Popular Inc (BPOP) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2011 Popular Inc. earnings conference call. My name is Kiana, and I will be your operator for today. At this time all participants are in listen-only mode, and later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Enrique Martel, Corporate Communications Manager. Please proceed.

Good afternoon, and thank you for joining us on today's call. Our Chairman and CEO, Richard Carrion, and our CFO, Jorge Junquera, will review our first-quarter results and then answer your questions. They will be joined in the Q&A session by other members of our management team.

Before we start, I would like to remind you that in today's call, we may make forward-looking statements which 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 press release and are detailed in our SEC filings, our financial quarterly release and supplements. You may find today's press release and our SEC filings on our webpage, which you can visit by going to www.popular.com.

I will now turn the call over to Mr. Carrion.

Good afternoon and thank you for joining the call. Please turn to the second slide. For the first quarter, we reported net income of $10 million, which compares with a $227 million loss in the fourth quarter of 2010 and a loss of $85 million in the first quarter of 2010. The results we are reporting today represent Popular's first profitable quarter since 2008.

The actions we took to manage credit were noticeably reflected in this quarter. Our provision for loan losses fell to its lowest level since 2006 while our annualized provision to loan-loss ratio was 1.13%. Net charge-offs at 2.73% of noncovered loans in the quarter fell sharply from the elevated levels reached prior to the reclassification of approximately $1 billion in loans to loans held for sale in the previous quarter.

A clearer picture of the potential of our business is now emerging as we enter what we believe may be the latter stages of the credit cycle on the island, a stable topline income of $500 million, a net interest margin above 4% and lowering credit costs.

In general, this was a good quarter, and we are happy with the results. There are a few things that come under the heading of bad news or things that give us a little heartburn that I will go into.

First, nonperforming loans rose in our commercial and mortgage portfolios in Puerto Rico. These two portfolios are reflecting the prolonged weakness of the economy, and we expect nonperforming loans in both portfolios to remain elevated for the rest of the year.

It is worth noting that new commercial nonperforming inflows in the Puerto Rico book were lower in the first quarter than in the previous quarter, and despite the increase in mortgage delinquencies and foreclosure levels, the reinstatement rate in Puerto Rico remains above 70%, losses remain low. We are certainly moving additional resources to the loss mitigation area.

Secondly, the construction loan sale in Puerto Rico did not close in the first quarter as we originally expected. Given the nature of some of these portfolios and the people we are dealing with, the due diligence process has been more time-consuming than we originally expected. We are working hard to close the deal that makes sense for the corporation during the second quarter, but I'll remind you that these loans are being carried first at fair value since the end of the fourth quarter.

Thirdly, world events and their effect on oil prices could have a significant impact on Puerto Rico due to our high dependency on oil.

On the other hand, there are a number of events that give us cause for optimism. In the first place, Popular is profitable again. Secondly, we continue making progress in our US operations. We sold most of the loans, over 93% of all the loans held for sale in the first quarter at a better than expected price. And we sold most of the remaining portfolio was sold after the quarter ended.

Credit continues to improve at the US bank and we are moving ahead with our rebranding rollout in California and Florida after favorable results in the pilot program in Illinois.

Thirdly, the assets acquired in the FDIC-assisted transaction of Westernbank continue to contribute more than originally expected. Our Puerto Rico operations started the year with a solid performance, producing revenues above $400 million in the first quarter for the third consecutive quarter.

We know there have been a number of significant events in recent quarters, so we will try to give you a roadmap so you can get a clearer picture of the results. For that, please turn to the third slide.

In Puerto Rico, the big item for this quarter was a deferred tax asset charge of approximately $100 million -- I think it was a little under $103 million -- since the marginal corporate tax rate in Puerto Rico was reduced from 39% to 30% as part of the local tax reform. We will of course reap the benefit from a reduced marginal tax rate going forward.

Noticeably absent from this quarter was the $176 million provision charge taken in the fourth quarter of last year that was triggered by the reclassification of approximately $600 million in Puerto Rico construction and commercial loans and $457 million in nonconventional mortgages in the US to loans held for sale. This is divided into $56 million in Puerto Rico and $120 million charge in the US.

Present in both quarters was the income related to the equity appreciation instrument that we issue to the FDIC as part of the Westernbank transaction. The instrument has a strike price of $3.43 and will expire on May 7 of this year. So if the stock price moves above the strike price before that expiration date, we would pay the FDIC the difference multiplied by 25 million.

So the majority of the reclassified nonconventional mortgage loans in the US had a positive impact to first-quarter financials of approximately $16.4 million to the results of operations for the first quarter of 2011, which includes $2.6 million in gain on sale of loans and $13.8 million classified as a reduction to the original write down. The accounting gods have concluded that this makes for an out of period adjustment of $10.7 million.

Now most of the extraordinary items in the quarter were recorded at the corporate level, so I will just go quickly over these and Jorge will touch on some of them and we can discuss any questions you may have during the Q&A.

The sale of our interest in the transaction processing business in the Dominican Republic, which we had agreed to do as part of the EVERTEC transaction, closed during the first quarter which resulted in a $17 million net gain and $31 million cash proceeds for Popular.

We also recorded a pickup of $11.8 million in our 49% investment in EVERTEC during the quarter. EVERTEC had a deferred tax liability, not a tax asset. So $13.8 million of that came as a result of the implementation of the income tax reform we talked about earlier. And we also had another $4.4 million tax benefit related to the income on the EVERTEC sale.

Absent in this quarter was an accrual taken in the fourth quarter of $7.5 million for some of the class action settlements that we've been doing, and we also opted to unwind our transaction processing operations in Venezuela, which was a leftover piece from the EVERTEC transaction at a cost of $8.6 million. We concluded that this was the best option among the alternatives.

We recorded a prepayment penalty of $8 million as we paid off $100 million in senior debt that carried a 13% cost. And we think we will more than make up that cost at the lower rate now.

Trends in the Puerto Rico economy are not yet as positive as we would like. But our outlook has changed. So as you turn to the fourth slide, you will note that the Puerto Rico economic cycle appears to be leveling off.

Regarding the Puerto Rico economy, there are several positive items to report. On the fiscal side, there is a lesser need for cost reductions at the commonwealth government level as it recently announced the fiscal 2012 budget which calls for a small increase in spending. Also for the first time in 28 years, S&P upgraded the general obligation bonds of the Commonwealth last March on the heels of an estimated 70% decline in the structural deficit.

Part of the reason why we feel more optimistic about the economy is the recently passed tax reform, which will add nearly $1 billion annually to consumers' purchasing power. The tax reductions are being funded by a temporary excise tax on certain US manufacturers.

The US economic recovery is expected to mainly benefit the manufacturing and tourism sectors. And of the nearly $70 billion in exports recorded in the last 12 months, the US economy accounted for approximately 75%. Of the more than one million nonresident tourists that registered in Puerto Rico hotels in the last year. the great majority came from the US mainland.

One emerging concern is the rise in the price of crude oil, which heightens the need for diversifying energy sources on the island. And to that end, the current administration is moving ahead with its plans of converting oil fire plants into natural gas and promoting the development of alternative energy sources.

On the employment front, the payroll survey shows signs of stabilization in the last couple of months, but good job growth remains a challenge and demand remains limited. So that will probably be expected to keep some pressure on the housing market.

There has been a broad package of incentives that we've discussed before. However, they continue to attract homebuyers into the market. But the high-end market is still under pressure due to excess supply.

We think that structural challenges are still present in Puerto Rico, but there are signs of stabilization, continued fiscal progress and the US economic recovery have definitely improved our outlook.

So with that, let me now turn it over to Jorge.

Thank you, Richard. Let's move to slide five for an overview of our consolidated financial results for the first quarter.

The improvement of our first quarter results was driven primarily by credit. The loan loss provision amounted to $75 million in the quarter compared with $354 million in the previous quarter. The fourth quarter included $176 million related to the reclassification of nearly $1 billion in loans to loans held for sale. The need to cover for loan losses was considerably less when you exclude the extra charge. When compared with the first quarter last year, the provision was down by $165 million.

Net interest income in quarter one amounted to $343 million, a decline of $11 million versus the previous one. The decline was driven by soft loan origination volumes due to the weak local economy. However, the margin improved modestly to 4.15%, building upon the increases of the previous several quarters.

This was partially offset by lower interest expense on interest-bearing deposits by $4 million and long-term debt by $6 million because of the reduced levels of the note issued to the FDIC.

Noninterest income increased by $59 million to $164 million due to the increase in the FDIC indemnity assets and a valuation markdown of the FDIC equity appreciation instrument. In the fourth quarter there were $35 million in charges to noninterest income including the reserve build in the fourth quarter for the mortgage loan recourse in Puerto Rico and a settlement of the rep and warranties recourse in the US.

During the quarter, we also had lower operating expenses by $70 million, mainly due to a decrease in OREO expense, a general reduction in business expenses and lower provision for unfunded commitments. The decrease in expenses with the previous quarter is also widened by the fact that during the fourth quarter, several significant events were expensed at that time.

Expenses are down $6 million from the first quarter of last year, which preceded the FDIC assisted transaction in April of 2010.

With our credit issues lessening in intensity, the strength of our Puerto Rico franchise is becoming more evident despite a weak economy.

Please turn to slide six for an overview of our Puerto Rico business. Gross revenues in Puerto Rico amounted to $417 million in the first quarter, up $6 million from the previous quarter. Net income amounted to $4 million for the quarter compared with net loss with a net loss of $23 million in the previous one. Excluding the deferred tax asset charge, the Puerto Rico business earned over $100 million in the first quarter.

Net interest income was relatively flat at $295 million compared with $303 million in the fourth quarter. Our margin improved, and we believe there is still more room for improvement in our cost of deposits on the island. Our average loan yield in Puerto Rico, 6.95% during the first quarter, compares favorably with our peers.

Operating expenses decreased by $43 million to $70 million (sic -- see accompanying slides) due to a reduced provision for unused commitments and lower pension, professional fees and advertising expenses.

The loan loss provision, including covered loans, fell by $130 million to $67 million on a linked-quarter basis due primarily to a special provision of $56 million added in quarter four. The addition of covered loans from the FDIC assisted transaction has helped offset lower loan volumes in the rest of our portfolios except the mortgage portfolio. The experience of our management team will be critical in solidifying the long-term relationships that we have maintained among those attained in the Westernbank transaction.

We have also used our strong capital position to make opportunistic purchases of performing loans from other financial institutions. In the first quarter, we made an intra-bank purchased of $236 million in residential mortgages. We are comfortable with this portfolio and expect further growth through originations or additional purchase opportunities.

Let us turn to slide seven to review our US bank. Gross revenues at the US bank were steady at $92 million for the quarter compared with $87 million in the previous one. The bank recaptured $14 million in provision during the quarter after the price for the sale of the non-conventional mortgage portfolio came in higher than expected, resulting in a provision of just $8 million in the quarter.

Excluding the impact of the loan sale, the provision fell from $38 million to $22 million in the quarter.

We are encouraged by the results of the rebranding pilot program in Illinois. We are increasing our appeal to broader demographic groups with the identity change from Banco Popular to Popular Community Bank. We will roll out the rebranding during the third quarter in California and Florida after the favorable results in Illinois.

Please turn to slide eight to review credit performance and the allowance for the first quarter.

Excluding loans held for sale, construction and consumer nonperforming loans declined in the first quarter but were more than offset by a rise in commercial and mortgage NPLs in Puerto Rico. NPLs increased by $64 million (sic -- see accompanying slides) on a linked-quarter basis.

When compared with the previous quarter, the inflow of commercial and construction nonperforming loans decreased during quarter one in both regions with a 24% reduction in Puerto Rico and a 55% reduction in the US.

Lower losses and improved credit metrics led to a drawdown in the reserved for the third consecutive quarter as we will move away from the peak of our credit issues. Excluding covered loans, our allowance for loan losses was drawn down by $66 million in quarter one. The loan loss provision was $60 million while charge-offs amounted to $139 million. Keep in mind that this number reflects a benefit of almost $14 million related to the non-conventional mortgage sale.

Excluding covered loans, the allowance for loan loss ratio stood at 3.50% (sic -- see accompanying slides) as of March 31 versus 3.83% in the fourth quarter.

Despite the favorable trends in credit, the economy in our main market remains stagnant as reflected in the unemployment level and negative real growth. Yet the chart at the bottom of the slide shows the progress in our credit metrics, suggesting that we may be turning the corner on asset quality. We need a further stabilization of the economy to maintain this trend.

Although total nonperforming loans to loans are far from a normalized level, we feel comfortable with the level of reserve balances due to the decline in the net charge-offs and lower inflows of nonperforming loans.

We are well reserved and well-capitalized. By turning to slide nine, we will briefly review our capital ratios.

After successfully completing our capital plan in 2010, the main point I would like to make is that not only do we now have robust levels of capital, but we are again generating capital internally.

As of March 31, our total capital ratio reached 16.5%. Tier 1 capital exceeded 15% and Tier 1 common amounted to 11.5%. We exceeded the level of capital mandated by Basel III.

Having a strong capital base permits us to consider a wide array of options to improve the profitability of our business.

And with that, I would like to turn it over to Richard for a recap and final comments.

Thank you, Jorge. If you please turn to the last slide, I'll wrap it up by reviewing the key takeaways from this quarter and key issues to focus on in the coming months.

Credit metrics such as net charge-offs and NPL inflows are generally improving and revealing the earnings potential of the franchise. One of the steps taken this quarter was the sale of the US non-conventional mortgages at a better-than-expected price. We have yet to complete the sale of the Puerto Rico construction and commercial loans. We will work on this during the quarter, hopefully get to a transaction that makes sense.

We will continue to closely monitor the performance of our Puerto Rico mortgage and commercial portfolios. We have buttressed the loss mitigation groups here, and while the economic outlook for Puerto Rico is better than it was for the two previous years, we are not yet seeing positive growth.

In the US, credit continues to improve amid more favorable economic conditions, and we are concentrated on growing our community banking business within our footprint as we seek for more ways to improve our balance sheet. So we will roll out the rebranding in Florida and California during the third quarter since we were encouraged by what we've seen in Illinois.

Popular had a good start to the year. There is a lot we still need to get done. The bottom line is that we are making money again, and that is a habit we want to keep.

So we thank you for your attention, and I would like to open up the call now for questions.

(Operator Instructions) Ken Zerbe, Morgan Stanley.

I guess my first question just in terms of profitability understanding that there is probably a couple of cents of net unusual items in the results. It still seems that you had a good quarter. Would you anticipate that you could actually maintain profitability in both the US and Puerto Rico by quarter going forward in 2011?

Clearly the provision is going to be the key to that, Ken. The level of the provision as you mentioned, there is a lot of noise here, but yes, we do think we can certainly maintain profitability for the rest of the year.

Including in the US?

The US I don't think so. I think we will be in a profitable status by the end of the year but I'm not sure we can commit to being profitable for the whole -- for 2011.

Understood. Okay. The other question I had, is there a way to I guess quantify the potential size of the intra market loan purchases that you did in Puerto Rico? How much of that is still available for you to actually purchase from other banks, or is this more of a one-off item?

No, it has been more like two offs. We did one in the first quarter, and we've done one so far in the second quarter. So I think it adds up to a little over $500 million. And we will look at them as they, as the opportunities are available. We will look at them if they make sense, we will go ahead and do it. I think that is the key thing.

I think the overarching theme here is that we have the machinery to add these assets with very little marginal cost from an operational point of view. So if they make sense, we are going to go ahead and do them.

And then the other question -- the last question I had, just on Western, is there a way to quantify the impact that Western has had on your net interest margin?

On net interest margin, I think there is -- you will have to impute some kind of a cost because we have the FDIC note, but that doesn't cover the totality of the assets. So I guess you can compute from what -- the level and yield statement that we put in the release and clearly we will put in the Q. You can get to a level there, but it is in the range of $70 million to $80 million a quarter.

Okay, great. Thank you.

Brett Scheiner, FBR.

Congrats on the quarter. A couple quick questions. First, the OpEx number here seems lower than I had expected. Is that something that we can view as recurring?

Again, there are a couple of things that I think Jorge mentioned. One is you are comparing to a quarter that is probably higher than normal in the fourth quarter we had a lot of stuff in there. And Q1 came in a little lower than we frankly expected.

So I wouldn't multiply it by four, but we do continue to keep a close lid on expenses and are trying to get more efficient.

Okay, then two other quick questions. Can you talk about the deterioration in Western loans? Is that something that is very contained? I know it was small but based on the write-up last quarter, I'm just curious about those dynamics.

Again, you have to now do this quarterly. You have to take a look at this quarterly. I think the big change was what you saw in the fourth quarter. Now it is just tweaking these things and frankly, bear in mind that with that additional provision, there is an 80% charge or revenue item that comes associated with that in the accretion of the FDIC indemnity asset. So those kinds of swings are going to be dampened by the fact that 80% of those losses are covered.

Okay, then finally, it looks like in the average balance sheet, non-interest-bearing funding was down from $5.1 billion last quarter to $4.3 billion. Can you talk about the reasons behind that?

No, I think in demand deposits are typically higher during the fourth quarter. What I think that figure that is there is -- if you are talking about the level in yields, that is just a plug to match the assets. There is more noninterest-bearing stuff than what is on that sheet. You will be able to sue the full balance sheet when the Q comes out, but we just match -- that is a plug figure to match the assets to the deposits and liabilities. But there is more noninterest-bearing than what is shown there.

Actually one last question. We talk about reserve bleed going forward, meaning do you think charge-offs will be in excess of provision?

I think they will. And that is what we are saying here that we will be taking some of that reserve build during the next few quarters. Our reserve still stands at a pretty high level. We are comfortable with that level and as long as we see these credit trends improving, we will bring the level of the reserve down and it will not match the charge-offs.

Thank you very much.

Joe Gladue, B. Riley.

Good afternoon. Let me I guess stick with asset quality for a minute. Just wondering if you could touch on maybe some of the trends particularly in the commercial and mortgage loan areas that saw the increases in nonperformers in the first quarter. Just wondering what the delinquency trends in those two areas are? Do you see any stabilization?

Okay, well in the C&I loans, I think it is general. We can't point to any specific portion of the portfolio. It is general and I think it reflects the economic situation. We did see lower inflows, and that is a trend we want to keep monitoring.

In the mortgage side, Joe, you are familiar with mortgages in Puerto Rico. You know that while our delinquency rate is considerably higher than on the mainland, our loss rate is considerably lower. And I think we've talked about this many times in the past.

We still see the same things that -- in terms of the behavior. But we have seen an increase, and even though 70% of the foreclosures we end up reinstating the loans, it is just built up and we are watching it closely. We've put additional people in that loss mitigation area, and it is just something we bring up because we are tracking it and want you to be aware of it.

Okay, and I guess on the housing front, I guess the housing incentive in Puerto Rico is scheduled to end in June. I guess I wonder if you could touch on the impact of that? Are you seeing any increased activity there, and is it helping how is it affecting unsold inventory?

We definitely have seen a big impact there, and we've seen a very positive attitude on the part of the government. And we've seen a lot of buyers step up as I think was announced we are also planning an auction on the weekend of May 21. We are encouraged by the number of people that have been out there looking at the properties that are going to be auctioned.

So there is a lot of inventory that is going to be worked out. How much of that has been aided we will probably have to wait until the results are in for June 30 to get an idea. But it has been a big help. Without a doubt, it has been a big help.

Okay. Let me ask a question or two on the net interest margin. Just you did prepay some of the medium-term notes and everything. What impact do you think that will have on the net interest margin, and are there any other opportunities for pre-paying or reducing any other high-cost funding?

Well, you know, that particular tradition was $100 million. There was about a year left and we paid an $8 million prepayment penalty. You can do the math. We think we will get $4 million of it back over the next 12 months, but that is fairly easy arithmetic for you guys.

But I don't know of any biggies out there in terms of holding company that we can do, frankly. We have seen costs on both the loan side and the deposit side begin to rationalize a bit, even though that never is as much as we'd like or as quickly as we would like.

Okay. I'll ask one last question. That is just on loan demand in general, are you seeing any I guess pickup in demand or interest either in Puerto Rico or in -- on the mainland that I guess --?

I think that remains the biggest challenge overall both in the mainland and here is the asset generation piece is always the tough challenge. We have seen a level off, so we are not -- obviously we've supplemented some of the new loan generation by a couple of asset purchases but we have seen the portfolios begin to level off. We have yet to see increases in the size of the portfolio. But hopefully, we have we have seen a good pipeline here locally. We'll have to see how much of that can stick to the ribs.

All right. Well, thank you.

Bimal Shah, Waterstone Capital.

Good afternoon. Thanks for taking my question. Your mortgage NPLs in Puerto Rico has been increasing and it has increased this quarter while some of the other players are seeing a decline in the mortgage NPLs. Can you explain the difference?

Some of the other players in Puerto Rico have seen a decline?

Yes.

That I haven't seen. And frankly I am surprised that is the case. I mean we have -- we are a big player in the market, but I don't see that our experience should deviate too much from the rest of the market. So that surprises me somewhat.

Oh, okay. I was just -- looking at --

No, no particular -- I don't have any reason because -- any answer for that because I just don't -- can't explain. I don't know Jorge if you want to jump in.

I'm unaware that anybody has reversed that trend yet. They are still rising because of economic conditions, and the high level of inventory of housing and the pressure on prices. So that trend continues slowly but manageable but still going up as we experienced in this past quarter.

But I don't know of any company -- I know some companies have been a little or -- quite active in modifying loans, but not to the extent that they've been able to reverse that trend.

And what has been your experience with loan modifications?

Good so far, very good. It is just they are time consuming to do and that is why we are adding more people there. Time-consuming because there is a thicket of different plans and regulations that you have to conform to. And it is quite a complex process. We have a ton of people looking at it, a couple of consulting groups looking at it to see how we can make it more efficient. But it is has quite a bit of complexity in there.

And last question, you talked about reinstatement process and you're saying 70% of your foreclosures end up being -- in the loan being reinstated. Can you explain that?

We've tried to do that in the past. Part of the reason, frankly, is because of the difference in the foreclosure process in Puerto Rico and the amount of time it takes to foreclose on a property that the people find that it is better to reinstate the loan. They have time to come and reinstate the loan.

Second, there is not much of a rental market in Puerto Rico. So that we like to joke if you don't pay your mortgage you are going to have to move in with your parents or move in with your kids. So that -- you really don't have too much in the way of alternate housing. So you generally find somebody to help you with and you get reinstated.

Great. Thank you.

(Operator Instructions) Brett Scheiner.

Just a quick follow-up. Can you give the timing of the $100 million debt prepay and the FDIC note at least the non-principal portion? Was it early in the quarter or did you see the full benefit?

It was late in the quarter -- the prepayment of the -- yes, pretty late in the quarter. So we will get the benefit in .

It was in March definitely.

Yes, it was in March.

So the benefit mostly has not gone through?

No, no, we took the $8 million charge. We will see the benefit over the next 12 months.

Right, I just meant on interest expense. Okay. Thank you very much.

Derek Hewitt, KBW.

Good afternoon. You guys provided the inflows for commercial and construction loans, but could you provide that same NPL inflow for the first quarter? I think it was roughly $580 million last quarter.

We have our risk management guy rifling through his papers here, but at any rate, it will definitely be out for the Q. Difficult to notice from the part that was shown.

We just put those two out there because those two are the highest visibility. There is no major difference in the other parts of the portfolio.

Okay. And then also could you guys comment on your intentions regarding TARP at this point since you are expecting to be profitable on a consolidated basis going forward? Now are you guys still looking to raise some sort of Tier 2 capital to redeem TARP? And I guess if so, will it be dollar for dollar, or would you use some excess liquidity to maybe shrink the balance sheet a little bit?

We don't have any specific plans yet for TARP, and I think we want to put in a couple of quarters of good, solid growth here and back to profitability kind of quarters and see some credit trends before we start performing any plans on that front.

I don't think -- I think time is probably our friend here in terms of the kinds of deals we've been seeing recently. So we will take our time and revisit that once we have a couple of good quarters.

Okay, great. And then finally, how are you guys thinking about the DTA in the North America franchise now that the North America at least for this quarter returned to profitability?

Clearly that is something that is out there. It is completely written off, so when you look at these numbers there is really the tax effect is nothing because it has all been written off. So hopefully if we are in a good position by the end of the year, I think next year we will be in a position to better reevaluate whether it is worth bringing some of that back onto the books.

As you know, you have to make an analysis of how much you think you can take in the coming years based on your profitability so we will have to put something together. But I guess suffice it to say most of us think there will be some value there.

Okay, all right. Great. Thank you very much.

[Jamie Dwaren], private investor.

Yes, I wonder if you could -- gentlemen, thank you very much for your report -- could speak a little bit more about the rebranding in Illinois and what prospects you think that will afford in Florida and California?

We have Carlos Vasquez here who is President of our US Operations. I will let him take that. Suffice it to say that the intent here is that we don't close our doors to any potential customers. But I will let Carlos handle that.

We looked at a number of different metrics when we rebranded the bank in Illinois. The most important ones were new account openings by non-Hispanic clients and the balance as of those new accounts. We were also obviously tracking continued account openings by our Hispanic clients and the result in Illinois was very positive trend in terms of new account openings of non-Hispanic clients and no negative effect at the time in our research about California from Hispanic clients.

So we believe that the rebranding is doing its -- it's fulfilling its intention which is to make the bank more attractive to all kinds of clients, which is our goal.

With the positive result in Illinois then we have moved forward with the process to do the rebranding in the California and Florida markets. That process takes a little bit of time but it should be completed by the end of the summer and the rebranding should be launched in the first week in August.

Thank you very much.

We have no further questions at this time. I will now turn it over to Mr. Richard Carrion, for closing remarks.

Again folks, thank you very much for being here. As you can tell, we feel good that the corporation is profitable again. And as I said earlier, it is a habit we want to continue. So thank you all for your attention.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.