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| Statement |
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| This quarter, we were really pleased with the loan production activity that we experienced across the three regions |
| We posted another good quarter with $82 million in net income or $0.46 per share, which translated into a fairly strong return on asset of 1.72% |
| And again, we have ample liquidity available to various funding options that allow us to continue to strategically manage our balance sheet growth plans |
| Total interest income for the quarter grew $11.2 million for 12 basis points improvement in yields on interest-earning assets |
| Total loan increased by 6% on a linked quarter annualized basis and reached $12 billion, healthy levels of both commercial and consumer loan origination |
| And given strong capital position, liquidity, and outlook for the remainder of the year, we do expect to continue repurchasing shares of common stock during the fourth quarter, but now under the 2023 capital plan authorization |
| Funding profile of the institution do remain very attractive |
| We continue to see the Puerto Rico economy, very stable, performing fairly well considering the interest rate environment and the emerging geopolitical events |
| It's a very well-diversified deposit base, composed of a balanced mix of core and retail customers |
| As you saw in the release, the results for the third quarter show an increase of $11.4 million in net income, which is primarily associated with the lower provision and a lower effective tax rate |
| The loan portfolio has been expanding since the third quarter of 2022, reflecting organic growth of over $150 million or 8% increase during this period |
| In the case of consumer loans, interest income was up $4 million, again, higher yields on new loans and we grew the portfolio on average $94.5 million |
| We said in the past, we have the experience to continue operating under this challenging market and changing market, and we continue to leverage our proven risk framework and franchise to supporting the customers through the cycle |
| Expenses were quite in line with guidance at $160 million, and the efficiency ratio reached 50.7% during the quarter, continue to be very, very top of the industry |
| Again, our loan growth strategy is supported by the increased business activity and economic activity that we see in the island, particularly in this market, coupled with timely focused execution of the sales teams across the three regions |
| Economic activity index of Puerto Rico reached its highest level in eight-years during the third quarter |
| In terms of capital, regulatory capital ratios continue to be significantly above, well capitalized, at the end of the quarter |
| $6 million of the reduction relates to lower reserve from HTM, of held-to-maturity securities due to the refinancing of the $46 million long-term municipal bond I mentioned, went into a shorter-term loan structure and also, there were significant improvement or there were improvements in the underlying financials of certain Puerto Rico government municipalities that are held in the held-to-maturity portfolio |
| So it -- again, going back to statements we have done in the past that the growth on the portfolio, on the investment portfolio could be a factor to offset some of that, helping keep that net interest income going up a bit from where we are or staying at the levels where we are |
| On the commercial loans, interest income grew $6.1 million, which reflected loan repricing based on rate changes, higher yielding new loans as well as an increase of $104.5 million in average balances |
| But that's why we mentioned that assuming your first statement that we agree that there is some stability on the government -- the public sector side in terms of cost based on where rates are, that those cash flows coming in from the portfolio, the investment portfolio, would be able to be used to generate better deals that would offset a large chunk of that |
| So that's why we see that stability and the margin coming in and starting on '24 |
| Again, as we have mentioned, we continue to maintain a very disciplined expense management framework and our target is to remain close to that 50% efficiency ratio in the near term |
| Again, we remain focused on retaining our market share in this segment we serve, pricing our products competitively |
| So we do expect to see some of that benefit of converting those cashflows to much higher dealing portfolio, loan portfolio to benefit of 2024 to mitigate what we have seen in the NIM and the NII |
| That's -- I think that is a good example of what are we seeing |
| Commercial loan yields for the quarter are up 24 basis points compared to last quarter |
| The pace of this disaster relief funding for the first eight months of the year, it's 72% above the same period last year, which is definitely driving construction activity in the island |
| Overall, yields on the consumer portfolio increased 6 basis points during the quarter |
| We look forward to seeing a number of you at these events, and we greatly appreciate your continued support |
| Statement |
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| When we look at the components, the projected macroeconomic variables last quarter deteriorated, especially in the commercial real estate side and some on the unemployment side, which resulted in additional provisioning mix in the quarter |
| Net interest margin for the quarter was down to 4.15% from 4.23% last quarter |
| This quarter, the projection still shows a deterioration on the longer term |
| However, they are still way below pre-pandemic levels |
| Adjusted pretax pre-provision did come down by $4.6 million to $113.4 million |
| The recently released deposit market assessment of the FDIC as of June shows an overall contraction in total deposit in Puerto Rico as of June 2023 |
| Net interest income registered a slight decrease during the quarter, mainly due to the expected upward pressure on deposit pricing and increase in the mix of interest-bearing deposits to total deposits |
| Again, this reduction primarily driven by erosion of liquidity in the overall market and migration to -- of retail customer to higher rate options actually outside the traditional banking sector, I would say, particularly credit unions and the U.S |
| Looking at the reserve on just loans and leases, was down $3.5 million, which mostly reflect that projected a slower deterioration on the macroeconomic variables, as I previously mentioned |
| If we exclude these gains on a non-GAAP basis, net interest income decreased $700,000 in the quarter |
| The tangible common equity ratio did decrease in the quarter to 6.74%, and the tangible book value per share decreased to $7.16 |
| And obviously, the pressure of the betas on the government was significant |
| The estimated tax rate for the quarter came down -- estimated tax rate for the year, but impact in the quarter came down to 28.2% from 30.1% as a result of a higher proportion of tax-exempt income to total income and additional business activities we did under tax advantages under the Puerto Rico code |
| At the end of the quarter, the net unrealized securities losses, including capital, were $151 million, which is about $4.88 in tangible book value per share and also represents a reduction in the TCE ratio of approximately 409 basis points |
| However, so far, delinquency -- consumer delinquency as a percentage of loans remains below pre-pandemic levels |
| In terms of the allowance, we get about $271 million, a decrease of $10 million from prior quarter |
| The company's actual results could differ materially from the forward-looking statements made due to the important factors described in the company's latest SEC filings |
| Notwithstanding NPA levels remain at multiyear lows and now represent just 70 basis points of total asset |
| So the increase was much less than reflected |
| The provision for credit losses in the quarter decreased to $4.4 million, which compares to the $22.2 million we had in the second quarter |
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