First BanCorp. New

Good morning, and welcome to the First Bank Corp First Quarter 2021 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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, IR Officer. Please go ahead.

Thank you, Betsy. 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 first quarter of 2021. Joining you today from First Bank Corp are Aurelio Allman, President and Chief Executive Officer, 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 form of 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, Aurelio Allman.

Aurelio. Thanks, John. Good morning to everyone, and thanks for joining our call today. Please let's move to slide five to discuss some of the highlights. Before I go into the detail of the quarter, as you have hopefully seen, we're really very pleased to announce earlier today the Board's approval of the $300 million share repurchase program. The repurchase may be in the open market or in privately negotiated transactions. Timing and exact amount will be subject to market conditions. Given our outside capital position and the continued earnings accretion, we are committed to return excess capital to our shareholders and we're very, very pleased to move forward with this announcement. Now before talking about financial results, I'd like to touch on the macro. the integration and how pandemic is progressing in Puerto Rico. On the micro front, there was significant stimulus flowing to the island, to the CARES Act and subsequent programs, the most recently approved in February. When you add all the programs, the latest estimates that we have seen from the fiscal board are around $45 billion, which is a material amount is over 60% of the island annual GDP. Obviously, this significant stimulus continues to support the recovery, continues to strengthen our customers, is driving growth in deposits, but on the other hand, it's also softening long demand in the near term. We're very pleased with being able to deploy this stimulus in the island and see how the pandemic recovery trends are showing. In our view, similar trend should continue this quarter and improve later in the year as the reopening takes place and as the reconstruction efforts continue to pick up. When we look at individual metrics, the economy in Puerto Rico and actually Florida also continues to show clear signs, clear evidence of recovery. Tourism, hotel occupancy, airline passengers, cement sales, all showing improving trends. Recently, the government disclosed their financials. Interim net revenue to the Commonwealth General Fund is up 21% for the first eight months, and that's probably the first time in many, many years we have seen the government exceeding the budget revenues. Having expanded our position in Puerto Rico and our significant presence in Florida, we're definitely very optimistic with where we are positioned to benefit from these improving economic conditions. And we're very pleased to see that finally the reconstruction efforts are getting traction. We have to say that the government has done a good job managing the pandemic challenges. As you might know, we've recently experienced tightening in safety protocols in Puerto Rico and travel rules as we experience a pickup in cases following spring break. While, you know, on the other hand, while cases spike, the number of those vaccinated is a positive, you know, sustaining the potential for recovery trends. As reported by the health department, the island has made significant progress on the vaccination front. with 27% of the eligible population fully vaccinated and approximately 48% with the first shot. So we believe these are really good numbers to support the continued recovery. Moving to the integration, I'm happy to say that we are progressing according to schedule. This past quarter, we converted the consumer and commercial lending platforms, and we just finished the credit card conversion in April. We also made some progress in the branch rationalization, and we have consolidated three branches during the quarter. Also, we implemented our second phase of the voluntary separation program, which was previously announced. So we're quite pleased with the progress, and we do remain on schedule to complete the full integration by the end of the summer. Looking forward to that date. Finally, with regard to the PPP program, it was the focus of the quarter in terms of number of applications and obviously making the most out of it to benefit our clients. We originated $209 million, actually disbursed $209 million, and actually we also processed forgiveness remittance for $176 million of loans that were originated in the prior year. We will continue originating PPP loans. Pipeline, it's been coming down. And the program will expire at the end of May. So we will continue processing PPP loans through the end of the program. And obviously for the rest of the year, we also will support our clients processing the forgiveness applications, which will continue to flow probably till the end of the year. So let's move to slide six. for some highlights of the quarter. I'm just gonna cover lightly, Orlando will cover in detail. We did generate 61 million dollars of earnings or 28 cents per share compared to 50 million last quarter. Definitely the improving macroeconomic trends and forecasts is a key driver of the reserve release of 15 million for the quarter. Pre-tax, pre-provision was basically unchanged at close to 86 million, even though this quarter has two fewer days of operations. Pleased to see that as a quality metric remains stable. I think we have mentioned in the last call that we expected some pick-up of MPAs as the moratoriums expire. Obviously, there's a lot of liquidity supporting the market, so it's positive to see this metric being sustained or improved. Definitely, liquidity was also a big contributor, and core deposit, excluding government, excluding broker, grew $472 million, which is about 4%, so we're very pleased with that also. And you just saw the capital ratios, they remain really strong, and they are the baseline to support our buyback going forward. Please let's move to slide seven to touch a little bit more on loan. Definitely, you know, long-array nature is a challenge as we see, you know, this economy being supported with all this additional liquidity, which is good. Even though I think it was solid considering the seasonality and the programs that are happening in parallel, it was solid reaching $1.2 billion in the quarter, including credit card reach of $1.3 billion. And definitely, there's always seasonality in the commercial deals as they gain traction through the later half of the year. But if we look at year versus year, obviously, you see the seasonality on the graph in the top on the right side of the graph. The, you know, I think obviously when we expect that in the second half of the year, you know, we have both the stimulus subsiding and we also have, we expect full reopening of the economy and definitely some reconstruction projects that are getting traction, so we're more optimistic about second half of the year commercial activity than what we're getting now. As I mentioned, PPP loan was also a focus. When we look at the loan portfolio, it declined by 1%, and the primary decline was in the mortgage portfolio. As I had mentioned before, our focus is to reinate conforming mortgages, which we sell in the secondary market, And it was also a good quarter in mortgage ordinations and non-interested income from the gains. We also have some repayments on commercial credit lines due to the liquidity. So if we look at credit lines, we probably have low usage compared to prior years, which also contribute to the reduction. On the other hand, the consumer portfolio continues to pick up. both the unsecured credit card a bit, but definitely the auto at least finance segment, which we are an active competitor, and we're very optimistic of being able to achieve additional growth in this sector. Florida also contributed. We obviously will continue to be focused in Florida. It brings our geographic diversity. And this quarter, the Florida commercial and construction portfolio increased by 23 million. So activity should also pick up. On the digital front, adoption continues to grow. We continue to do investments to continue to enhance the platforms. Digital banking registers and active users grew 6% and 9% respectively during the quarter. So with that, I now will turn over the call to Orlando, and I will return back for questions. Thanks to all.