First BanCorp (FBP) 2018 Q3 法說會逐字稿

Good day, and welcome to the FirstBank Third Quarter 2018 Results Conference Call and Webcast. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Mr. John Pelling, Investor Relations Officer. Please go ahead.

Thank you, Keith. Good morning, everyone, and thank you for joining First BanCorp's conference call and webcast to discuss the company's financial results for the third quarter 2018. Joining you today from FBP are Aurelio Alemán, 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 forward-looking statements such as projections of revenue, earnings and capital structure as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from the forward-looking statements made due to important factors described in the company's latest SEC filings.

The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the webcast presentation or press release issued by First BanCorp, you can access them at our website at firstbankpr.com.

At this point, I'd like to turn the call over to Aurelio Alemán, our CEO. Aurelio?

Thank you, John. Good morning, everyone, and thank you for joining us to discuss the third quarter 2018 results. We are very pleased to report another quarter of positive profitability and actually more importantly, the solid core trends of the franchise. Our net income of $36 million was up 17% from the prior quarter and our pre-tax, pre-provision for the quarter, again, at $60 million.

Importantly, we actually progressed in 3 critical objectives: number one, we continue to de-risk our balance sheet; number two, we achieved growth in the loan portfolio; and number three, we continue to optimize our deposit mix, which is a very important component.

We have to say that the Puerto Rico economy continues to show improvement in key economic metrics and rebuilding activities are definitely enabling our growth opportunities. Year-to-date, economic trends for the most part are looking better than before the storm. Unemployment rate is improving, gasoline consumption is improving, cement sales are up, sales tax collections are up, retail sales are up, so there is a lot of components here that demonstrate that the core economy is moving in the right direction.

The new fiscal plan approved earlier this week shows an increase of $20 billion in disaster relief and reconstruction funding. Now the projection suggests around $82 billion, which will support the island economy over the next years. While we bill this as a positive, we do expect a slower pace of -- on the inflow of funds. That's why because we believe the reconstruction activities ahead would actually demand more time for execution, obviously, due to complexity and compliance requirements, but the funds will be deployed basically over the next 1 to 5 years.

Our portfolio grew this quarter. I think it's important to highlight that that was achieved even with meaningful organic reduction in the resolution of nonperforming assets. The performing loan in Puerto Rico by itself grew approximately $107 million and over $50 million in Florida.

There is definitely -- we continue to see increased investor demand. And when we look at -- when we take into consideration the progress on reducing the NPA, definitely the excellent work done by our credit and special asset teams and the investor demand led to the nonperforming asset reduction of $98.6 million for this quarter. NPA declined 16% and now represent 4.3% of assets. Recognizing this continues to be a priority, and there is still work ahead of us to continue improving this metric.

Portfolio delinquencies are also positive. They continue to sustain stable trend for the third quarter in a row after the hurricane. And definitely our de-risking strategies continue to get traction driven by investor interest and demand.

During the quarter, we achieved sales and we also moved some additional loans to held for sale to continue our de-risking path. Capital continues to build now, 3 of the 4 key capital ratios are now above 20%.

Please now move to the loan portfolio slide on Slide 6. As reflected in the bar chart on the right, the increasing trend in origination activity continues if we go back to the fourth quarter of 2017. And now we see the third quarter of 2018, every quarter we've been able to show further improvement and we actually expect this trend to be sustained.

Loan originations and renewals were up in all major categories. When you look at the chart, commercial and construction increased to $423 million, consumer and auto loan increased to $316 million. That already exceeds pre-hurricane levels. And residential mortgage reached $142 million.

Our Florida region continues to contribute with strong origination activity to this overall growth. The overall corporation loan portfolio increased $61 million this quarter, but we also have to consider that this was impacted by a $30 million reduction in our mortgage book, driven by our focus on conforming mortgage origination and actually sales to the secondary market.

Please let's move now to deposits, Slide 7. Core deposits were up slightly this quarter. Excluding government, they were relatively flat. We actually continue to focus on optimizing the use of excess liquidity and at the same time improve our mix. If we look at the progress over the past year since the hurricane, our core deposits grew approximately $1 billion or 13% over the past 4 quarters. We have materially transformed the makeup of our deposit mix with noninterest bearing over 25% of our deposits and broker now reduced to 7%.

Definitely deposit beta still remain low in Puerto Rico. Our cost of total deposit, excluding broker, was 64 basis points, up only 1 basis point from prior quarter.

Now let's move to Slide 8. Capital levels, as I said, continue to get stronger. Unfortunately, at this point, I still do not have any additional information on capital actions announcements. But obviously, it remains a top priority for our management team and the board. And we do expect to provide more information on our capital plan during the initial part of 2019.

So I have some additional remarks before turning the call to Orlando. October marks our 70th anniversary as a Puerto Rico Corporation. It also marks our 25th anniversary as a New York Stock Exchange listed company. This has been quite a journey. We are very pleased with the corporation performance and of what our team has been able to accomplish. We will be ringing the closing bell at the New York Stock Exchange to celebrate these milestones on October 31.

Also, I want to highlight, September marked the 1-year anniversary of the devastating storms that impacted our market. And I have to say that we are very pleased with the progress achieved and the contribution to the recovery that we have made. Over the past year, our dedicated employees volunteered significant hours to support our communities.

We originated and renewed approximately $30 billion (sic) [$3 billion] in loans and credit facilities. We grew our core deposit by $1 billion. We have reduced our nonperforming asset by 18%. And today our capital exceeds $1.9 billion. Every metric has moved in the positive direction, and capital continues to build. With the economic recovery still underway, we are optimistic about growth opportunities as our franchise continue to deliver solid operating results.

Needless to say, there are still fiscal and economic challenges ahead of us and external factors that we must continue to monitor closely. Obviously, one of them is the fiscal plan and its execution to achieve final fiscal stability in the island.

There are also ongoing discussions on the proposal about tax reform. We're monitoring that -- those discussions. We're also monitoring the post-hurricane performance of insurance companies because they are supporting our market. We have to closely monitor the pace of inflows into -- of the construction of funds. And I think importantly, there is a -- we are closely working with the Opportunity Zone initiative, which we believe could be significant for the reconstruction of Puerto Rico.

So with that, I will turn the call over to Orlando to go over the highlights, and we'll come back later for questions.

Good morning, everyone. So I'll touch on some of the key highlights that are more detailed on the earnings release we sent out this morning. So Aurelio mentioned the second quarter posted a net income of $36 million or $0.16 a share, which compares with $31 million or $0.14 on the second quarter.

One of the key drivers was an $8 million reduction in the provision for loan losses that came down from $19.5 million in the second quarter to $11.5 million this quarter. The provision includes a $10 million charge, which is tied to nonperforming commercial loans that were transferred to held for sale and also reflects a $2.8 million reserve release from the allowance -- the qualitative allowance for storm-related losses.

As of September 30, that hurricane-related allowance stands at about $24.9 million, which includes the effect of that reserve release of $2.8 million and $14.5 million, which is related to charge-offs and specific risks that have been identified in the portfolio and specific reserves have been allocated.

Taxes for the quarter remain at basically the same levels as before. The effective tax rate was 25.7%, which is the rate we expect to have for the year.

Also showing improvement was the net interest income that grew $2 million in the quarter. It's driven mainly by the increase in the consumer portfolio. So as Aurelio mentioned, we had a significant improvement in the auto and personal loans, which carry higher yields. And we also achieved reductions in interest expense from repayment of broker CDs, repayments of repo agreements and some FHLB advances, which is part of the use of the excess liquidity we've had over the last year.

Clearly, improving and helping the margin that grew 5 basis points of $454 million was the change in mix in deposits that we've seen over the year as noninterest-bearing accounts have grown significantly as a percentage of total deposits.

Overall, deposit cost, Aurelio also mentioned, it's 64 basis points. It's only $0.01 up. Betas in Puerto Rico have remained very stable. Even though we're seeing a little bit of pressure on some of the time deposits, that the overall doesn't show and with significant liquidity reducing the need of wholesale funding, which clearly has been more volatile, has helped improve the margin.

On other income components, the key thing there was that noninterest in general was down $2 million, which was largely due to a $2.7 million loss we had on the sale of 2 nonperforming commercial and construction loans. We -- of the 2 loans, 1 was sold at a small gain and the other at a loss.

The other items were we had -- we've sold the facilities of one of our -- a relocated branch we had and made a $500,000 gain and received $500,000 in insurance proceeds this quarter, that were booked as part of the other noninterest income components.

The other items were fairly in line, a slight improvement in the case of services and deposits as we have grown the noninterest-bearing accounts.

Expenses for the quarter were increased slightly from last quarter. The quarter includes approximately $600,000 in consulting expenses that were incurred in model validations and special review of the mortgage servicing functions. These are not expenses that recur every quarter, so that affected the results. We also had some increases in attorney's fees, which were approximately $500,000 as we have increased foreclosure actions related to the mortgage servicing portfolio.

You might recall that the government entities, meaning Ginnie and Fannie, put a moratorium on foreclosure efforts and that moratorium expired at the end of the second quarter, beginning of the third quarter. So we reinitiated some of the efforts with a significant amount involved in there. Also saw some increases on occupancy costs, mostly electricity and some items that have variability from quarter-to-quarter.

The other large improvement we saw in the quarter, which Aurelio made reference to also, was significant reduction in nonperforming that were down $98.6 million. Now nonperformings stand at 4.3% and it's a total of 500 -- almost $523 million. This improvement includes sales of $25 million on nonperforming.

There were $44 million of loans restored for accrual status, all collected. We did collect -- in the commercial portfolio, we did collect about $8 million. And we had reductions in -- of $8 million in OREO properties as the inflows exceed the amounts of -- I mean, the sales have exceeded the amount of inflows we've had. And at the end of the presentation, you can see some details on the inflows and outflows for the quarter.

Inflows were down $73 million, largely related to a 2k large cases that migrated -- commercial cases that migrated last quarter, which were approximately $70 million, but we also saw reductions in inflows of $4 million in consumer portfolio.

Early-stage delinquency are slightly down from second quarter and continue to show the same pattern we've seen throughout the year after the hurricane, which has been consistently lower than what we had prior to hurricane levels.

Charge-offs for the quarter were higher, were $33 million, which is 1.52% of average loans compared to the $23 million we had last quarter. It was driven by $12.5 million of charge-offs that we took on the commercial loans that were transferred to held for sale. This represents our 57 basis points on average loans out of the 152 increase. So we'd have been just under 1 considering the other components.

The allowance still remains at high level at 2.3% of loans and represents our 59% of nonperforming. And as we have disclosed in the past, the carrying amount of commercial nonperforming is at about $0.517 per dollar, which is a reflection of the charges and reserves we have on these loans.

With that, we shared some of the key components. I'll open up the call for questions.

(Operator Instructions) And the first question comes from Ebrahim Poonawala with Bank of America Merrill Lynch.

So just first, if we can talk about the NPA's decline. So they went down about 70 basis points this quarter. Aurelio, can we talk about in terms of how quickly you think this can get to 3% or lower? And it seems like just there is a sense that getting below 3% may be one of the last opportunities to get capital return going. So if you can talk about just the ability to get to 3% the interest that you're seeing in your assets and how that probably will play into capital return outlook?

Yes. I think first of all, there is no specific number, make sure that we're clear that there is a correlation, but there is no specific number. Remember the overall relationship of excess capital is also a consideration here. So when you look at the risk profile, it's two sides of the equation. So capital also counts.

With that, I think it's important to -- obviously, it's a function of inflows and outflows as we all know. We're optimistic that the pace that we will be able to show is positive, the way things look today. And based on investor interest, definitely some point next year, we expect to be at that mark that you mentioned.

Obviously, we're working towards expediting as we could with reasonable judgment and use of capital. But it's a very interactive process. And we maximize the value of the assets while we protect our capital. So -- but definitely, it's a priority for us to continue achieving progress here.

Got it. And I guess, just tied to the comments you made on asset quality, provisioning, as we think about going forward, is $10 million to $12 million is what you're thinking? Or could it be lower? Or does it go back to the $20 million run rate that we've been having in the first part of the year?

Yes. It's also -- remember, that's a function of migration in. So if things continue the way they are, it should be on the lower end of your estimate, not on the higher end. But it's a function of migration in. It was -- the migration was really good for the quarter and the outflows were really good for the quarter. So we see positive signs of that that could support the trend.

Got it. And one for Orlando, if I can. Just in terms of expenses, I think we had been operating with this expectation for $85 million below ex-OREO expenses. Is that still the right way to think about expense outlook?

Yes, we think so. This quarter clearly was about $1 million higher than that. The -- there were a few things like the mortgage servicing special analysis we've done to try to keep our operations as efficient as possible, considering what's the average size of the loans in Puerto Rico for servicing and some of the expenses incurred in model validations.

We do have additional expenses for a while that at this stage we're dealing with CECL implementation and a leasing implementation and some other items that take -- there are ongoing costs on those. But at the beginning, you have a higher level of support from third parties in the process, which put some pressure on the expense side. But we continue to push for that same kind of indication of the $85 million, excluding the OREOs.

And the next question comes from Alex Twerdahl with Sandler O'Neill.

A couple other questions on the credit quality and just kind of -- to continue the conversation on the provision. You talked about the provision being more dependent on the migration trends that you're seeing.

I think, last quarter maybe it was, that you kind of told us the size, the number of loans that were in that sort of inversely classified bucket that were of any size and I think the number was pretty small. Can you just give us an update on sort of how the -- sort of the complexion of the adversity classified bucket looks and kind of like what would be reasonable to expect for inflows in the future?

Let me -- yes -- obviously, we haven't -- we don't disclose that much detail, but definitely if we look at what we had at hand, 2 years ago, 1 year ago and what we have at hand today, definitely there is less significant loans in that classification with smaller size that could be a potential. But we still have a couple of live relationships that we continue to monitor. But probably 2 years ago, they were in the 20s, not in the couple.

So definitely the forward-looking migration are not only because of the environment and the net capacity, but from what is in the portfolio today, it should be less. Obviously, we have to take into consideration that interest rates are coming up. And we also look at the sensitivity to our borrowers to that. But taken into -- take into consideration, the cleanup that we had achieved on the portfolio, the remaining large cases are minimal now.

There hasn't been any -- as you saw adversely classified came down, but in the quarter, as nonperforming have gone out and there haven't been any significant things migrating to adversely classified, and that's why it's been consistent on the impact on the provisioning (multiple speakers).

Yes.

Great. And then just on the other side of the NPA reduction calculation, I think you've kind of highlighted the OREO and the held for sale is the low-hanging fruit. Is that still the case? And how long generally from the demand that you're seeing today would you expect some of the held-for-sale loans to kind of stay in the held-for-sale bucket?

I think we -- some of the things that we were able to move out in the quarter were actually moving early in the year or in the second quarter. So it's really 1 to 2 quarters in some of those, the way we're seeing things now, yes.

And we moved more this quarter, again, driven by the same interest that we moved last quarter. There is incoming inquiries on asset. There is prices that are closer to our expectation. Again, there is a cost of expediting the resolution of an asset. And some assets we were not moving because we are working themselves and we're getting more value by working them out.

And so it's a very interactive process. And I think, obviously, the fact that we're moving things over for sale is that we believe we have certainty on -- certain level of certainty on moving the asset out of the balance sheet. And that's the reason we take the action of moving them.

Got it. And then just a little bit more color on the charge-offs in the consumer book associated with the hurricane that you took this quarter. Is that related to a specific time period from the end of the moratoriums? I mean, is that something -- I think we kind of expected the charge-offs to pick up at some point following the hurricane, but just is this something that's kind of a onetime to the third quarter? Or should we expect additional cleanup in the fourth quarter?

It was a bigger number in this quarter related to the hurricane only because when you look at the charge-offs for the quarter included a number of loans -- on the consumer side, you realize that it's more of a gray area at times.

But the charge-offs that we have for the quarter including -- included items like on the credit card portfolio that we saw were occurring before the hurricane. And once the moratoriums expired, we saw some of those loans or a chunk of these loans start moving from bucket to bucket every month. And typically we charge off credit cards at 180 days, so that was clear.

And other -- in some of the other portfolios in the auto and personal loans portfolio, it's also where cases that were occurring before the hurricane. And once the moratorium expired, it takes a little bit of time before you see whether in fact this is going to be a pattern and eventually it showed up.

There could be some others related, but I don't think that -- because of the time frames of the 6 months' time frames after the 6 to 8 months depending on the portfolio after the moratorium expiration, it gives you a pretty good idea of the relationship of those charge-offs with the hurricane impact.

Yes, but there's really nothing in the horizon that lays that as a trend when you look at early delinquencies and NPA levels of those portfolios.

And the next question comes from Joe Gladue with Merion Capital Group.

My question is, I guess, more about loan yields and interest rate sensitivity. I'm just looking at the average yields on the loan portfolio and all of the yields on the largest segments in the portfolio were either flat or down in third quarter versus second quarter.

Just wondering if you could talk a little bit about the percentage of the -- remind us of the percentage of the portfolio that's adjustable or variable rate. And talk about interest sensitivity and what you're seeing -- or what do you expect as far as loan yields going forward?

So the -- it all depends on the portfolios as you mentioned. If you're looking at the mortgage portfolio, clearly, the longer end of the curve hasn't changed that much, so we haven't seen that much change in terms of portfolio pricing. And what we are originating, it's a higher percentage of conforming paper that has been sold. So that number at this level is not changing much.

On the consumer -- on the commercial side, we do have an amount of loans that are floating, about 2/3 of the portfolio is floating. And we should see some improvements, but there is a relationship of what's performing and nonperforming. And the growth and repayments, even though we've grown, we continue to see some levels of repayments on the portfolios with the excess cash people have.

This quarter, we had about $32 million of repayments of loans that were large components. So that affects the margin. But clearly with rates going up, we've seen some pickup on the floating rate portfolio of the commercial side with a clear -- now customers want fixed rate loans, so you have to deal with that, as we can understand.

The personal -- the auto and personal loans portfolio, they are a higher yield portfolio. They will move, but not at the same pace. You don't the same pace because of the rate already. So the fact that LIBOR goes up 25 basis -- I mean, prime goes up 25 basis points, it's not going to move them immediately on the auto and personal loans. So it's going to be more of a gradual kind of increase on those portfolios.

And also -- it's also that mix is important, where we grow in the portfolio. The quarter move on the loan yield from $641 million to $643 million. We go back a year and it was $609 million. So you see the repricing effect of the base rate.

But as Orlando said, if we grow more in the consumer, which is more fixed, we grow more in CRE, which is also some of them are fixed versus the variable compounding of commercials. So on mortgage, it's a lower yield also.

So we're not growing in the mortgage, as you saw the movement in the loan portfolio. We're trying to focus actually on the gain of sale of conforming mortgages in that component.

And just generally on the commercial portfolio, are new loan originations -- I take it they are being put on at higher yields than sort of the average portfolio yield.

That's a correct assessment. Obviously, new originations are at current rates, yes.

And the next question comes from Brett Rabatin with Piper Jaffray.

Wanted to talk about deposits for a second and just kind of go back over the trends we saw in 3Q with balances. And then what your plan might be for maybe continued atrophy of the brokered CDs? And how you're thinking about managing liquidity over the next few quarters?

And I guess I'm just also kind of curious what you're seeing from depositors. Are they using some of their cash? Or maybe just give us a little more flavor for kind of the linked quarter trends and flows.

Yes, I think it's going to be -- it's something that is a day-to-day management, very dynamic, what's happening in the market. The inflow of funds, obviously, it's a catalyst, but the timing is unpredictable.

So obviously, we had inflow of funds in the first 6 months of the year. That was significant and that was reflected in the banks. There is still a big inflow of funds on the government side. But we are selectively participating on that component, as they don't really become liquidity because they need collateral. So we're opportunistic on that specific segment.

But as we move on, you know that we've been carrying excess liquidity for some time. So we continue to -- with the objective of reducing broker, improving our noninterest-bearing products with services and products linked to it. And on the CDs, on the certificate of deposits and money markets, we monitor the market and we adjust accordingly.

Obviously, everybody knows that the Puerto Rico betas remain low and the Florida betas are high. So it's really to optimize the 3 regions that we have. It's very dynamic and, as I say, we have to make decisions almost every day based on what we see comes in and goes out.

This quarter was also impacted by -- we had good, good -- we have more accounts, we have more customers here today. We grew customers during the quarter, but we also have some outflows related to some of the insurance money that remain in the accounts based on significant payments and reconstructions on the commercial clients that were still taking place. So that also impacted some of the flow in the quarter.

Our goal is to continue to improve our core. There's going to be increases in the consumer interest-bearing side. And hopefully, we can mitigate some on that with the noninterest-bearing growth. And when you look at it, the growth that we achieved in the quarter was related to the areas of the government deposit structure that we're looking after.

Okay. And then I wanted to talk about loan growth for a minute. I mean, if I think about the loan portfolio, you've kind of been flat for the past 2 years. And I get that the asset quality cleanup may have had part of an impact on that.

But if I think about 2019, is it fair to assume that you guys have to grow? And maybe can you talk about -- is that in Florida, and Puerto Rico is stable? Or can you maybe give us a bit of an outlook for what you're thinking about 2019?

Yes, I did mention it's an important win, obviously, because of our de-risking activity. We -- you also have to look at performing loans growth, how it's moving, that's what I mentioned.

If you look at what happened in the quarter, in Puerto Rico, we grew $107 million in the performing book, which obviously that gets kind of hidden because of the fact that we sold notes and we got payments on NPAs and we got also some charges.

So obviously, the cleanup will continue to impact the overall portfolio. What I think, you should monitor where -- how the performing book is moving because, obviously, we're starting the quarter with $150 million more of loans than we started the prior quarter, when you look at loans that will generate revenue. So that's a metric that we continue to monitor.

We expect that we will continue to achieve the trend, and obviously, the set of improving our performing book. So we see enough pipeline and activity for that trend to continue. Some of the deals are -- take more time than others, but, obviously, some of these deals that we're looking today should be an opportunity of growth for 2019. But the way we see the pipelines, most of the growth actually should happen in Puerto Rico, yes.

Okay. And then maybe just one last one on the overall outlook. I mean, with the new fiscal plan out I'm just curious how you guys are feeling about the changes that we've seen the past quarter and some of the announcements.

Obviously, there's been progress in the negotiation of the debt and some agreements are being made public. We look at exactly the information that you look at, which becomes public. The recent fiscal plan brings some additional funding into the plan. And as I mentioned before, I think the timing of the funding is kind of unpredictable.

We know that reconstruction activity, it's much more complex than just repair activity, which is what we have seen so far. So some of these projects will take time. The money is there, it's not going to go away. It's just a little difficult to predict when the projects will come to fruition.

We know the demand for construction work has continued to increase. We talked to developers, we talked to some of our clients. We are starting to see some of these projects coming into us. But obviously, they're not necessarily going to be closed in 2018, but they're going to be reflected. So that activity is building up and the money is there to support it.

There is critical structural reforms in the fiscal plan that need to be achieved. And definitely, obviously, the political discussions are taking place to what the demands of the board are. Obviously, I think, that's not going to stop. I think that would continue as a normal -- it is probably the expected reaction of the situation.

So I think, on the other hand, where also I have to mention the Opportunity Zone initiative, now final guidance was published couple of weeks ago. We have seen investors coming to the island. That's an additional source of capital that we don't know the size and we're trying to estimate it and we're trying to size the opportunity.

But we believe that there is -- could be significant capital. Puerto Rico almost -- all of Puerto Rico classifies an opportunity, so qualified. And with the number of projects that we see, there is an opportunity for also additional private capital to play in the reconstruction.

And the next question comes from Glen Manna with Keefe, Bruyette & Woods.

Congratulations on the bank's anniversary. So you kind of touched on what was going on with investors coming on the island. And I guess my question was when you come to selling off some of your nonperformers, who is the incremental investor now that's kind of buying in Puerto Rico?

And I wanted to just ask another part. I think I saw on the tape that you're in a new alliance, I think, with Resnet to kind of post some of your OREO online. And what are your expectations out of that program? And maybe if you can just give us some details around that.

Well, the promise on our alliance, we just implemented the software and make it more easier and agile to be able to display our inventory with the original information and tracking mechanism. So it's virtually a more effective process to dispose our OREO inventory, which more wider access, more pictures, more information on the properties, that's really what it is. It's a new technology platform.

So I think, obviously, we will not disclose name of investors, but there are combination of local capital and U.S. capital that some of them are participated in prior transactions in Puerto Rico. And they have the capabilities of managing the assets, they know the market.

So they were kind of on hold on buying for some time and they are active, again. So that's -- and we've also seen some local investors that want to put some of their capital to work based on the opportunities that they see on specific assets.

Okay. And maybe, if, Orlando, you can just check my math. I think, you said there was about $25 million in unallocated left in the hurricane reserve and about $14.5 million that was specifically allocated. So does that imply about $40 million in reserves left out of the original $66 million taken, so you have about 2/3 of that specific reserve -- or that special reserve for the hurricane? Is my math right on that?

The $14 million -- the $24 million -- the $25 million, it's correct. That the $14.5 million included charge-offs that were taken against the reserve this quarter and some loans that -- some balances that were allocated to specific components. But a large chunk was charge-offs taken. So it's already gone then from the reserve.

So the number that it's -- there is some that were moved to specific reserves on the loans. It's already part of the specific portfolio reserves, and then the remaining, it's $25 million. The other one will depend at the end on what happened with the cases. So it's like any other part of the reserve.

Okay. And with all the stuff that comes out of Washington these days, it's hard to keep track of it. But if you could just remind me, you're still subject to the DFAST submission and normally you've kind of released the results around the end of October. So will that be the case again this year? Or are you not required anymore?

No, we're not required. That was eliminated for -- basically for all banks that are under $50 billion or a little bit higher.

$100 billion.

$100 billion. So we're no longer required to do a DFAST submission or run a DFAST process. We do our internal stress testing for our own purposes, but we are not required to do anything specifically. I mean, the exercise for this year would not have been that different from other years.

Okay. And would you be voluntarily disclosing the results of that internal study or not?

I guess, some of those are idiosyncratic scenarios that we put in for our own purposes to analyze industries or behaviors. So it's very difficult to, Glen, try to explain why X or Y. It's more of a capital management and capital planning kind of exercise.

(Operator Instructions) And the next question comes from Arren Cyganovich with Citi.

I wonder if you can just talk about what your plans are to unlock the kind of trapped the capital into 20%? CET1 is a very high level. And if you can't have it returned, what other options do you have in terms of the M&A or other portfolio acquisitions that you can help utilize some of that excess capital?

We -- unfortunately, we're not in a position to tell the market specifics at this stage. Hopefully, we can be more open to that on the first quarter. Obviously, the capital is there, as you say, is trapped. I fully agree with you.

But we have -- obviously, we see some growth opportunities organically. There could be some organic opportunity in the market. And if those things don't come to fruition at the end, there's other ways of returning capital to shareholders by, obviously, dividends or buybacks.

So everything is on the mix, I have to say. And there is very active discussions on the matters. And I wish I could give you an even more specific answer, but we don't have it. So hopefully, at the beginning of the year, we can have that conversation with more specific capital plans to disclose to the market.

And as there are no more questions at the present time, I would like to return the conference over to John Pelling for any closing comments.

Thank you, Keith. As Aurelio mentioned, we'll be ringing the closing bell at the New York Stock Exchange to celebrate our 70th anniversary and 25th anniversary as a listed NYSE company on October 31.

In addition, we have a number of conferences and investor tours in the next couple of months. On November 5, we'll be attending the Bank of America Merrill Lynch Future of Financials Conference in New York. That same week, we'll be attending the Sandler O'Neill East Coast Financial Services Conference in Palm Beach on November 7. KBW has planned their annual investor trip to Puerto Rico on December 17. Additionally, Bank of America will be coming down on December 18 to Puerto Rico.

So we look forward to seeing a number of you at those events, and we greatly appreciate your continued support. At this point, we'll conclude the call. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.