up front, Boca in coming February

XXth. attending as Key the Credit also Puerto as well Investor XXth, on Biscayne are in on February Tour Suisse KBW Conference We to the Rico March

up hosting of Thank a -- the individual down and look this continued It's conclude addition, here, forward we'll the beautiful We the tired if the us. and on in to we're come here coming appreciate you weather months. you're so of you. call. your investor is north, In At support point, seeing number Island. many of cold meetings visit

Aurelio Alemán

all. you, Thank

Operator

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

now You disconnect. may

First BanCorp. (FBP) 28 Jan 202019 Q4 Earnings call transcript