Popular, Inc.

Good morning, and thank you for joining us. With us on the call today is our CEO, Ignacio Alvarez, our President and COO, Javier Ferrer, our CFO, Jorge Garcia, and our CRO, Lidio Soriano. They will review our results for the third quarter and then answer your questions. Other members of our management team will also be available during the Q&A session. Before we begin, I would like to remind you that on today's call we may make forward looking statements regarding popular such as projections of revenue earnings expenses taxes and capital structure, as well as statements regarding popular plans and objectives. These statements 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 release and RCC filing. 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. In the third quarter, we achieved net income of $155 million, a decrease of $23 million from the second quarter. These results were primarily driven by a higher provision for credit losses, which was partly a result of loan growth at BBPR. Credit quality trends remain stable in the period. An interest income increased by $4 million compared to the second quarter. While this was below what we had anticipated, it was largely a result of a $1.8 billion reduction in deposit levels at BPPR, which impacted the balance and mix of earning assets. That said, average retail customer deposit balances remain approximately 30% above pre-pandemic levels, and we continue to add new deposit clients during the quarter. Going forward, we expect to continue to benefit from the repricing of our investment portfolio and loan originations. We achieved strong loan growth in the quarter, with balances increasing by $603 million, or nearly 2%. PPR's loan portfolio grew by $583 million, primarily in the commercial segment, but reflecting growth across almost all lending categories. Popular banks saw a $21 million increase in loan balances driven by commercial loans. Our net interest margin expanded by two basis points to 3.24%, mainly driven by higher average loan balances and the repricing of loans and reinvestment of securities in a higher interest rate environment. This was partially offset by higher deposit costs and a lower average balance of investment securities. Operating expenses decreased by $2 million to $467 million. During the quarter, we repurchased 600,000 of our shares for approximately $59 million We continue to believe that our shares are attractive to repurchase at current prices. Tangible value per share increased by 10% to $69.04 driven by lower unrealized losses in our investment portfolio. Please turn to slide four. Business activity in Puerto Rico remains solid as reflected in the favorable trends in total employment, consumer spending, and other economic data. Consumer spending remained healthy Combined credit and debit card sales for BPR customers increased by approximately 4% compared to the third quarter of 2023. Our auto loan and lease balances increased by 105 million compared to the second quarter as demand for new cars continue to be strong in Puerto Rico. Mortgage loan balances at BPP are increased by 104 million in the third quarter, driven primarily by home purchase activity and our existing strategy of retaining FHA loans in portfolio. The tourism and hospitality sector continues to be a source of strength for the local economy. Passenger traffic at the San Juan International Airport increased by 5% in the third quarter compared to the third quarter of 2023, and hotel occupancy continues to be healthy. There is a significant amount of committed federal funds that have yet to be dispersed. Disbursement of these funds will continue to support economic activities for several years. We remain optimistic about the future of our primary market and are well positioned to support our clients during the coming years. On that note, I turn the call over to Jorge for more details on our financial results.

Jorge Mancilla- Thank you, Ignacio. Good morning and thank you all for joining the call today. Please turn to slide five. As Ignacio stated, we reported net income of $155 million in the third quarter, $23 million lower than the prior period's results. Net interest income increased by $4 million. This increase was below what we had expected. The lower NII was driven primarily by an unanticipated decrease in deposits in Puerto Rico, which impacted the balance of higher yielding tax exempt T-bills in our investment portfolio. Ending customer deposit balances at BPPR, excluding Puerto Rico public deposits, decreased by $856 million in ending balances. and by approximately $1 billion in average balances during the quarter, primarily in low-cost interest-bearing deposit accounts. From the beginning of March and through most of the second quarter, retail deposit balances in BPPR benefited from tax refunds of more than $1.2 billion. During Q3, in addition to continued outflows of deposit balances driven by rate-seeking behavior among our commercial and affluent retail deposit customers, We also saw a significant increase in spending and use of these balances across our retail client base, reversing the increase in average deposit balances we saw in Q2. At quarter's end, average retail deposit balances at BBPR are still approximately 30% higher than pre-pandemic levels, down from a peak of roughly 50% that we saw in Q2 2022. At the end of the third quarter, Puerto Rico public deposits were $18.7 billion. down one billion compared to Q2, and slightly above the upper end of our year-end guidance range. Average public deposit balances were higher during the quarter as the bulk of the reduction occurred on the last day of the quarter. Going forward, we expect public deposits to be in a range of 17 to 19 billion. While we did not anticipate this level of contraction on our deposit balances, the benefits of investment repricing, stable non-public deposit costs, and loan growth in the quarter contributed to a $4 million increase in net interest income despite the reduction in the investment portfolio. Our net interest margin expanded by two basis points on a gap basis driven by loan growth and by the repricing of loans and securities. NIM on a tax equivalent basis contracted by one basis point, primarily resulting from lower balances of tax exempt securities and higher levels of disallowed deposit expense. Loan growth was solid, increasing by $603 million in the quarter, driven by activity at BPPR, where we saw increases across nearly all categories, led by commercial, lending, auto, and mortgage originations. Non-interest income was $164 million, a decrease of $2 million from Q2, driven primarily by lower income from mortgage banking activities, as a result of a decrease in the fair value of MSRs. We continue to expect non-interest income to be approximately 160, 165 million in Q4. We're pleased to see that credit metrics remain stable during the third quarter. The provision for credit losses of 71 million, although 25 million higher than the second quarter, increased in part due to loan growth during the quarter, in addition to charge-off activity in the consumer loan portfolio. Total operating expenses were 467 million, or 2 million lower than last quarter. driven by lower professional fees and reserves for operational losses, offset in part by higher technology costs related to our transformation efforts and higher personnel expenses due to annual merit increases. We expect total full year expenses of approximately $1.91 billion within the range of original 2024 guidance of $1.89 to $1.95 billion. Our effective tax rate was 22% compared to 19% in the prior quarter. driven by the lower tax exempt income. We now expect an effective tax rate for the year of 23% at the top end of our prior guidance range of 21 to 23%. Please turn to slide six. During the quarter, we began to reinvest investment maturities in two to three year US treasury notes, buying approximately 1.1 billion at an average yield of 3.75%. We expect to continue this strategy as a way to hedge against lower rates. In BBPR, deposit costs increased by six basis points to 1.89%. The deposit costs of BBPR continue to be impacted by the proportion of public deposits to total deposits. As discussed last quarter, approximately 800 million of low-cost government-related accounts managed by our fiduciary services group were repriced during the last months of the second quarter to market-linked rates. The full effect of that adjustment is reflected in our Q3 deposit cost, run rate, and margin. At Popular Bank, deposit costs decreased by eight basis points during the quarter. This change reflected a reduction in the cost of intercompany deposits. The underlying economic activity and demand for credit in Puerto Rico remains strong. In our U.S. markets, we have begun to see a pickup in the demand for credit. As a result, we now expect consolidated loan growth in the fourth quarter of approximately 1%. This will result in total loan growth in 2024 of approximately 4% within the original 3 to 6% guidance range for the year. We anticipate fourth quarter NII will increase by approximately 1.5 to 2% compared to Q3, driven by continued reinvestment of securities and loan originations coupled with the beginning of the repricing of Puerto Rico public deposits and online deposits at Popular Bank. This will result in a year-over-year growth in 2024 NII of approximately 6% to 7% below our previous 8% to 10% guidance. Additionally, we expect NIM expansion to reaccelerate in Q4 and continue into 2025. Our deposit mix and our ability to reduce the cost of deposits in the U.S. and the volume and cost of public deposits in Puerto Rico will continue to present the biggest risk to achieving the expected level of expansion in NIM. Please turn to slide seven. Regulatory capital levels remain strong. Our CP1 ratio of 16.4% decreased by six basis points from Q2, mainly due to an increase in risk-weighted assets. Tangible book value per share at the end of the quarter was $69.04, an increase of $6.33 per share from Q2, mostly resulting from the decreased AOCI and our quarterly net income, often in part by dividends and stock repurchase activity during the quarter. During the last two months of the quarter, as part of the previously announced common stock repurchase authorization, we repurchased approximately 600,000 shares for roughly $59 million, or an average price of about $90 per share. Return on tangible common equity for the quarter was 10%, a reduction from the 11.8% last quarter driven by the higher provision expense and higher effective tax rate. As we look forward to 2025, given a variety of drivers, including the impact of the reduction in deposit balances experienced this year, the mixed shift to higher cost deposits, along with the limited loan growth year to date in the US, we no longer expect to achieve our target of 14% RODSI by the end of Q4 2025. We now anticipate that we should be able to generate at least a 12% RODSI in the fourth quarter of 2025. Longer term, we as a management team continue to be focused on achieving a sustainable 14% return on tangible common equity. We are confident that our transformation efforts, the repricing of our investment portfolio, and loan demand in all of our markets will be important catalysts to achieve this target over time. With that, I turn the call over to Lidio.