Popular, Inc.

Good morning, ladies and gentlemen. Thank you for attending today's Popular Inc. Q1 2023 earnings calls. My name is Tia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to your host, Paul Cordelio with Popular Inc. Please proceed.

Good morning, and thank you for joining us. With us on the call today is our COO, Javier Ferrer, our CFO, Carlos Vasquez, 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. Our CEO, Ignacio Alvarez, is unavailable today due to a medical matter. We expect him back at the office early next week. Before we begin, 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 COO, Javier Ferrer.

Thank you, Paul. Good morning and thank you for joining the call. We began the year with a strong quarter, achieving net income of $159 million. Our quarterly net income was $30 million lower than the adjusted fourth quarter net income of $189 million. First quarter results were impacted by lower net interest income, offset in part by lower higher non-interest income, and a slightly lower provision for credit losses. Loans increased during the quarter by $261 million. Banco Popular generated loan growth across all segments, while Popular Bank saw commercial loan growth offset by runoff in the construction and consumer portfolios. Our net interest margin decreased by six basis points to 3.22 percent in the quarter. Higher deposit costs, particularly in our Puerto Rico public deposit portfolio and a popular bank, impacted our margin. This was partially offset by an improvement in asset mix due to loan growth and a reduction of the investment portfolio. Credit quality trends remained favorable during the period. MPLs decreased and net charge-offs remained well below pre-pandemic levels. During the quarter, Popular issued 400 million in five-year senior notes with a 7.25% coupon. We intend to use a portion of the net proceeds of the offering to redeem or repay the 300 million principal amount of our senior notes that mature in September. Please turn to slide four. We maintain robust liquidity anchored by our diversified deposit franchise and our high levels of cash reserves and unpledged securities. Our deposit franchise is made up of approximately 42% in retail deposits with an average balance of less than $10,000 per account. 25% of the balances are in public sector deposits, which are secured by collateral. 28% are in commercial deposits, and the remaining 5% are wholesale deposits. Overall, deposits were down by $273 million in the quarter, but liquidity sources were up by $1.3 billion. Our total consolidated borrowings, including our newly issued senior notes, remained flat during the quarter. Our customer base in Puerto Rico grew by approximately 12,000 during the quarter, reaching nearly 2 million unique customers. Adoption of digital channels among our retail customers remains strong. Active users on our MiBanco platform exceeded 1.1 million, or 56% of our customer base. In addition, we continue to capture more than 60% of our deposits through digital channels. This trend remains significantly higher and pre-pandemic levels and well above our island peers. In the first quarter, consumer spending remained healthy and with combined credit and debit card sales up 9% compared to the first quarter of 2022. As on the mainland, mortgage originations in Puerto Rico have been impacted by rising rates and also by limited inventory of available properties. The dollar value of mortgage originations at Banco Popular decreased by 29% compared to the first quarter of last year, driven by lower refinance activity due to the interest rate environment. The local economy performed well during the first quarter. Business activity is solid and remains in good shape, as reflected in the continued positive trends in total employment and other published economic data. While new auto sales have slowed compared to the quarterly pace of the past couple years, they remain above pre-pandemic levels, evidencing continued robust demand for cars in Puerto Rico. The tourism and hospitality sector continues to be a source of strength for the local economy. Year to date, San Juan Airport has seen record levels of passenger traffic. Hotel demand also has been strong, as can be seen in record high average daily rates and revenues per available room. There are still approximately 50 billion of hurricane recovery funds that have yet to be disbursed. We expect that these funds will support economic activity in many sectors in the coming years. We are uniquely positioned to serve the needs of our customers and to benefit from such activity. In short, we are pleased with our results for the quarter, particularly our solid loan growth in Puerto Rico and the continued strength of our deposit base, liquidity, and credit quality. We are mindful of and have been monitoring the economic and market environment. as well as the recent developments in the U.S. banking sector. We will continue to manage our banks to maintain significant available liquidity as we grow responsibly. Despite these headwinds, we remain optimistic about the future of Puerto Rico, our primary market, and our ability to manage and serve the needs of our customers through any potential challenges that may lie ahead. I now turn the call over to Carlos for more details on our financial results.