Popular, Inc.

Good morning and welcome to Popular, Inc. Q1 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that the event is being recorded. I'd like to turn the conference over to Mr. Paul Cardillo, Investor Relations Officer. Please go ahead. Thank you, Nick.

Good morning, and thank you for joining us on today's call. With us today is our CEO, Ignacio Alvarez, our CFO, Carlos Vazquez, and our CRO, Lidio Soriano. They will review our results for the first quarter and then answer your questions. Other members of our management team will also be available during the Q&A session. Before we start... I would like to remind you that on today's call, we may make forward-looking statements that are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release and are detailed in our SEC filings. You may find today's press release and our SEC filings on our webpage at popular.com. I will now turn the call over to our CEO, Ignacio Alvarez.

Good morning, and thank you for joining the call. I hope that you and those closest to you are healthy and staying safe. Before addressing our quarterly results, I'd first like to discuss the current business environment in Puerto Rico and how we're responding to the COVID-19 pandemic as outlined in the first three slides of the presentation. The COVID-19 pandemic has negatively impacted the global economy, creating significant volatility and disruption in financial markets and increasing unemployment levels. The Puerto Rico macro indicator that we regularly provide remains stable through the end of February. However, the pandemic and related economic disruption has had a very dramatic impact on the markets we serve. The local response to the COVID-19 pandemic has been substantial. On March 15th, the governor of Puerto Rico mandated a strict lockdown for residents and ordered all non-essential businesses on the island to close indefinitely. Most business establishments are closed, and those that remain open are only operating partially, causing a significant disruption to the island's economic activity. Only businesses involved in providing essential services, as defined by the governor's executive order, have been permitted to remain open, and even those have been curtailed in their operations. For example, banks have had to temporarily suspend mortgage and auto loan originations. The severe lockdown restrictions have also disrupted commercial lending. Additionally, the Puerto Rico government has mandated its citizens to remain sheltered in place and imposed a mandatory 7 p.m. curfew. Puerto Rico was the first U.S. jurisdiction to enact this scale of lockdown. Moody's Analytics estimates that approximately 80% of Puerto Rico's $105 billion They estimate the economic costs through April 12 at approximately $6.3 billion. And for as long as these restrictions remain in effect, they estimate an additional cost of $1.6 billion per week in reduced economic output. While employment trends have remained stable through February, initial unemployment claims have spiked over the past month in Puerto Rico, as they have across the entire United States. And as could be expected, tourism has also been significantly impacted. The Puerto Rico Tourism Company estimates the total hotel occupancy to be approximately 8%. According to the operator of the San Juan International Airport, during January and February, Puerto Rico received 14% more passengers than in 2019. However, during March, arrivals dropped by 38% when compared to March 2019, dropping over 73% over the last two weeks of the month, and they have continued to drop. The curfew and stay-at-home order have also had a dramatic impact on the spending patterns of our clients. Customer purchase activity has been severely impacted. Like employment, trends through February were stable compared to the year-ago period. However, for the 30 days after the curfew was enacted, debit and credit sales decreased by 46% versus the same timeframe in 2019. Both the local and federal governments had begun to provide relief and assistance in response to the pandemic. To date, the Puerto Rico government has approved a $787 million fiscal stimulus plan. Additionally, as part of the CARES Act, Puerto Rico will receive approximately $5 billion in funds, including up to $1.5 billion in direct payments. Residents of Puerto Rico are also entitled to receive the supplemental federal unemployment benefit of $600 per week. Our management team has been closely monitoring the spread of COVID-19 and has taken measures to ensure the soundness of our operations and the safety of our employees and customers. We've strengthened our business continuity plan and our executive team is constantly meeting to monitor and implement actions to mitigate the impact of the pandemic. We are communicating regularly with our employees to keep them informed of the involving business environment and to help ensure their safety. We offered alternative work arrangements for a significant portion of our employee base, provided incremental training, added personal leave days, and paid approximately $3.4 million in bonuses to frontline employees. Branches are operating under compressed schedules, emphasizing drive-through where available, and rotating personnel to reduce exposure. I am deeply grateful to our colleagues for the effort, commitment, and bravery exhibited under very difficult circumstances. We are encouraging customers to use alternative banking options, such as our digital services, smart ATMs, telephone banking, and drive-through services. We've increased transaction limits for remote deposits and ATMs. We have also waived ATM and certain other fees, as well as early withdrawal penalties on CDs. Most importantly, we are assisting customers facing financial difficulties, offering payment deferrals for mortgage, auto, and other consumer and commercial loans. Finally, following the passage of the CARES Act, we mobilized our human and tech resources to offer SBA loans to affected small and medium-sized businesses. We have submitted more than $1.2 billion in loans representing more than 15,000 small and medium-sized businesses. To date, we have received confirmation of SBA approval of $819 million of these submissions. We will continue to accept and process applications until the funding is exhausted. In our communities, we have committed $1 million to support efforts in four primary areas, providing medical equipment to healthcare professionals, supporting locally-based healthcare research projects to combat COVID-19, providing financial advice and business continuity support to entrepreneurs and small and medium-sized businesses, and finally, assisting nonprofit organizations to ensure the continuity of their services. As we continue to respond to this rapidly changing situation, Our plans and actions will continue to evolve. Please turn to slide six. The quarter's results reflect the impact of the economic disruption caused by the COVID-19 pandemic. Our reported quarterly net income of $34 million was significantly lower than our results for the fourth quarter and compared to the first quarter of last year. The primary driver of this decrease was a substantially higher provision expense reflecting the newly adopted Cecil County pronouncement and the most recent post-COVID macroeconomic forecast for Puerto Rico and the U.S. Aside from the increased provision, the first quarter results were characterized by higher net interest income, lower operating expenses, and lower taxes, partially offset by lower non-interest income. In the quarter, our non-interest income was impacted by reduced merchant transaction activity, the waiving of certain fees and service charges, the suspension of mortgage and reginations, as well as lower income due to the COVID-19 disruptions over the last two weeks of March. Additionally, we have experienced higher expenses related to expanding remote access for employees, additional employee benefits, increased measures to protect employees, and additional efforts related to customer relief programs. Excluding the adoption of CECL this quarter, credit quality metrics through March continue to show stable results. The continuing impact of COVID-19 on the economy and our operations will be heavily dependent on advances in the medical arena and how quickly economic activity can safely resume. I will now turn the call over to Carlos, who will discuss the financial results in more detail.