BPOP - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to the Popular, Inc.

Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to [indiscernible] for Popular. ahead. go Please

Unidentified Company Representative

will thank members With and our joining on be answer the Soriano. us Carlos third during for Good and available our quarter today you management is call. then They Lidio CRO, us and questions. Alvarez; session. our our today's results Vázquez; the Other morning, your our for review of CEO, Q&A CFO, will Ignacio team

forward-looking that release today's I within materially subject from today's and start, remind supplement. cause filings, like that detailed call, management's these forth release results we press on SEC would set make are and uncertainties. to Factors are are on we could to earnings Before you in current actual may to quarterly statements and forward-looking and financial differ based are that our statements our expectations risks

and find the page will popular.com. today's I press may our You Ignacio SEC to release web our filings at over CEO, turn on now our call Alvarez.

Ignacio Alvarez

thank and the you joining morning, Good call. for

We strong financial are important which actions. acquisition Reliable during another executed capital and quarter report closed the excellent results, achieved we to happy several

Rico. the I I would on level of more on address island. in seeing activity both the progress and different tracked detail, we're get the in comment to Before a sense metrics, like quarter's Puerto internal We to highlights external, of economic

have literally than higher positive. of dollar September year to and calls, reflected and months allowed of be compared all credit Debit sharing seasonality. here. to significant variances from quarter in variances due July XX% a spending figures The make period the we and If the of better XXXX. and August previous customers' increased reduction July and in fair include that basis, were our us for transactions a ago. been an card the part than significantly dark September, The volume out activity year-to-date are for On was XXXX a to the business a and we was comparison those of year, trends While anomaly we as slight are island the sharing the of would month. in spending August quarter a prior the the same as linked-quarter to of same reflected was

at are If you loan encouraging. look the consumer the activity, trends also

were While originations year. XXXX levels, year in were and same last the higher first August the July X% the than those of half X% of originations below period

portfolio, important of finance with loan consumer opposite the are ends the spectrum. differences, there auto Within mortgages at and

July in and were August industry excluding XXXX, higher a Our for is XX% auto than well. as Reliable, originations whole XXXX. doing The

the Rico to August, higher XX% new year. car compared in on first Puerto XXXX. other X hand, the sales months Mortgage of as were As XX% were originations, in lower in than the previous

surpassed originations However, starting for levels XXXX this the in mortgage July, first time have year.

through the term as sales, Cement growth for that considered debt. pay short larger XX% positive the and often up believe down a -- August. demand financing. will as continued finance loan to additional liquidity not which a have economy we we to loan On their to to is yet seen the in commercial side, lot the as expansion customers are lending but opportunities continues There in of system, arise the using recover. indicator We well generate economy, projects continued growth, expect products of showed strength, economic healthy

As September since XX,XXX down X% of employment XXXX. jobs had with end stabilized, of salaried the September,

of the first these to year quarter and hotels hospitality XXXX. We in figures later expect additional reopen jobs during once larger the bolster

July who that With migration Bank data the the New released Juan is Airport the people However, study of from island XXX,XXX XX,XXX lower of inflow while and left wage slightly December much in Despite September from trends, York. customers net recent than to respect last San initial X this average first passenger September of outflow has estimate. and was XXX,XXX, in employment year to the by decline of the The but net Federal to by salary income to approximately a of between is up reflects down, year. months have amount significant a population, been according X% the Reserve a net XXXX published number increase. Popular's recently partially offset continued

to dependent steady. the based the an companies very Insurance has reach fund be slower many federal pace timing XX,XXX storm And Puerto advances. island. the recovery hurricane. the flowing pace into like, Excluding in brought and metrics has and magnitude by of on and Puerto continue economy approximately Rico sustainability of customer following we're amount the been been XX,XXX the in insurance unique than In recovery billion. oversight the new this our of billion customers of the base has heavily the out approximately has fiscal board transaction, been on short, with The make Puerto would $X increased by Reliable seeing, while Rico $X.X the dispersed will to approximately since Rico private estimated recovery

impact billion to billion in fiscal public to anticipates assistance Rico in and funds, Puerto individuals, close dispersed relief federal corporations plan was $X The government municipalities. emergency Regarding XXXX an additional inflows fiscal current year $XX and the funds a be will XXXX federal next These insurance fiscal have the of X the in fiscal $XX years. and year over on stimulative undoubtedly economy. in to billion dispersed

designed effect the to measures fiscal the However, fiscal plan long-term contains the government austerity island. structural a will by to number somewhat imposed board. recently The on budgetary the improve the stability by oversight revised plan of tempered by yesterday reforms certified -- fiscal be and

implement process, will the long-term we achieving increased This discipline government. reform. and that the reforms growth. those Looking board the the on the that local and will this impact regarding fiscal to Rico's island's and essential cooperation are take Puerto structural recovery rebuilding is immediate opportunity sustainable long-term depend decisions unique require to between the of of oversight the economic implementation required stimulative imperative beyond process It

turn $XXX million of In in highlights third the Please the adjusted of Popular impact X. quarter quarter. the of agreement. quarter. income $XXX to address to for termination net compared of me exclude the third reported second second million net loss-share quarter, our FDIC the Adjusted results of the Slide income the let Now

Third loans. the February transaction we closed announced on in contribution a which Reliable, auto quarter of August in results include approximately commercial in and billion $X acquired and we auto-related X

been as of excited our we We talented are seasoned combined happy about and transition part auto are a the smooth, a prospects to have transaction. business. and brought onboard this has The team of

million the Reliable net $XX of income. For contributed quarter, approximately

are total and we grew on growth approximately loans by million, am deposit by also Lidio continued metrics on in have organic in remained results report or U.S., our I In $XXX increased to to pre-hurricane We medallion will In credit execute better that these base quality than Puerto taxi the stable. quality later is U.S. the commercial pleased strong, expand credit levels. our Rico, business portfolio. close The our strategies. to except most corporation's call. X%. for

with levels quarter-end. X common our capital at remained Tier Our XX.X% at ratio robust,

to an over shareholders, capital results detail the end. of the on in actions, that acknowledge on executed capital the call provide During discuss this these working turn more common update towards quarter, now actions. who -- the Carlos, and repurchase. I will will quarter to we capital financial million continue our quarter's previously importance stock we will and our $XXX including returning announced We the

Carlos Vázquez

Slide turn Good Thank you, Please Ignacio. to morning. X.

results update quarter, transaction. the into Reliable going the let's Before the for revisit and

yield million As the value of for the the acquired in quarter-over-quarter fair the front-loaded, include mentioned, income portfolio's next Reliable. yields $XX the points. quarter quarter, Including value of will XX for Ignacio couple impact contribution the discount, our to main results the approximately amortization assets of yield in towards from XX% pure Reliable was gravitate net the NIM basis the of this years. over Since the contributor increase discount of fair contractual is higher the

of the with pleased performance are financial We acquisition. the

rates second loan loss press plus lower and which income contribute were variances offset higher lending the be to fee provision, Reliable including the and quarter. by Slide auto million quarter X volumes part the from million by quarter, acquisition release driven the in the $XX million, the for continues loans a operating approximately the Today's conversion cost Reliable contribution and for The higher was increase earnings and information portfolio, and sector turn to results. X offset by deck. interest by higher partially was provision of Slide the Auto million of on expect portfolio fee to higher since $XX quarter. the strong. deposits. we income up interest-bearing of Popular income, details combined by in income, investments provided $XXX Net Note demand XXXX, was income, the additional on servicing appendix during net $XXX is for grew that This third Please million net interest in expenses. quarter to cost. and The higher timely Reliable auto driven second For $XX

basis or interest interest-bearing the XX also Our purchase to quarter, The and commercial of net due characteristics deployed than loans, Rico of in deposit deposits bond Rico and during of deposit and basis These billion public Puerto rate Puerto cash cash approximately and was of achieved We basis The the margin U.S. for X.XX%, acquisition. bills. yield XX of costs. attractive the treasury the short-term up $X adding was portfolio investment driven securities. notes the Treasury Reliable of sector for higher quarter, in the corporate a changing points, impact higher-yielding risk more deposits minimal points intermediate-term of billion materially investment sectors X the additional points consumer approximately to of $X increase We years. after-tax nearly and without The the we overall the Separate cash costs purpose by Reliable retail holdings duration from $X loans. billion the redeployed up mostly credit to U.S. purchased from is XX from investments portfolio. close to cost saw volume last our higher in

driven Reliable modifications. quarter $XX growth by income nearly Rico. the $X.X modification The excluding operating fee all growth related the for balances, slight net for balances the activity, income, prior continue hurricane-related were quarter. third in operating million in FDIC in overall we Puerto and Mae and acquisition, the Excluding Fannie expenses categories. stable million, in in $X revenue loan to loan million, for increased U.S. quarter, interest service insurance million recoveries the reflecting $XX loss-share quarter includes in up the million continued $XXX XXXX, from by higher the In to anticipate Total income hurricane-related

increased resulting expense Third Approximately project of quarter write-down $X.X reimbursement million in expense was numbers $XX.X million occupancy costs. of insurance of a a million reduction $X for that canceled capitalized of software costs from include a and to hurricane-related personnel to remaining related in compensation from increase operation are incentive two expenses of Popular's part mostly the resulting expenses cost, The expected to months Popular. due under improved in related higher performance. Reliable is of

each the will expense million. quarter, $XX fourth see we couple a significant for During approximately items, of

is first of related the in early $XXX termination Popular's cost million the X% to notes XXXX. The due

the estimated in closed Secondly, be will million the salary we year. an will reduce the fourth expected by window window cost next early third is see about to quarter that retirement expense That $X offered of during quarter.

fourth related on the of costs. Excluding added Again, expenses the quarter will $XXX $XXX million XXXX, $X last to the mentioned expected effect slightly expenses noncore higher the for expenses and the which average is quarter, XXXX in million expenses Reliable additional acquisition, of for principally than of about million, third in personnel Reliable expenses quarterly add described the and the numbers $XX just to higher exclude quarter. these million an

year XXXX, approximately million to year activity result expected full expected and a add the to in OREO foreclosure pension, Reliable of personnel are of are $XX cost technology, expenses of to to for from quarterly expenses $XXX the normal return the normalization Popular's million. expected Higher expenses. and For average approximately resulting operation regulatory XXXX

For expect quarter, to X. be approximately our Slide tax turn we the fourth XX%. to Please rate

capital during the As of took we our to related Ignacio plan. quarter, actions mentioned, a series

tangible stock the The announced book entered value during the quarter. expected ASR repurchase recognizing quarter. July's total repurchase, to by into a an a reduction $XXX accelerated million during $XXX million approval in fourth of of is agreement, be last completed Following a we share

of high-cost a We also completed coupon million with the of of X.XX%. redemption at $XX TruPS par

net plus cash Finally, XXXX. on this XX million October we of used issued X% redeem The were notes million X.XXX% of notes $XXX $XXX XXXX. Popular's due offering senior available to due of proceeds

actions plan. result for million. X% of capital discussions The in $XX interest charge will capital million. As our mentioned combined earlier, XXXX early this engaged redemption decrease of fourth of quarter for our XXXX, our now a completed Having redemption notes result TruPS the expense in in and $XX regulators we will annual approximately with in the are

We are few early an months, the next next these for conclude in allowing discussions hopeful announcement will year.

with book portfolio, to capital preferred was losses the remained investment the earnings to per the banks $X.XX part and related respect Our in quarter. share value an regulatory our compensated for strong common levels by as quarter effect for of share, well-capitalized stock the well peer in in our per and as $XX.XX increase dividends down requirements. unrealized Annual on buyback,

Our Equity results. XX.X%, Common XX.X% actions, effects X of quarterly the Tier Reliable acquisition, dividends down on ratio the was from on capital our

turn call have tangible are while we our past in the for our double-digit risk and we capital to I improving target that appropriate of to will With levels return calls, Lidio. continue As over pursue Popular's maintaining that, mentioned profile. equity keeping

Lidio Soriano

to morning all. Good Carlos. you, Thank

$XXX the than report nonperforming Results loans metrics Reliable, We Rico collection third the of by quarter quarter activities. are in volatile last to in charge-off or and to year quarter than net to within of the onwards the NPLs. NPLs prior year. positive quarter storm, are of our near early $XX year, both X.XX%, have quarter or levels. quarter of U.S. Rico reflect higher create or included of million. a of last general, $XX third for slightly and compared the the temporary at operations. metrics results for Credit charge-offs happy of post-hurricane, the continue third increased second consumer last $X used at consumer our reflect X.XX%. the suspension third levels. second the are Puerto million, trending in In in assumptions At portfolio, below the trends compared actual the consumer the mortgage been When with results reserve stood delinquencies million acquisition better end The hurricane million most decrease the last Puerto than XXXX was moratorium quarter, which and to the quality NPL to In pre-storm the payment credit of for Consumer by to impacted strong quarter. somewhat this better pre-hurricane of

to of last frame, second commercial quarter by the have the Mortgage in approximately the $XX time the credit were X.XX% However, early and quarter years. remained the XX-XX X decreased overall during delinquency lowest stable million net during delinquencies the in third same levels pre-storm last lending, reaching for compared In levels. X.XX% metrics charge-offs quarter year. near

exposure in prior decreasing the to borrower During the Rico quarter, our central quality continue commercial $XX is reflect portfolio. or outstanding the due net quarter sector credit NPLs Slide government direct for increased received. by $X medallion At No million, from to basis. mainly principal the decreased driven Please corporations. on public quarter-end, Puerto this taxi part million. by of to charge-off public of turn a exposure our $XXX to direct case the Puerto was stable million, the million to by #X. U.S., third its of $XX linked-quarter In Rico except quarter payments operations single million the by metrics $X Commercial a the

the each is good municipality exposure central of and to direct taxing the independent to most group municipalities unlimited to entire municipalities whose government. priority of power consists revenues of select senior and loans. Our repayment loans faith cases, the pledged of are a of the largely credit In mainly is

Our the top large and exposure exposure represent to XX% of total Juan are area. municipalities metro San our four in

to programs The in is Slide for improvements Nonperforming to residential Rico. to a indirect in in the discuss of individual as assets loans declines We million driven loans. associate a a million in decrease government $XX guarantee OREO of credit U.S. the $XXX metrics the in Puerto largest decreased in coupled similar facilities the $XX borrowers of by driven a by quarter. also decrease acts exposure Turn to mainly this in government mortgage quarter, million Both with #X by the such provides which have to nonperforming guarantor. were lending which form million $X

quarter. my quarter the due in impact lower early Inflows The was Please turn mortgage by in lower the driven the mainly inflows Puerto discussed the driven with inflows Rico $XX inflows in held in coupled to mortgage NPLs portfolio Rico Rico in lower to decrease by quarter, NPLs remarks. lower Rico NPL and Puerto discuss sales in reflects decrease construction million, other million, mainly of in nonperforming to been the of end NPLs the X.X% by million. from This ended. inflows in U.S. of decreased by loans in lower decreased slightly consumer mainly Inflows commercial from an the to related primarily by quarter. of of to of previously to borrower. driven portfolio inflows. in earlier quarter, in customer Reliable by decrease impacted increase, of The amount and the was the foreclosure million. offset to X Puerto NPLs to the partially recently Rico by have million Rico inflows portfolio portfolio $XXX prior Compared Puerto in the million. moratorium was in decrease efforts. to The X.X% At decreased portfolio resumption a held Puerto related aggregate Rico the the the The mentioned, $X Puerto previous $XX was the commercial $XX NPLs #XX portfolio. to previous of inflows in by inflows delinquencies portfolio higher single million the of lower Rico $XX The ratio Puerto that consumer as while acceleration was NPLs commercial for decrease mortgage also due loans was increase the commercial acquired total third driven higher $X $XX of million, Slide with of Puerto

the unpaid prior the quarter. third current while -- current Puerto by $XX portfolio is an taxi principal medallion of than driven Slide medallion $XXX XX% of in million. this $XXX with the amounted this Net XX% from decreased in million end for by $X $XX to second credit create an for losses used ago. corporation portfolio. At the to by prior the million performed million purchased for or to totaled balance, or of reserve, quarter. decrease of an provision Turning New the has by unpaid provision the had quarter value better million, its loan down in reserves in this offset the balance from held X% increase The was in increased City, assumptions million value from downward or losses a reserves, allowance in reserve annualized hurricane-related basis than due and $XXX,XXX to of million XX Puerto U.S. approximately the decreased loans loan adjustments portfolio year. $X This to Rico provision compared in to average #XX. of taxi medallion. The of quarter by total $XX X% $XX research points higher average our charge-offs The the due Rico portfolio year of loans. principal mainly York $XX to the million is $XX to the per Net for million, less portfolio million million our in million quarter, of impaired previous the loan of loan representing the $XXX portfolio portfolio $XX higher of charge-offs, taxi

turn results the credit with in the Excluding quarter metrics. for continue Puerto of would favorable, credit were Rico. close you. positive Ignacio taxi third over continued reflect were impact operation U.S. medallion, metrics pre-hurricane to to that that, Thank to for quality call quality remarks. to better To and or the the summarize, the strength in the like U.S. than concluding With his I U.S. levels

Ignacio Alvarez

Slide working some Rico of Rico XX% Islands. we sense you, the and October, Many marked and since devastated and power. stabilize XX. Thank approximately Carlos, Virgin businesses closed, time Puerto last still Please to the X were and the At for month Puerto was the Lidio your situation turn of tirelessly all our regain remained update. year hurricanes of earnings to normalcy. and schools call without Last

saddened affected and massive of While obstacles. people, damage that despite proud have many extremely many by so the we're recovered of we property these how lives loss

our the to financial milestones, addition important In actions. of strong Reliable the accomplished have such several and agreement, acquisition loss-share important we the results, as of execution of capital termination

seeing challenges franchise in manage to Rico unique in opportunities Puerto as arise. Our position take advantage to of as inevitably is are a will well that we that effectively

have growth we traction progress. further to in expect Our and good States initiatives United the see

we sources of value, additional to investment have unrecognized such October in which investments XXXth we anniversary. represent earnings continue as and Finally, On X, value. and to Evertec our our contribute BHD, celebrated

and the value. good momentum up positive and solid past We to to over deliver continue drive determined months have we energized that of are built results shareholder to to the make use

We answer to now your ready are questions.

Operator

[Operator Instructions].

The first question comes with Sandler from Alex O'Neill. Twerdahl

Alexander Twerdahl

lower I wondering I'm in to Puerto but you alluded overall costs? cost the Carlos, mainland deposit quarter. the in quarter versus you just break if this us, the out -- Rico, them kind Puerto low being for versus last Rico could think deposit in of

Carlos Vázquez

increasing was Yes, prepared the to costs clients for on Hold with increase and has a Rico mentioned the for we do thing XX whole Most in was on on And sector hold for The was -- remarks, Puerto the second. points public a Puerto Rico, Alex. basis it in Puerto XX. as second. of Rico.

Alexander Twerdahl

this versus Okay. last XX basis higher points quarter? quarter

Carlos Vázquez

Yes.

Ignacio Alvarez

Yes.

Alexander Twerdahl

should just we in of those Or over little you pretty just sort any a Obviously, balances, big the quarter couple the as seasonal inflows us give deposits? flows? Okay. think public just kind of of can sector had each And of last years. around about some progresses? then kind of color flows the you've And bit how expected

Carlos Vázquez

we come those about now have down. to years expect balances Well, we X.X been saying that for

forward. trying for perfectly to at We them which now, so look have wrong we're been years cautious be we X.X now

that debt unclear. We government payments still start and towards normal when as happen assume is move those continue to come Exactly as that's reached that going that will normalcy balances get down. of to deals operations

Ignacio Alvarez

No.

very I debt think get date to the it's to anticipated. deals as government than revenues government paying restructured and have obviously, funds, as Obviously, the better using said, Carlos the depend predict. from it hard the service starts will been on, other and

of but So fact, hard us that's it's that. for predict very sort to

Alexander Twerdahl

way carve kind sort what kind of core the you of consider operating deposits be quantify average versus sectors? more to out any account there public and for might sort to of of Is Okay. deposits volatile

Carlos Vázquez

formula Yes. Alex, compensate sector bit the our little public we clients is which a the of number floors, that complicated because it includes rates. negotiated

because it's our We and service for components that I for now we will close other fees reference given in But interplay where the moving change the to provide are the with public entities. costs I those to change sector to clients think that in delta have offsets of forward, be rates assume government mentioned, fair deposit all how other rates.

will beta So close it'll has while to that increase. for our X quarters, deposit that to cost to -- beta prior are X%, be have almost hard mentioned been keep as the X.X that we that, way rates close continue we In okay. years to

bit that effect a now. seeing you're So little of

that, is net public still income wholesale attractive. It said comparable funding having lower cost Now the of is deposits than is accretive. very and total

of the which composition to similar quarter we in static, X forward, future points, you any basis result this moving deposit should the moving cost quarter, points deposit this like is we rates So the saw of in that okay. saw basis quarter-to-quarter increase one if moves assume forward, in XX stays

the obviously lower. a and deposits between difference a be is amount of X lot the asset-sensitive. we retail that for interest-bearing and that continue significant those have is Now deposits we beta commercial to fact fact the Overall, the also net do our

good So go performance. for if it's up, our financial rates

way goes the hopefully, assuming that market predicts, benefit that. from So everything we'll

Alexander Twerdahl

relative just just prepared great. up customer competitors then obviously, doesn't that flows, population of mean, one is the base accounts and of Okay. coming it your balance said question. formations? XX,XXX you quite accounts of That's the where people kind Is didn't you quoted Great. these Can business your similar kind sense about they're since Is in you a that coming remarks, a I hurricane. is just their from? give do And magnitude have for sheet. sort high-level to your of size customers with it -- jive kind number just of Where Ignacio, additional see from? of that new us a before?

Ignacio Alvarez

of we can don't remain, say, markets the in of some we've you pick our we all can some but of We think statistical a that abandoned up branches of anecdotal. information have happening. have, there's I it's been but the can explanations couple that to give get Obviously, trying do these some we things surveys, closed of and more you our -- some case, branches. you in have we're when and competitors I close normally, of some we customers. that the And we -- are

up account. bank more opened than people have one Some

funds bank a Rico where one than all think more push basket. bank not people I know that seeing tried some one may so electronically accept We monies people recovery in in increased, government -- you're that eggs think to number for have your required, Puerto you're fact we of the through account. a the a think, wasn't I that necessarily putting although tendency may federal of federal have -- the to the have

has So be customers certain the regions do branches, exact we there's we a greater. know number that in increase where in been of would going on. you competitors But tell closed hesitant factors don't. have to a for because we the really other reasons fact I know

there. obviously is relation some there So

Operator

Brett with comes Rabatin question Piper next Jaffray. The from

Brett Rabatin

the fine-tuned we there? change to the gotten Can about you as net assumptions million, maybe you talk And also, through $XX that deal, low. that 'XX? you've first million. a guess, income I on expense I I wanted was And is your of thought little that the now into income further on side? ask all had additional you're income, Or go Reliable. original or accretion $XX as

Carlos Vázquez

a combination it's Well, of things, Brett.

obviously, all, on significant of effect First accreting the has discount that. a

part that's of it. So

put Second, June. include an not is And together. loans did we servicing thought estimate service we estimate market lot not put when was the have to did together income because we in than better when our the a original doing the agreement that thirdly, estimate

So the think, up it. combination is of to I a all very those and about we're better, happy forecast that things, add X

Brett Rabatin

Okay. some And then in of just way, by great was on even higher-earning it the Can and guys get higher absent to the that? assets. forward, an you around And to about balance of thinking like any the about rates. the the as is some see T-Bills additional changes And the treasuries think purchases margin. seem in you sheet would then color quarter? margin give you liquidity month when going the additional margin use to put auto continue One put the during the some did we maybe us it would

Carlos Vázquez

Yes.

I purchase the the the part early of happened think in quarter. treasuries of the

is there that in of reflection effect of bit this quarter. a quite So

far as loans higher-yielding work of The maybe -- you're quarter, in right. I benefit additional for be little As have a longer way, the time. period math We There'll suspect that fourth right? yes.

Brett Rabatin

year. Okay. to than if a next then ASC maybe lot banks, not what seeing it your year could assumption? know sneak if think about can give But going on last in specific you're And we number, just one I that some capital. you me would one I Carlos. we're this and Is more a seem from other fair did like be aggressive a what buybacks

Carlos Vázquez

to try higher of year our peer have return in As through Ignacio buybacks. to this banks, of of shareholders the them path and moved to during capital dividends their all we'll and continue mentioned, follow

well, to we that path. will continue hire But we follow obviously. -- as have We will

of on leads you capital. in that to us the hope that because will which higher Exactly, can't components, We we return is tell part a negotiation.

Operator

from with comes Arren next question Cyganovich Citi. The

Arren Cyganovich

the you Are the use some other there so of portfolio acquisition. Just portfolio acquisitions beyond buybacks? acquisitions of excess or capital other the seeing capital benefit can following we're nice that up do types on just of any the question,

Ignacio Alvarez

Yes. Historically, we've been portfolios. very opportunistic buyers of

So at are if short the there's obviously, available, to close anything to means -- and will term, had at at capital look possible, in they're take hesitate looking them. best we there a deploy the a we going out be often portfolios. always Reliable I get would to look we say to Reliable, but

looking. keep continue will So We'll we that trend.

Carlos Vázquez

billion $X But look. we'll there. of chunks are, there out there's sitting if take unlikely a It's

Arren Cyganovich

benefit that to deal, you the numbers Okay. there's be we of I there remaining and Reliable Can -- next couple of a on the accretion of years? as of -- maturity tenor go And for respect some how then the guess, what's discount. lot obviously the through will around of put what, with the

Ignacio Alvarez

So million the or end the so. of around will remaining discount at $XXX probably third the be quarter roughly

discount. that probably mostly see be has You'll of that will the off than average portion that is part the less our a of that more disclosures filings. course, are commercial These auto X run the years. so able And XX-Q that's part quickly, in there we'll life, portfolio year facilitate, smaller related to of X loans to

Operator

comes from Capital Gerard The Cassidy RBC with next question Markets.

Steven Duong

This Steve is Gerard. actually Duong for

points if go do going of acquisition, assuming end rates, just where rates towards and XXXX acquisition, up back you the on your through -- NIM of XXX So end XXXX? holding see basis the the Reliable recent up

Carlos Vázquez

on views NIM, forward-looking give Steve. don't We

comes in far on components as driving we so NIM change Reliable we you mentioned. depends quarter, -- the just Exactly, also the asset-sensitive, this we've as are asset money. we're out make we our will which had gone [indiscernible]. and Again, up been NIM to more mix, I where had think we given

that have worry next an component [indiscernible] important to also So year. will

Steven Duong

Okay. guys I Fair before. enough. your you originations about And spoke think mortgage

uptick there more July. you just Can give on color said us I an think was in some that? you

Ignacio Alvarez

base, and July Well, the activity long time both in we're low a we coming increased a did off but August. in see first time for

-- that a I off still hopeful, low it's So it's base. we're think coming but

Carlos Vázquez

doesn't to in see the was we quarter fourth what better. X hope so happens quarter. quarter third the make trend, The

Ignacio Alvarez

It positive, a we actually growth. and was saw

$XXX originations million. were I the think

Carlos Vázquez

than They're the second quarter. clearly higher

Ignacio Alvarez

Second quarter.

rates up. positive a fact up the that interest given again, sign went was a got went still to they and sector. that But go that in So we ways

Steven Duong

In And where was is right? Rico, Puerto that that occurring?

Ignacio Alvarez

States million Rico $XXX had We of.... increase the is originations. an Yes, Puerto in

Carlos Vázquez

as The up U.S. well. a little went bit

Ignacio Alvarez

Yes. mentioned But the I all $XXX is million Puerto Rico.

Steven Duong

guys you update and have get gains unrealized I on your more. just an just BHD? great. Okay, And could if one Evertec for do And

Carlos Vázquez

you offline. No. $XXX a million. of number -- Yes, couple get Evertec I'll back is calculate and that it's to

Operator

comes The Group. Joe next with from question Gladue Capital Merion

Joseph Gladue

it's to wanted touch the to a little Yes, good continue increase. Just bit. the profitability on see operations to U.S.

in possibility of mainland -- capital you terms a get -- as wondering can And where about of you the the can you think Or growth, if growth see operations you the for Just too? growth U.S. deployment just on profitability of is there? well. what wondering do,

Ignacio Alvarez

heavily you we Well, as are that think on, concentrating I say, profitability.

So we at and have think, a of I improving our franchise. initiatives, number one them of directed deposit were

launched. that a sort we've initiatives We of bank number of initiatives private have a

We branch of network. retail a our transformation have

crazy. hard -- our we're we're also, book on being We're working So growing growing Obviously, but not cost. deposit we're anything our doing loan prudently. it we're really

slower, So but grow we'd rather prudently.

we're of on emphasis lot So a putting profitability.

as in inorganic and we'll the cycle. lately, terms an high, In we're the prices interesting at you know, The time States, growth look economic have of been it. very in at always

very So at we're that us, but going be look to opportunities are careful. presented to we'll

Operator

Bruyette The Woods. next question with Keefe, comes from & Glen Manna

Glen Manna

Or months question just loan So fees income on auto other of portfolio, other service here. The in on P&L? some on landscape was was the a two income? quick that the servicing that in

Ignacio Alvarez

was in other income. It

Carlos Vázquez

income. Other

Glen Manna

And okay. include Reliable X there's that quarter, you be the nonrecurring? Other the expenses in that I said for $X million next that million income, deal, $XX and announced Carlos, have you acquisition-related when gave about books, expenses does any million think so you might left. you Because $XX

Carlos Vázquez

come -- that the like number some third best as add and quarter like that. by it and to looks fourth with and is Yes. in noise that normalize the the There obviously third think two probably, divide something Then million to you'll about the up a well. the $XX quarter, is expense a way

Glen Manna

on And so your well that? kind Are dividend. just on on of your ratio? the payout regulatory as much on inclined and just increasing as Or dependent you normalized be but the dividend would And to not the of kind on what's thinking go approval buyback, to capital a plan? Okay. buyback

Carlos Vázquez

there we have approval, things our most contained regulators, with that can but mean, same capital conversation don't in are necessarily we Glen, that the do I Fed of in the require are Yes. return things okay.

So It Fed approval, we up basically the the the while technically together. should higher with dividend it be agnostic investors would buyback, be some discussions. -- things slightly the might on not all sort discuss whole things will by assume we that depends to payout require between one higher other. our -- slightly a for fair end Whether those versus or of not

Sometimes, they are.

try our and Sometimes, And to I of But even they're business. to They you not. explain wouldn't cannot negotiation. it's why are our again, part they -- or of would be. part

Glen Manna

Or they have all termination? Well, at those negotiations same a conclusion do different time? to the does come

Carlos Vázquez

yes. They tend to,

Operator

a Rabatin from Piper Brett with is question next The follow-up Jaffray.

Brett Rabatin

when in stable to two is, -- expect still -- just optimistic your growth up Rico. Puerto follow Carlos, seeing you on a in Wanted said for Rico us things. more clients One you in stuff? seeing? originations of give that Puerto payoffs they're seeing is what assumption about what of existing some Rico, flat on can color Or And guidance? more some little new and growth Are you're slight you'd the U.S., looking you Puerto be your say you're a you versus maybe little

Ignacio Alvarez

Yes. of year the their This clients, clients there's of go influx you the And seeing optimism. during a of you when greater level And seen to is with most optimism. Ignacio. more performance have the definitely talk the We're funds. general around improve and

as my of takes of time. system. there's mentioned lot prepared remarks, the in I in a this -- liquidity There's Some

in And adjusting they greater with their paying people fact, are So liquidity. many the to consumer own instances, in down are demand the debt.

there business terms debt. prospects. a I people keep So But would the general, the because community of we're balances are in paying medium-term our greater near- sense and of down working hard to optimism say, is in undoubtedly, among

Carlos Vázquez

Yes.

in billion is as year, assume doing. their will far to a flow, whatever, $X our we loan flat, given if XX% to that, bankers our originate like are portfolio As what keep or of we which have normally balances come due any XX% still year,

that activity. see answer rate turned So as the it. the happy the numbers. into lot it, we'll yet. By Again, about present in in Evertec comment $XXX not When has of is gains Ignacio at unrealized to be the mentioned, activity not growth there is that's on is gain loan Evertec, we net about way, a million

Brett Rabatin

around Are to you Monday, at feeling total. draft the and on PREPA And other things the follow some of then mentioned be just fiscal care plan? and taken I fiscal was initiatives the more about what on the you're I need the plan, with Okay. to up $XX optimistic guess, thing other billion looking want I was the And that kind of of? seeing you

Ignacio Alvarez

a mixed it's bag. think I

increase they medium into the X to flow have look resulted you years. the federal the for which GDP the if estimates obviously, near think, increased of growth in estimate at plan the next fiscal are going I effect in funds to in the of -- term, in the island, has that

going So and what PREPA. I'm next at see a sort feeling. we're look plan, definitely, The near you to about it medium I think that stimulative -- Rico, term -- the if in very backs of optimistic the Puerto impact. you're The

major put In seeing monetary government to some level long-term permitting the in carried that reforms the between a out impact. They the am So this are is the us to that big reforms achieve we're government and in fiscal have it the have I'll and way, very being government. of in a of the terms not the about Rico will short collaboration growth. requires the going I board plan what difference. There Puerto worries optimistic is terms rightsizing that of term, PREPA

we think medium difficult the will that's the I of to have more PREPA going required -- But be the level the isn't the long have prospects cooperation reforms Unfortunately, term, there. biggest struc to to impact. -- are short in good.

Brett Rabatin

Okay.

pretty you're that up. was just The opportunities while it's hearing kind about or was zone those X now and maybe X to locally, heat for starting a I if Sorry, others. could quiet meaningful? curious, be lending enterprise what of

Ignacio Alvarez

week. A a regs, lot lot the people published the of to they'd people that. waiting inquiries, I regs -- the A of come think of of, The lot, lot last of lot people. a are office, initial lot a a for

I definitely important. think it's

economic we're in get about an stock. talking -- that capital capital -- additional our long-term investment Puerto to Rico, requires think long-term growth in it I

which really So hopefully, stock, zone that's growth. investment of opportunity and the partly fund. is recovery partly economic long-term source public this capital in going essential the private the from to partnerships. ingredient will come another be to Hopefully, from And public

Brett Rabatin

under Okay. XQ. of $X And had regulatory [indiscernible] perspective deposits total then billion at end the the from government a I little a

it? it, if XQ, but in you I have the If gave missed number it, you

Ignacio Alvarez

-- billion. $X.X of at $X Quarter-over-quarter, billion billion end it We're third about quarter. we're $X.X grew about the the

Brett Rabatin

billion, $X.X okay.

Operator

the like to session. any our remarks. to closing question-and-answer Alvarez Ignacio I concludes This back turn conference for would over

Ignacio Alvarez

for you Thank your questions, thanks for today. us joining and

results. The another us, strong third are our with pleased one and for quarter was we

on update in momentum that build Thank you. call. our will our on We next you and progress

Operator

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

may You now disconnect.

Popular (BPOP) 24 Oct 182018 Q3 Earnings call transcript