First BanCorp. New

Good morning and welcome to the first Bancorp third quarter earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an 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 this event is being recorded. I would now like to turn the conference over to John Pelling, IRO. Please go ahead.

Thank you, Debbie. Good morning, everyone, and thank you for joining First Bank Corp's conference call and webcast to discuss the company's financial results for the third quarter 2020. Joining you today from First Bank Corp are Willie Wallman, President and Chief Executive Officer of and Orlando Berges, Executive Vice President and Chief Financial Officer. Before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from the forward-looking statements made due to important factors described in the company's latest SEC filings. The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the webcast presentation or press release, you can access them at our website, onefirstbank.com. At this time, I'd like to turn the call over to our CEO.

Brilliant. Thank you, John. Good morning, everyone, and thanks for joining our call today. Please, let's move to slide four of the presentation. It was a very important quarter for our corporation, and I would like to go over some key highlights and then expand in certain matters. First of all, we're extremely pleased that we completed our strategic acquisition by closing the Santander transaction on September 1st. This transaction not only solidifies our position in the island, but strengthens our competitiveness in commercial, retail, as well as residential. Very pleased to welcome our 150,000 new customers, and we look forward to support them, to support their plans with an expanded branch network, expanded service channels, and enhanced technological offerings. On the economic front, definitely the relief funds from the pandemic, combined with 2017 hurricane funds being deployed, have bolstered liquidity in our market and will continue to drive economic activity. We'll touch on that. On the balance sheet side, even following the completion of the acquisition, we truly sustain a fortress balance sheet. Our liquidity, reserve, capital levels are among the highest in the banking sector. Core performance was strong for the quarter. We generated $28.6 million of net income Pre-tax pre-provision was $77 million with only one month of earnings from the acquired operations, and loan originations were strong at $971 million for the quarter. We basically increased originations in all categories through the quarter. Total deposits, including broker and government, increased to $12.5 million. And finally, our capital ratios remain among the highest in the banking sectors, and capital actions remain a priority as we see the economic environment stabilizing. Now let's cover more closely a few of these items on slide six. Start with slide six. Let's talk about the transaction. Definitely was a long time in the making, and as you see, we really improved our market position in all key areas. As you recall, the transaction was announced back in October 2019, and closing and completing was impacted by the COVID pandemic, definitely. But since then, some of the deal metrics have improved from announcement. We still expect 35% EPS accretion to consensus estimates. The revised TBB at closing is estimated at 4%, lower than our original estimate. and we expect less than two years of earn back now. This improvement is driven by, you know, slightly smaller loan portfolio, additional reserves delivered at closing, and the rate marks due to the rate environment. While cost savings are estimated at $48 million, we definitely work harder to see if there are areas that we can achieve more, but we're also focused on growing the franchise, so it's a balancing act as we move forward and achieve our goals of being more efficient and increase market share. I think together we have an excellent team, and we're working diligently to integrate and to turn on the growth engines as opportunities come in the economy. I want to touch on the integration. You know, we made a lot of progress on the first 45 days. Integration is underway. In those 45 days, we completed the conversion and integration of the mortgage business. the insurance agency, and several administrative functions. The plan is to complete the integration process by the end of the second quarter 2021. And this do consider, remember that we continue to operate under COVID limitation and distancing, and obviously a process of this magnitude, you know, takes times. We also announced this month as part of the The program, as part of the synergies and integration, we announced a voluntary separation program that provides an opportunity for early retirement to approximately 160 employees of the combined institution. This program will be executed over the next three quarters, starting in the fourth quarter. Other potential synergies identified include the opportunity of consolidating 8 to 10 branches, definitely the incremental utilization of digital channels could drive other efficiencies. But again, we don't want to hamper our potential to grow our market share with the now expanded market distribution that we have. So we will continue to move and report on this effort. Now let's move to slide seven. The new combined balance sheet is solid and well diversified. You know, the $2.6 billion acquired loan portfolio definitely complements ours nicely. And the deposit books improve our funding. Now the loan-to-deposit ratio stands at 78%, and obviously we have an expanded customer base to cross-sell and move to other products. Let's move to slide eight to talk about the economy. I think the quarter, we clearly saw the correlation of the reopening in our markets and the trends of economic recovery. It was clearly reflected in the third quarter. Remember that in the case of Puerto Rico, we have some severe tightening in the second quarter, and some of those rules were relaxed later. We're still operating under certain lockdowns, But I think the market has reacted very well to the situation and getting used to operate under that scenario. Importantly, you know, to support this economy, there are still over, you know, 60 billion of pandemic and hurricane relief. So those are numbers that are big for this economy. And there's a lot going on regarding reconstruction. Those funds are being deployed and they're definitely showing the liquidity and activity. Employment figures continue to turn positive. Recent numbers of August are 92% of August 2019. So definitely there's a recovery on the employment side. From the perspective of our client base, 100% of our corporate clients are operating and close to 99% of the business banking clients have reopened well. There are sectors that are more sensitive. The hospitality industry continues to reflect lower occupancy, but improving trends. Our hotel portfolio is below typical occupancy level, and San Juan Airport traffic is low, closer to 50%. And as we are all aware, These are the segments that are more sensitive and will require longer recovery periods. So we continue to closely monitor. On the other hand, from the business activity perspective, lending activity for the quarter was near pre-pandemic levels and digital activity sub-significantly. Retail lending for the quarters was very strong for both auto and mortgage lending activities. And actually, it came above pre-pandemic levels. So we are optimistic with the recovery and the possibilities of additional stimulus, but we are also vigilant to the fact that, you know, potential economic hurdles could come if there is a need to implement additional restrictions for COVID in the future. So we have to be watchful. Please now let's move to slide nine. We wanted to give you an update on the relief programs trends. The relief trends are actually positive. The graph show, you know, the peaks and lows over the last six months, actually since March, of the different regions and products. I think, you know, we see a positive trend during the quarter, actually after the quarter closes, our active moratoriums were reduced to only 0.8% of the portfolio, less than 1%. This is as of October 21st. I think so far the post-moratorium payments performance is positive with, you know, 98% of commercial clients scoring and 94% of retail as of October 21st. It's important to note that this data reflects only the due dates prior to October 21st regarding the payment patterns. So we have to wait until the end of the month to see the final trend. We do have a segment of the commercial portfolio that belongs to the industries that I mentioned, the more sensitive ones, such as hospitality, retail, and entertainment, that could need additional support through a longer stabilization period Those are being evaluated under the potential modification of terms provided by the section 14 of the CARES Act. So, please let's move to slide eight. You know, here we have how the trend of the balance sheet, you know, how we compare to peers and definitely, you know, acquisition, you know, our liquidity level, reserve coverage and capital position. they really give us opportunity with their position well to take advantage of any growth opportunity. Definitely will be good stewards of our capital position. And again, capital deployment opportunities remain a priority once our economic environment stabilizes. Let's move to slide nine for a moment. I wanted to talk about and show you the trends of core metrics. Obviously, you know, this graph shows you know, the trends and the positive impact of the acquired operation. We generate the incremental PPNR net income with only one month of earnings contribution for the acquired operations. And again, the enhanced funding profile should help us driving, you know, additional revenues. Loan origination, as I mentioned, were solid for the quarter. You look at the level and digital adoption rates continue to improve during this pandemic. We will continue to work harder now with more clients and more distribution points to improve our level of service to all our customers. I have to say that I'm really proud of my team and what I've been able to accomplish so far, managing the pandemic challenges. And we're definitely excited for the future growth prospect of our institution. And we're also excited to show our patient investors what we are able to accomplish. With that, I will turn the call to Orlando to cover the details of some of the financial metrics. Thanks to all.