Operator: Before we begin, I would like to remind you that during today's call, we may make forward-looking statements regarding Popular, Inc., such as projections of revenue, earnings, credit quality, expenses, taxes, and capital structure, as well as statements regarding Popular, Inc.'s 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 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 CEO, Ignacio Alvarez.
Ignacio Alvarez: Thank you, Paul. Good morning to all. Before I begin, I would like to apologize. I'm not feeling 100% today. I'm a bit under the weather. I've asked Javier to cover the business highlights. Before turning over to him, I would like to make some comments regarding the announcement we made in February about my upcoming retirement on June 30th and the board's appointment of Javier as my successor. Javier is a proven leader and has assumed increasing responsibilities and has demonstrated that he has the experience and vision to lead Popular, Inc. He fosters a collaborative, high-performance culture and will infuse new energy ensuring a smooth transition into the CEO role. I am grateful for his support and friendship, which began close to 35 years ago. I am confident that under his leadership, Popular, Inc. will continue to drive forward. I have spent 15 incredibly rewarding years at Popular, Inc. Leading this extraordinary organization since 2017 has been a privilege and the opportunity of a lifetime. I am immensely proud of what we have achieved in recent years, thanks to the dedication and hard work of our entire team. There is no perfect time to retire, but I am confident that the timing is right for this transition. Popular, Inc. is in a strong position and well-prepared for the future. With that, I hand it over to Javier.
Javier: Good morning. Thank you, Nacho, for those incredible words. It has been one of my life's true privileges and a gift to enjoy your company as a mentor, a dear friend, and a partner. Please turn to slide three to discuss highlights of the first quarter. Our net interest income increased by $16 million, and the net interest margin expanded by five basis points to 3.4%, mainly driven by lower deposit costs. Loan balances increased by $146 million, primarily driven by the commercial and construction segments in Popular Bank. Deposit balances grew by $935 million, with both banks contributing to the increase. Credit quality improved, led by lower net charge-offs and early delinquency. During the quarter, we repurchased $122 million shares at an average price of roughly $96 per share. Today, we have repurchased $340 million of our current $500 million authorization. Tangible book value per share increased by nearly $4 to approximately $72, driven by our quarterly net income and lower unrealized losses in our investment portfolio, offset in part by share repurchase activity and dividends in the period. Please turn to Slide four. Before commenting on the business activity for the quarter, we would like to address the recent volatility due to tariff uncertainty, which has impacted markets and raised recession concerns. We are closely monitoring the situation and communicating with clients about its potential effects. Regardless, our strong balance sheet, diversified business mix, and extraordinary team have consistently enabled us to perform well in uncertain times. This is the time to be focused on supporting and serving our clients and to demonstrate the strength of our great institution. As of the end of the first quarter, business activity in Puerto Rico continued to be solid, as reflected in the favorable trends in total employment, consumer spending, and other key economic data. The current employment rate of 5.5% continues to hover around the all-time lows. Consumer spending has been resilient and remains healthy. Combined credit and debit card sales for Banco Popular customers increased by approximately 6% compared to the first quarter of 2024. Mortgage loan balances at Banco Popular increased by $136 million in the first quarter, driven primarily by home purchase activity. Our auto loan and lease balances increased by $21 million compared to the fourth quarter, as demand for new cars continues to be strong in Puerto Rico. The tourism and hospitality sector continues to be a source of strength for the local economy. Compared to the same period a year ago, passenger traffic at the San Juan International Airport increased by 11% during the quarter, and as of February, the average daily rate and revenue per available room or RevPAR increased by 10% and 9% respectively. Hotel occupancy exceeded 75%. We continue to expect that the ongoing disbursement of federal recovery funds will support economic activity in Puerto Rico for several years. And on that note, I turn the call over to Jorge for more details on our financial results.
Jorge Garcia: Thank you, Javier. Good morning, and thank you all for joining the call today. Please turn to Slide five. We are very pleased with the quarter's results, particularly with deposit activity, the NII growth, and the expansion of the NIM. Despite all the uncertainty in the economic outlook, we started the year on a strong footing. Net interest income increased by $15 million, driven by asset repricing in our investment portfolio as well as lower deposit costs in both banks. As anticipated, loan growth in the quarter was slower after a very strong Q4. Loan balances increased by $146 million, led by the US segment. At PV, we saw increases in commercial and construction lending, and at BPPR, we continue to see an increase in mortgage loans. However, as discussed in our Q4 webcast, we received some large commercial loan repayments that impacted the ending balances. Ending deposit balances increased by $935 million, while average balances grew by $1.4 billion. At the end of the first quarter, Puerto Rico public deposits were $19.6 billion, an increase of approximately $160 million when compared to Q4. We continue to expect public deposits to be in the range of $18 billion to $20 billion. At BBPR, excluding Puerto Rico public deposits, ending and average deposits each grew by approximately $400 million. And at PV, ending deposit balances increased by $250 million, net of intercompany. We are very happy with the successful efforts of our teams and their focus on deposit retention and growth strategies. Net interest margin expanded by five basis points on a GAAP basis and eleven basis points on a tax-equivalent basis, driven by lower deposit costs and a larger balance of tax-exempt investment securities. Non-interest income was $152 million, a decrease of $13 million compared to Q4 and below the low end of our 2025 quarterly guidance. The primary reason for the delta versus our expectations was a $3 million unfavorable variance in the fair value adjustment of our MSRs and lower than anticipated income from equity method investments. We continue to expect quarterly non-interest income to be in a range of $155 million to $160 million during 2025. As Lidio will cover in detail, credit metrics improved across the board during the quarter. Total operating expenses were $471 million, an increase of $3 million when compared to last quarter. The largest expense increase in the quarter related to higher personnel costs, driven by annual incentive awards and payroll taxes that are normally higher in Q1, offset in part by lower business promotion expenses, which tend to be seasonally higher during the fourth quarter. We continue to expect full-year 2025 expenses to increase by approximately 4% when compared to 2024. Our effective tax rate in the first quarter was 20%, flat with Q4. In 2025, we expect the effective tax rate for the year to be in a range of 19% to 21%. Please turn to slide six. We continue to reinvest the maturities of our US treasury note portfolio into two and three-year treasuries, approximately $900 million at an average yield of around 4.2% during the quarter. We expect to continue this strategy to lessen our sensitivity to lower rates while maintaining a similar duration in the investment portfolio. In BBPR, deposit costs decreased by twelve basis points to 1.55%, mostly due to a thirty-eight basis point reduction in the cost of market-linked public deposits. At Popular Bank, deposit costs decreased by eleven basis points during the quarter. While we have made progress in reducing the cost of our US deposits, we continue to see a lag in the reduction of deposit costs due to the competitive landscape of our US footprint and online deposit space, as well as the high proportion of time deposits which take longer to reprice. When we provided loan growth guidance in January, we expected the rate of growth to accelerate as the year progressed. Despite growing uncertainty about the economic outlook, demand for credit in Puerto Rico remains strong. In our US markets, demand for credit was stable during the first quarter as we continue to benefit from draws from ongoing construction projects and loan growth in our healthcare and community association lending business. While the impact of tariffs on economic activity may affect loan demand, we believe that we can achieve our original loan growth guidance of 3% to 5% for 2025. However, given the overall environment, we now see the lower end of that range as a more likely scenario. We expect NII to increase by 7% to 9% this year and anticipate further NIM expansion during my continued reinvestment of maturing lower-yielding securities and loan originations in the current rate environment, as well as lower cost of online deposits at Popular Bank. Please turn to slide seven. Regulatory capital leverage remains strong. Our CET1 ratio of 16.1% increased by eight basis points from Q4, mainly due to quarterly net income that was somewhat offset by capital actions during the period. Tangible book value per share at the end of the quarter was $72.02, an increase of $3.86 per share from Q4, driven by our net income and lower unrealized losses in our MBS portfolio, offset in part by our capital return activity during the quarter. During the first quarter, we repurchased approximately $122 million shares at an average price of $96 per share. As of the end of March, we had $160 million remaining of our existing $500 million authorization. Return on tangible common equity for the quarter was 11.4%, an increase of fourteen basis points from last quarter, driven by stable net income and buyback activity. We continue to anticipate at least a 12% ROTCE in the fourth quarter of this year. Longer term, we remain focused on achieving a sustainable 14% return on tangible common equity. With that, I turn over the call to Lidio.
Lidio Soriano: Thank you, Jorge. And good morning. Credit quality metrics improved during the first quarter with lower early delinquencies, NPLs inflows, and net charge-offs. Our mortgage and commercial loan portfolios continue to reflect credit metrics significantly below pandemic levels. As we have discussed in previous calls, we have been encouraged by the performance of our most recent consumer vintages. During the quarter, our consumer portfolio reflected lower delinquencies, NPLs, and net charge-offs driven by our auto and personal loan portfolios. Over the years, we have managed credit under different macroeconomic and operating environments. More recently, we have taken several credit tightening actions to reduce our exposure to riskier borrowers. We continue to carefully monitor the performance of our book and respond to the environment accordingly. We are confident that the improvements in the risk profile of our loan portfolios position Popular, Inc. to operate successfully under more difficult economic conditions. Turning to Slide number eight. Non-performing assets and loans decreased during the quarter driven by BBPR. NPLs in BBPR decreased by $30 million during my lower auto, mortgage, and commercial loans. Commercial NPLs decreased, driven by a $9 million single loan payoff during the first quarter of 2025. NPLs in Popular Bank decreased by $7 million driven by a single loan sale. The Oreos decreased by $5 million during my sales of residential real estate properties in Puerto Rico. Inflows of NPLs decreased by $16 million quarter over quarter. In BBPR, total inflows decreased by $11 million driven by lower mortgage inflows. In Popular Bank, a decrease of $7 million was driven by lower commercial inflows. The ratio of NPL to total loans held in portfolio decreased eleven basis points to 84 basis points. Turning to slide number nine. Net charge-offs amounted to $49 million or annualized 53 basis points, compared to $67 million or 74 basis points in the prior quarter. Net charge-offs in BBPR decreased by $60 million driven by lower consumer by $11 million and lower commercial related to the commercial NPL payoff I mentioned earlier. In Popular Bank, net charge-offs decreased by $3 million. In our prior webcast, we provided guidance for the 2025 full-year net charge-offs estimating a range of between 70 to 90 basis points. Considering the performance of the loan portfolio in the first quarter, and short-term outlook, we could lower our guidance. However, given the uncertainty and liquidity of the current environment, we are not changing our estimates at this time. Please turn to slide number ten. The allowance for credit losses increased by $16 million to $762 million. The increase in the ACL was driven by changes in the probability weights of economic scenarios coupled with increases in qualitative reserves, offset in part by improvements in credit quality and changes in portfolio mix. We leveraged multiple scenarios to estimate our ACL. In response to the current economic uncertainty, we increased the rate of price to the pessimistic scenario causing an $18 million increase in the ACL. In BBPR, the ACL increased by $6 million driven by the change in profitability rates, offset in part by improvements in the credit quality of our commercial and consumer portfolio. In Popular Bank, the ACL increased by $11 million driven by the change in probability weight and higher quality of resources for the CRE portfolio. The corporation ratio of the ACL to loans held in portfolio was 205 basis points, compared to 201 basis points in the prior quarter. The ratio of the ACL to NPL was 243% compared to 213% the previous quarter. Provision for credit losses was $64 million compared to $66 million in the prior quarter. In BBPR, the provision was $53 million compared to $67 million, while in Popular Bank, the provision was $13 million compared to $2 million in the prior quarter. The combined provision to net charge-off ratio for the quarter was 133%. To summarize, credit quality metrics improved during the first quarter. We are attentive to the volatile environment, but we are confident that the improvements in the risk profile of our loan portfolios will allow us to operate successfully under more difficult economic conditions. With that, I would like to turn the call over to Ignacio for his concluding remarks. Gracias.
Ignacio Alvarez: Thank you, Lidio. And thank you, Javier, Lidio, and Jorge for their updates. We are extremely pleased with our strong financial performance in the first quarter. We increased our net interest income, grew loans and deposits, and maintained strong credit metrics. We also expanded our customer base and continued making progress on our transformation program. I want to express my sincere gratitude to our employees for all the hard work and support during my tenure. I am grateful for our achievements as well as the challenges we faced and conquered together. I wish Javier great success in his new role, for which I believe he is more than ready. I am confident Javier and the team will take Popular, Inc. to even greater heights. It has been an honor and a privilege to serve as CEO for the last three years, and I look forward to celebrating Popular, Inc.'s success, albeit from a different vantage point, for many years to come. We are now ready to answer your questions.
Operator: Thank you. Upon preparing to ask a question, please ensure your device is unmuted locally. Our first question comes from Frank Schiraldi with Piper Sandler. Your line is open. Please go ahead.
Frank Schiraldi: Morning. Good morning, Frank. First, congrats to both of you, Javier and Ignacio. I wanted to start with kind of a broader question. You mentioned the macro uncertainty, the tariffs. Obviously, the news flow seems to change every day, but there's some of these concerns. There's also talks of potential benefit for the island, and specifically about the comparative advantage in pharmaceuticals. Obviously, it's still early days in trying to figure all this out, but things are changing quickly. Just wondering what you guys are hearing, seeing on the ground from clients in terms of talk of potential new investment on the island and how significant a headwind are issues like the power grid?
Ignacio Alvarez: The power grid is, I hate to answer it this way, but the power grid is not a significant issue because Puerto Rico has over time become very resilient to power outages. I was going to the airport the other day, and I was shocked during the outage at how much light there was. So I don't think it's going to be a significant issue for the industries that are here. It may be something that people have to think about when they decide to invest in Puerto Rico. But many people in Puerto Rico, especially in the pharmaceutical and medical device sectors, are doing their own CHPs and power plants. I think the relative cost of that for the benefit is small. So I don't think we've seen a new pharmaceutical yet. I don't know. You were talking to someone from the industry the other day, right?
Javier: Yeah. So there's definitely, I mean, this is a priority for the government and for the team tasked with bringing investment to Puerto Rico. This is an area where we believe Puerto Rico stands out and that it's a known entity for companies considering reshoring. We have the proven skilled talent pool in Puerto Rico, and the financial incentives are still more attractive than any stateside option. Remember, Puerto Rico, depending on how you measure it, is either the number one or number two exporter of pharma products in the United States. So there's definitely a robust industry. We still have capacity both from existing companies in Puerto Rico and for plants that were here before that may be kind of white box at this point. There's also CMO organizations in Puerto Rico that can ramp up to do third-party manufacturing. So it is an area that could be a highlight. I'd love to give you some example of a big win, but all we can talk about right now is the strength of the industry and the anecdotal focus of the government and the teams that are focused on that task to bring this to Puerto Rico.
Frank Schiraldi: Gotcha. Okay. No, that's helpful. And then just switching gears as a follow-up, Jorge, I wonder if you could update us on your broad thoughts on deposit flows. I mean, obviously, you had the outflows in the third quarter of last year, I think it was. You talked about $600 million to $800 million additional at risk. Where are we now on that? You've had a couple of positive quarters on deposits. How seasonal is the growth in 1Q and just your thoughts on flows through the year here?
Jorge Garcia: Sure. So first of all, happy with the efforts of the teams and their focus on deposit gathering. The teams have reacted as they usually do, and we're very happy with those results. There's a lot of momentum. During the first quarter, as you know, we do have historically some seasonality related to tax refunds. So we did see that in our retail business. We're running around $200 million ahead of last year in terms of tax refunds in our client accounts. We continue to expect more tax refunds in April and maybe a little bit into May. In terms of the deposits, when we look at our balances today, we're about 35% higher on average balance when compared to pre-pandemic. You may remember that the peak was 50%, and that was in 2022 when our clients were benefiting from a lot of federal stimulus. One of the interesting things that we see is that when we compare the inflows into our clients' accounts that have continued after 2022, our clients are actually getting more inflows today than they were in 2022, and that's driven by the higher earnings and higher wages, higher economic activity that's ongoing in Puerto Rico. So that gives us some confidence that the baseline is tracking to where we think it would be. When we look at retail clients getting tax refunds, we do expect some of them to spend some of those refunds like they did last year. So we'll see how the trends, whether they repeat, and to what magnitude in the second or third quarter. But also given the uncertainty in the environment right now, we would also expect some clients to counteract that with maintaining higher balances or perhaps curtailing some of their spending activity. So I think the bottom line is we are outpacing where we thought we would be with deposits at this time of the year. Very happy with the efforts and our team's focus. And we'll see where we turn out in the second and third quarter. But glad to be starting from this point forward.
Frank Schiraldi: Great. And just thinking about the seasonality again, is it still fair to think that 3Q is probably the trough from a seasonality standpoint for deposits?
Jorge Garcia: That's what we saw in 2024. We'll have to see how it goes. We would expect continued tax refunds, like I said, through early May. Last year, we did begin to see some of the spend in the second quarter, so it will just depend on the speed and magnitude. But again, we think that the point of baseline should trend higher.
Frank Schiraldi: Gotcha. Okay. Appreciate the color. Thanks.
Operator: We now turn to Gerard Cassidy with RBC. Your line is open. Please go ahead.
Gerard Cassidy: Thank you. Nacho, congratulations on your retirement, and Javier, congratulations on taking over the new role. With that, Javier, can you share with us your view of where you see Popular, Inc. under your leadership? Will it differ at all from the last three or four years? What do you see for Popular, Inc. in a big picture?
Javier: Well, I continue to see Popular, Inc. as a preeminent financial institution in Puerto Rico. I think we're only getting stronger. Our transformation efforts continue to show results and accelerate. I see us becoming stronger in certain areas, such as payments or money movements. I see us strengthening our market-leading omnichannel experience for our customers. So executing our strategy. I don't think it's going to be about execution. Building on what the team has done under Ignacio's great leadership. So steady as it goes with those nuanced areas that I just described. And, of course, we're gunning for that full percentage of the year of ROTCE, and as the big investment orgies have said before, we have to get to the 14% ROTCE on a sustainable basis. So that's what I see.
Gerard Cassidy: Very good. And I know on these calls in the past, discussions about capital levels always come up and share repurchases. You announced $122 million in buybacks this quarter. The authorization continues, of course, into the remainder of 2025. In view of, you know, it appears from the US regulatory standpoint that the regulators are going to maybe loosen the corset around the banking industry to ease up on maybe some of the capital requirements. Do you guys see, for you folks, your CET1 ratio even with the buyback went higher this quarter? Any way of kind of projecting for us what's a comfortable level above, you know, your peers? So I know there's the Puerto Rico kind of premium or excess that you need to carry, but it seems like your capital levels are so strong or too strong, you know, that you could lower them maybe more optimally with a stronger buyback over the next twelve to eighteen months?
Jorge Garcia: Gerard, good morning. It's Jorge. You know, we share in your perspective that we have robust capital, and certainly, we've spoken in the past about having a cushion or a spread against peer averages given our geographic concentration in Puerto Rico. We don't believe that it needs to be, you know, five or six hundred basis points depending on how you measure it today. However, on the other hand, we have also said that we will be measured in our reduction of capital and doing it over time. We do have an active authorization. I will correct you; the authorization is open-ended. It does not expire in 2025. Our intent is to make sure that we're always working with some level of open authorization we can execute upon and have the flexibility to do that. I read you, and we hear it from many of our investors, trying to have a target of CET1 out there. I think when we can share that along with a path and a plan to get to those targets, I think that will be the right time for us to kind of stick that flag with a level of confidence and a path to get there. But in the meantime, focus on return on the level of capital that we have, focus on executing, and making sure that we are active in returning capital to our shareholders both in organic growth and in capital returns through dividends and repurchases.
Gerard Cassidy: Very good, Jorge. And just as a quick follow-up on your comment about the open authorization, once you've satisfied the $500 million that you were authorized, I think, the third or fourth quarter of last year, once you satisfy that amount, what's the procedure to increase the authorization further?
Jorge Garcia: So for us, we have a process that we run. It's not much different than we used to. Right? It's heavily based on our internal stress test, based on the Fed scenarios and obviously adjusted for Puerto Rico. Talking to our board, looking at our organic growth plans, looking at our strategic plans, and making sure that we consider the overall environment in going to our board and communicating with our regulators of our plan.
Gerard Cassidy: Very good. Thank you.
Jorge Garcia: You're welcome, Gerard.
Operator: Our next question comes from Timur Braziler with Wells Fargo. Your line is open. Please go ahead.
Timur Braziler: Hi. Good morning.
Ignacio Alvarez: Good morning.
Timur Braziler: Starting on NII, you know, impressive start to the year just looking at first-quarter performance versus guidance, and your thoughts around maybe upper versus lower levels of the guide and what would you actually need to see for the pace of the top-line growth to slow into that kind of lower-end range?
Jorge Garcia: I mean, I think, you know, certainly, we have some tailwinds in the reinvestment of our investment portfolio. Certainly, in addition to that, loan originations, the demand for loans, you know, adds to that NII growth. Ultimately, the deposit mix and the deposit cost are a big driver, Timur. So, you know, like I said, we're very happy with the levels of deposits. We'll see kind of client behavior and the efforts or continued efforts of our teams. But certainly, that mix, cost, and levels will have an impact on where we end up in that 7% to 9% range.
Timur Braziler: Okay. That's helpful. And then I guess just on deposits, looking at DDAs in specific, just end-of-period versus the average discrepancy. Is the expectation that some of that build towards quarter-end exits in 2Q? And then just as you think about this mass affluent strategy, can you kind of ring-fence the portion of DDA that might be at risk of migrating into higher-cost categories as the strategy plays out?
Jorge Garcia: Yeah. One thing I want to remind you is that in the fourth quarter, we launched a new product targeted to our mass affluent client base, and we have reclassified, I think it was around $600 million from demand non-interest-bearing demand deposits to a low-cost interest-bearing transaction account. That's why you're seeing kind of the discrepancy where you see a significant reduction in average balances of demand, but you don't see it in ending balances because that had already been embedded in the year-end numbers. So that is to say that I wouldn't expect that trend to repeat organically. Right? So in terms of the cannibalization of people moving to higher-cost deposits, we haven't really seen that in Puerto Rico. We do see it in the US. It's more prevalent in our US business, not in Puerto Rico. And part of that is driven by average balances, the levels of average balances in Puerto Rico, our commercial and corporate clients, working capital requirements, etc.
Timur Braziler: Okay. And then just last for me, a follow-up on the buyback. Popular, Inc. was one of the more conservative banks when rates started hiking and pausing the buyback. The level of uncertainty is higher today. Does this rise to that same kind of level where maybe you guys would pause and take a step back and gauge what's going on in the macro, or is the comfort level internally enough where the buyback resumes here despite some near-term uncertainty?
Ignacio Alvarez: Yeah. These are discussions we have on a constant basis with our board. I don't see anything today that would cause us to do that. Obviously, we're very vigilant. If something really bad happened, we would take action.
Timur Braziler: Great. Thank you. And congrats.
Ignacio Alvarez: Thank you. Thank you.
Operator: We now turn to Jared Shaw with Barclays Capital. Your line is open. Please go ahead.
Jared Shaw: Hey, good morning. Thanks for the questions, and just to echo everybody's congratulations. As well for me, and Ignacio, I hope good luck with your next steps.
Ignacio Alvarez: Thank you so much.
Jared Shaw: You know, I think maybe looking at the potential opportunity for onshoring in Puerto Rico, is there anything else, any other incentives the government's offering apart from the pharma industry? Is there an opportunity to attract new industry, or is it really most of the efforts focused around pharmaceuticals?
Ignacio Alvarez: No. You know, the incentives are not directed only to the pharmaceuticals. They're across different industries the government is trying to promote. However, because of the huge amount of money that they make, it's much more attractive for the pharmaceutical company. So now these two other areas that have been gaining traction. One is the medical device, and again, they have good profit margins. And recently, aerospace. And aerospace has a different incentive because not much of what the aerospace industry produces in Puerto Rico is for the US military. And you know, that by law, that has to be made in the US. So that's an advantage we have there.
Javier: And more recently too, we have seen some technology-focused organizations coming to Puerto Rico. Given that some of the R&D credits apply to software development, and that is attractive to some of those folks, particularly in AI and those unique areas.
Jared Shaw: Great. Thanks. And then maybe just a little more detail on the expectations around construction growth. Is that something we should be thinking continues to sort of grow at an accelerated pace here?
Jorge Garcia: So I think there's a couple of things there. You know, one, we are seeing our clients, and most of their construction portfolio is focused in New York. And it's a start to multifamily development projects. We are seeing behavior where because the pipelines are slower or less, developers are able to dedicate more people to accelerate the construction efforts. They're doing this to try to reduce the impact of the higher rates, borrowing rates, mitigate their increasing cost of development, etc. So, you know, we are at some point expecting to see where we'll see some payoffs and there won't be the pipeline to continue the level of growth that we have seen. When that happens, yes, to be determined. Right? There's obviously a lot of different projects that are ongoing at the same time, meanwhile, as our teams are going out and continue to develop business. So, hopefully, we get enough runway that it becomes a little transparent. But there is that nature. Remember, while we may compete in some of the takeout loans, our construction loans are not contingent on the takeout loan. Sometimes we don't want the takeout loan. So it's not certain that you would end up moving from construction to CRE, for example, or moving family.
Lidio Soriano: I'm also at the in Puerto Rico, we expect at some point in time to see the benefit from some of the FEMA funds that are being allotted to the construction of low-income housing in Puerto Rico. The timing is a little bit difficult to say, but we think that's going to happen here this year or next year.
Jorge Garcia: And one other area where we've seen demand in the US is in our community and condo association lending, particularly in South Florida, but there are some legislative requirements for condo boards to address maintenance on any building that's higher than three floors and thirty years old. And there's a lot of activity in that area. That shows up more in our C&I portfolio rather than the construction given the nature of the collateral and the way those loans are made.
Jared Shaw: Great. Thank you.
Operator: Our next question comes from Benjamin Gerlinger with Citi. Your line is open. Please go ahead.
Benjamin Gerlinger: Hey. Good morning.
Ignacio Alvarez: Good morning. Hi, Ben. Good morning.
Benjamin Gerlinger: Everything we kind of talked through here is longer-term. It seems to be pretty positive. But in your commentary, you're kind of towards the lower end of the guidance range. I'm just kind of curious, is it more so just being prudent and conservative, or is it just like elevated payoffs with people not utilizing lines at the pace we're thinking? I'm just kind of trying to marry the two of like positive outlook for lower loan growth.
Jorge Garcia: Yeah. I mean, I think, you know, first, there's payoffs in our runway that we see. So, obviously, that's money that needs to be replaced. We've tried it in the past, you know, for example, our auto portfolio, our runway is somewhere in the $400 million in originations to just stay running in place. So it's, you know, we talk a lot about growth, but the machinery that has to support that growth is extensive as well. I think when we talk about our low end of the range, it is driven by not only visibility to our pipeline but conversations with our clients. Most of our clients are confident with the projects that are ongoing, but the uncertainty certainly gives pause for people. I mean, the lack continuously we hear people saying it's a fluid environment. Every dynamic changes every day. That uncertainty gives people pause. You know, particularly with projects that are longer-term, people just want to understand what it is that they're building into, committing into, buying into, etc.
Benjamin Gerlinger: Okay. That is helpful. And then I think in the kind of previous discussion, you talked through kind of refund taxes and returns and just the overall deposit pull that you normally see is getting a little bit better or better than it had been over the past couple of years. When you kind of look at the credit trends, you guys seem to have been a little bit more proactive on kind of the retail portion across those lines of business. Are you seeing those refund checks go directly to paying off delinquent loans, or is it kind of two different ships passing at night? Both are positives trying to see if one hand's going right to the other.
Lidio Soriano: I will say that it will be a natural tendency for it to occur as people become more liquid. They use some of that liquidity to deleverage themselves. But I think what we have seen this quarter is a function of some of the actions that we took back in 2023 related to tightening some of our risk-free borrowers and management effort that we have put forth in collections has really paid off this work.
Jorge Garcia: And when we look at the delta of balances in the first quarter this year versus last year versus the increase in taxes, those seem to be consistent. So whatever behavior we're seeing, it is not out of sync with what we have seen traditionally. So if people are using it to pay and become current, and we're still seeing the deposit balances grow. So you're getting two positives there, I guess, a better way of saying it.
Benjamin Gerlinger: Gotcha. That's helpful. I appreciate your time. And also, slide seventeen is great. Thank you, Paul.
Operator: We now turn to Kelly Motta with KBW. Your line is open. Please go ahead.
Kelly Motta: Hi. Good morning. I just wanted to echo everybody's congratulations to you, Ignacio, on your retirement. It's been such a pleasure working with you, and Javier, congrats on the new gig coming up. So let's see. You know, I would like to talk a bit. I know it seems like the credit is holding in a lot better than perhaps you may have expected a quarter or two ago. And one thing we've been talking about the past several quarters has been this normalization of the consumer. Can you just, it sounds like there's the potential of net charge-offs maybe dropping below the end of the range depending on how this goes. I'm just wondering where we stand on that normalization of the consumer and life cycle there. Is there still a potential of, you know, some of those losses taking higher? Or has that, you know, addressing the FICO scores on that kind of contains that back more towards the normal end of the range? Just trying to kind of frame where we are in what we've been talking about the past several quarters.
Lidio Soriano: I think as we mentioned in the prepared remarks, we're very pleased and very happy with the performance of our loan book this quarter. We also mentioned that given the performance in the first quarter and the outlook for the short-term outlook for our book, we could be in a position to lower the range. However, given the operating environment, the fluidity, uncertainty, we're not changing our estimates. So we echo your positivity in terms of what we see in terms of results for the quarter and outlook for the rest of the year. However, given uncertainty, we're holding off from changing the estimate at this time.
Kelly Motta: Got it. Okay. That's helpful. But maybe stepping back, I think I caught that you reiterated your intermediate-term outlook for, you know, eventually getting to that 14% ROTCE. In order to get there, can you help frame would that take a more substantial return on capital beyond fees? You know, opportunistic share repurchases you have here. I'm just trying to square the, you know, eleven and a half, call it, ROTCE you're at here, versus the improvement you would need to see. Is that fair to say that you would need something a bit beyond just these normal share purchases and kind of at a high level what it takes, what would it take to get there?
Jorge Garcia: Yeah. I mean, I think that, you know, part of the reason of extending and then making that a target, right? And not giving a timeline to that target. It is that it requires us to execute across the entire, let's call it, P&L and balance sheet. Right? It will require us to maintain our focus on deposit growth, our mix of deposits, our expanded NIM, expense controls, strategic decisions, including our capital stack. So it's really all of the above, Kelly, and just goes to the nature of the effort and focus that our management team has to have as active participants in making sure that we make decisions towards that goal.
Kelly Motta: Great. I'll step back. Thank you very much.
Operator: Our next question comes from Paul Cardillo with Evercore ISI. Your line is open. Please go ahead.
Paul Cardillo: Hi. Good morning. Just a second question. Talking about your fee income, do you expect your total fee income to rebound from here after the slight decrease this quarter? And have the mortgage banking income uptick again?
Jorge Garcia: Yeah. We do, as we said in the guidance, expect to finish the year between $155 million to $160 million per quarter when we look at year-end. So that would signify, as you say, a pickup. There is some seasonality in some of those fee lines. You know, for example, transactional accounts, credit cards, you know, we would expect higher activity as the year goes by. Our equity method investments, you know, we would expect them to add to that increase going forward. And then there's also other cyclical fees from our insurance company that get paid some in the second quarter and others in the fourth quarter. So you put that all together, there are levers in our business mix that should help take that off to the levels that we're guiding to.
Paul Cardillo: Perfect. Well, thank you so much.
Jorge Garcia: You're welcome.
Operator: This concludes our Q&A. I'll now hand back to Ignacio Alvarez, CEO, for any final remarks.
Ignacio Alvarez: Once again, thank you. It's been a pleasure working with you, and we appreciate the interest that you have in our company. And while we may not always agree, we always listen. So thank you, and look forward to listening to the next webinar. Take care.
Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
