First BanCorp. (FBP) Earnings Call Transcript & Summary

Good morning, and welcome to the virtual First BanCorp. Inc. Annual Meeting of Stockholders. Before we begin today's virtual meeting, it is the company's responsibility to inform you that this meeting may contain 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 the important factors described in the company's latest SEC filings. The company assumes no obligation to update any forward-looking statements made during this meeting. At this time, I'd like to turn the meeting over to the Chairman of the Board of Directors of First BanCorp., Mr. Roberto Herencia.

Thank you. Good morning, and welcome to all. I am Roberto Herencia, Chairman of the Board of First BanCorp. Joining me on the line today is Aurelio Alemán, Director, President and Chief Executive Officer of the Corporation; Orlando Berges, Executive Vice President of the Corporation and Chief Financial Officer; and Sara Alvarez, General Counsel and Secretary of the Board, who will serve as Secretary for this meeting. Also in attendance today are our fellow members of the Board of Directors, Mr. Juan Acosta Reboyras, Ms. Luz Crespo, Ms. Tracey Dedrick, Ms. Patricia Eaves, Mr. Daniel Frye, Mr. John Heffern and Mr. Felix Villamil. I would also like to recognize the participation of CPA Lisa Roney and CPA Brian Hecker, representatives of Crowe LLP, the corporation's independent registered public accounting firm. Needless to say, 2020 was a very challenging year, and that our corporation employees demonstrated tremendous [ heart ] and resiliency. Beginning January 2020 [indiscernible] in the Southwestern region of the island, only to be followed by the COVID-19 pandemic, taking hold in March and still persisting today. Our customers belief and communities have been impacted in significant and sometimes very unfortunate ways. We are thankful that we have been a resource for them, donating to various support organizations and providing first aid relief. That we emerge from this spirited, we're confident that we will rise stronger. I'm very proud of how our corporation and our management team have stepped up to meet the moment, driving our strategy forward while taking important steps to support customers and communities when they have needed us the most. Our strong capital levels and the faster preparedness gave us the flexibility to serve our customers and our employees during this time of need. 1 year following the lockdowns and after [indiscernible] of March 15, our stock price has appreciated over 250%. The increase in our dividend announced in January improved our current dividend yield to 2.2% and we recently announced a $300 million share repurchase program. We will work diligently to provide and create value as we continue to actively evaluate our [ opportunities ] and deploy excess capital [indiscernible] what are to be growth opportunity in the markets we serve or returning it to our shareholders. We are resolute in our commitment to move forward with optimism and confidence. I would like to take a moment to recognize the valuable contributions made by our directors in such a challenging and difficult year. Their leadership, guidance, engagement and support were instrumental for the executive team which once again proved their ability to navigate the corporation through difficult times. I'm also very grateful to our leadership team, our steadfast employees and our resilient customers and communities that combined have driven the success of our institution. I would also like to recognize the contributions made by Mr. José Menéndez-Cortada, who served as Director since 2004, and Mr. Robert Gormley, who served as Director since 2012, both of whom communicated their intention to not stand for reelection at the end of their current term. I know they have dialed into the call, and we thank José and Bob for their years of service, advice, commitment and their strong overall contributions to the Board throughout their tenure. Thank you, José and Bob. I will now call this meeting to order. We will first provide a brief management report, after which we will conduct the formal business portion of the meeting. It is now my pleasure to leave you with our President and Chief Executive Officer, Mr. Aurelio Alemán.

Thank you, Roberto. As Roberto highlight, definitely, 2020 was an unprecedented year. But in spite of all those challenges presented by the pandemic, which some of them are still present, we're extremely pleased with the operational achievements and the strategic achievement that we have during 2020. The M&A transaction represented the largest transaction in history in our corporation in 2020 in spite of the pandemic challenges. I have to say that I'm truly proud of how the team -- the management team and the Board managed all the challenges that were presented last year and put us in a position that we are today. Our assets climbed to $18.8 billion at the end of the year, an increase of $6.2 billion, due in large part to the $1.3 billion cash acquisition of Banco Santander Puerto Rico, which was completed in September 1, 2020, and contributed a total of $5.6 billion in total asset increase. On the economic front, I think the good news are that post-pandemic recovery is definitely promising for our territories. The increased pace of disbursements of disaster recovery funds looks well for the economic improvement in the island. And there is across the 3 territories that we operate, there's significant stimulus flowing. In the case of Puerto Rico, the CARES Act stimulus represent approximately $45 billion of economic stimulus, which is over 60% of the annual GDP for the island. The integration of the core operation is a priority to achieve and obtain efficiencies plan, is definitely progressing as planned in the execution. And we are contract to complete the acquisition and the full conversion by the end of the summer of 2021. Our fortunate balance sheet with liquidity, research coverage and capital ratios well above the top quartile of our peers, will continue to support our growth initiatives and goals, and will support our capital deployment strategies. For the year, 2020, we generated $102 million of net income or $0.46 per share compared to $167 million or $0.76 per share in 2019. Despite economic effects of the pandemic of both our CECL estimate and the expenses tied to acquisition, results were quite in line to the projections. Pretax preprovision income for the year increased 6% to $300 million. Loan originations and renewals for the year reached $4.4 billion and organic core deposit growth achieved a historic record of $2 billion. The acquisition contributed an additional $4.1 billion in core deposits. Now the earnings part of our franchise continues to contribute to our growing capital position. Even following the acquisition, we ended the year with the highest capital ratios among Puerto Rico publicly traded banks and the top 5% of U.S. peers. Capital deployment is a priority. Early in 2021, we increased our dividend, and more recently, we announced a $300 million share repurchase program. We are grateful how we all came together as a team and organization to rally and overcome the obstacles, and I'm proud of the ways in which we supported our customers, communities and colleagues. The future looks bright for FirstBank, and will remain a pillar of support for the communities we serve. Now I will leave you with Board Secretary and General Counsel, Ms. Sara Alvarez.

Thank you, Aurelio, and good morning to all. As is our custom, we will conduct the business portion of the meeting first and answer questions at the end of the meeting. The meeting agenda and rules of conduct are available on the meeting website. We ask that you will review those items, and we appreciate your cooperation with the rules of conduct. As a reminder, a shareholder attending the meeting can vote their shares online from now to the closing of the polls by logging on to the meeting website as a shareholder by entering the 16 digit control number included in your proxy card and clicking the Vote Here button on your screen. If you have previously voted by proxy and do not wish to change your vote, your vote will be cast as previously instructed, and no further actions are required. If you have logged into the meeting as a shareholder, you may submit questions by typing it in into the text box on your screen. When asking a question, please include your name and affiliation to the company. To assure that we receive your questions before the Q&A session is closed, we encourage you to type your questions now. Any questions related to the matters to be voted at the meeting will be addressed to the extent possible prior to the closing of the polls. Though we may not be able to answer all the questions, we will do our best to answer as many questions as time allows. To give everybody a chance to ask a question, you will limit -- we will limit your each shareholder to 1 question or topic. Questions and answers may be grouped by topic and substantially similar questions will be grouped and answered once. At this point, I would like to inform you that joining us today is Mr. Ramil Robles, who represents Broadridge Financial Solutions, the entity that has been appointed by the Board of Directors as inspector of election for this annual meeting. Mr. Robles is in charge of the tabulation and certification of the votes cast in this meeting. Please note that most of the shareholders have voted by proxy and their votes have already been counted. As Secretary of the Board of Directors, I have received an affidavit of distribution for Broadridge Financial Solutions certifying that the materials related to this meeting were mailed or made available to the corporation's shareholder as of March 25, 2021, which, as noted in the proxy statement, is the record date for the shareholders entitled to receive notice and to vote at this meeting. Our first matter is to determine the existence of a quorum for the purposes of conducting this meeting. We have in possession a list of shareholders from the corporation's common stock as of the close of business on March 25, 2021, provided by Computershare, our registered and transfer agent, which shows that the holders of 218,336,661 shares of common stock issued and outstanding, have the right to vote in this meeting. Our inspector of election has informed us that they are represented by proxy approximately 88.8% of the shares of common stock entitled to vote at this meeting. Consistent with state law and our bylaws, the list of shareholders entitled to notice is available for your review at the office of the Secretary of the Board. Given that the majority of the shares of common stock entitled to vote are present at this meeting, either participated in the call or by proxy, I certify that this meeting is duly convened for the purposes of transacting the businesses properly brought before it. The first item of the agenda is the reading and the approval of the minutes of Annual Shareholders Meeting held on May 21, 2020. I'll proceed with the reading of the minutes.

Ms. Alvarez, Orlando Berges here. I present the motion [indiscernible] at this time.

I, Roberto Herencia, second the motion.

Thank you, Mr. Berges and Mr. Herencia. The minutes of the Annual Meeting of Shareholders on May 21 are approved. They will be available for your review at the office of the Secretary of the Board. We will now proceed with a description of the matters properly brought before today's meeting. The first proposal is the election of directors. For this purpose, the Board of Directors duly nominated the following 9 individuals to serve as directors of the corporation for a term expiring at the next Annual Meeting of Shareholders held in '22. These are: Mr. Juan Acosta Reboyras, Mr. Aurelio Alemán, Ms. Luz Crespo, Ms. Tracey Dedrick, Ms. Patricia Eaves, Mr. Daniel Frye, Mr. John Heffern, Mr. Roberto Herencia and Mr. Felix Villamil. The Board of Directors recommends a vote for each nominee to the Board. The second proposal relates to the advisory approval of the compensation structure of the corporation's named executive officers. The Board of Directors recommends a vote for the advisory approval of the named executive officers compensation as disclosed in the corporation's proxy statement. The vote on the approval of this proposal is informative and hence not binding on the Board. The third proposal relates to the ratification of the appointment of Crowe LLP as the corporation's independent registered public accounting firm for fiscal year 2021. The Board recommends a vote for the ratification of the appointment of Crowe LLP as the independent registered public accounting firm of the corporation for this fiscal year ending December 31, 2021. The affirmative vote of a majority of the shares represented herein and entitled to vote is required for the approval of all 3 proposals. If there is any shareholder who has not voted and who wants to vote at this time, we ask that you please do so by clicking on the Vote Here button on your screen. I will pause now to allow shareholders to vote and address any questions received on these proposals. [Voting]

We understand that all that wish to vote have done so at this time. Having received no questions on the proposals, the polls for voting on the matters before this meeting are now closed. The inspector of election has informed us that the proxies have been tabulated and that the corporation has received the proxies necessary to elect all 9 director nominees, approved on an advisory basis the corporation's named executive officers' compensation, as it is described in the corporation's proxy statement and to ratify the appointment of Crowe LLP as the corporation's independent registered public accounting firm for fiscal year 2021. The final voting results of the matters properly brought to your attention at this meeting will be reported in a Form 8-K to be filed with the Securities and Exchange Commission within the next 4 business days. Please note that a replay of today's webcast will be available for 1 year on the corporation's website. This concludes our agenda for the business portion of the meeting. We will now move to the questions and answers portion of the meeting. As previously mentioned, if you have logged into the meeting with the 16 digit control number, you may ask questions now by typing it in to the text box on the bottom of your screen. Okay. So there's no question. This meeting is duly adjured. Thank you all for your participation and your continued support.