Popular, Inc.

Welcome to today's popular INC Q3 2022 earnings call. My name is Drew and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. If you change your mind, please press star followed by 2. I'm now going to hand over to Paul Cordillo, Investor Relations Officer at Popular Inc. To begin, please go ahead.

Good morning and thank you for joining us. With us on the call today is our CEO, Ignacio Alvarez, our COO, Javier Ferrer, our CFO, Carlos Vasquez, and our CRO, Lidio Soriano. They will review our third quarter results 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. Our results for the quarter were solid and reflect the strength of economic activity in our markets, our diversified sources of revenue, and prudent risk management. In the third quarter, we achieved net income of $422 million or $196 million, excluding the impact of the Evertech transactions. At the beginning of the quarter, we closed the previously announced agreement with Evertech to acquire key customer-facing channels and to extend important commercial agreements. This transaction is already allowing us to accelerate our ongoing digital and business transformation as we focus on the changing needs and expectations of our clients and enhancing the omnichannel experience that we provide. Please turn to slide three. Our quarterly net income, excluding the impact of the Evertech transactions, was $16 million lower than the second quarter. Third quarter results were characterized by positive variances in net interest income and fee income, offset by higher provision for credit losses and operating expenses. The adjusted results for the quarter do not include any equity pickup from our prior investment in Evertech. During the quarter, loan growth was strong and broad-based, both geographically and across all loan segments. Total loan balances grew by $1.2 billion. Commercial loan growth in Puerto Rico was particularly healthy during the period. Our net interest margin improved in the quarter. However, we have begun to see a higher cost of deposits, particularly in our Puerto Rico public deposit portfolio and a popular bank. Credit quality trends remain favorable during the period. NPOs decreased in the quarter, and NCOs are significantly below pre-pandemic levels. In the third quarter, we continued to return capital to our shareholders. In July, we completed the previously announced $400 million accelerated share repurchase program. Also, upon completion of the sale of our Evertech shares in August, we entered an additional $231 million ASR which we expect to complete before the end of the year. In light of the rapid increase in interest rates year to date, as well as the uncertain outlook for interest rates going forward, in October, we referenced $6.5 billion in intermediate-term U.S. Treasuries from available to sale to held to maturity. This reduces the impact of OCI on tangible capital from future interest rate fluctuations. These securities had an accumulated pre-tax loss of 873 million. Please turn to slide four. Our customer base in Puerto Rico grew by approximately 8,000 in the third quarter to reach 1.97 million unique customers. Adoption of digital channels among our retail customers continues to be strong. Active users on our Mibanco platform exceeded 1.1 million or 56% of our customer base. we continue to capture nearly two-thirds of our deposits through digital channels. This trend remains significantly higher than pre-pandemic levels and well above our island peers. Commercial loan growth was strong. Commercial loan balances at BPPR and Popular Bank increased by $489 million and $332 million, respectively. Auto loan and lease balances at BPPR increased by $97 million or 2% versus the second quarter. The dollar value of credit and debit card sales of our customers remained stable during the quarter and were 1% above the third quarter in 2021. As on the mainland, mortgage originations in Puerto Rico have been impacted by rising rates and limited inventory of available properties. The dollar value of mortgage originations at BPPR decreased by 36%, compared to the third quarter of last year. In September, Puerto Rico and Florida were impacted by hurricanes Fiona and Eon, respectively. Hurricane Fiona caused a complete blackout on the island and considerable damages to certain sectors in the Southwest region. While the impact to our operation was not material, some customers concentrated in flood-prone communities were significantly impacted by the disaster. Hurricane Ian did not have a significant impact on our operations. We have offered various forms of assistance to our customers in both regions. This includes waiving late payment fees on certain products and waiving ATM withdrawal fees for using ATMs outside of our network. Additionally, we have offered a moratorium to eligible borrowers impacted by the storms. We are still evaluating the impact of Hurricane Fiona and Ian. However, given the low level of assistance requests received to date, the effect on credit risk should not be significant. That said, we will continue to work with our customers that were impacted by these events. Please turn to slide five for an update on the current macro environment in Puerto Rico. The local economy continued to perform well during the third quarter. Business activity has remained solid. However, certain metrics suggested economic trends in Puerto Rico, while still positive, may be moderating somewhat. The Puerto Rico Economic Activity Index for August, which is the most recently released data, is 1.5% higher than August 2021 and continues to exceed pre-pandemic levels. We remain encouraged by solid employment levels. In September, total non-farm employment in Puerto Rico increased slightly from its level in June. The August 2022 employment rate of 5.8% is the lowest ever. New auto sales decreased by 11% in the third quarter compared to the same period in 2021, but remained above pre-pandemic levels. The auto industry was disrupted in September by Hurricane Fiona and continues to be affected by supply chain related product shortages. Despite these challenges, there continues to be robust demand for cars in Puerto Rico. The tourism and hospitality sector continues to be a source of strength for the local economy as Puerto Rico is a popular destination for mainland residents. Airport traffic has remained robust. Year-to-date through September, total passenger traffic has increased by 8% compared to 2021. Hotel demand has also remained strong. Occupancy rates are up 10% year-to-date, and the average daily room rate continues to compare favorably to historical levels. In short, We are pleased with our results for the third quarter, particularly the strong loan growth. We are mindful of the global economic uncertainty and market volatility, but remain optimistic about the future of Puerto Rico, our primary market, and our ability to manage through any potential challenges that may lie ahead. I'll now turn the call over to Carlos for more details on our financial results.