First BanCorp. (FBP) Q1 2016 Earnings Report, Transcript and Summary

Good day, and welcome to the First BanCorp. 2016 First Quarter Results Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Mr. John Pelling, Investor Relations Officer. Please go ahead.

Thank you, Nan. Good morning, everyone, and thank you for joining First BanCorp.'s conference call and webcast to discuss the company's financial results for the first quarter of 2016. Joining me today are Aurelio Aleman, 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 the important factors described in the company's latest Securities and Exchange Commission 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 and press release issued by First BanCorp., you can access them under the IR section of the company's website at firstbankpr.com. At this time, I'd like to turn the call over to our CEO, Aurelio Aleman. Aurelio? Aurelio Alemán-Bermúdez: Thank you, John. Good morning, everyone, and thank you for joining us again to discuss our first quarter results. On the call with me today, as usual, is Orlando Berges, our CFO. Orlando will cover a lot of the details for the financial results of the quarter. Let's begin with some of the highlights of the quarter. Please turn to Slide 5 of the deck. We have to say that we had a strong quarter, generating $23 million of net income. We're really very pleased about that. On an adjusted basis, it was $26 million, which Orlando will cover in detail. This compares to $15 million in the fourth quarter. I want to highlight not necessarily financial but 2 events that are -- that we believe are very important for -- and positive for the quarter. We were quite pleased that we were able to execute on a small capital action with the repurchase of a portion of the TruPS, $10 million for 70%, resulting in a $4.2 million pretax gain. And I will have to say we were able to accomplish this with the Fed rate agreement still in place. Secondly, and very important also, during the first quarter, we opened our new branch on Brickell Avenue, Miami that will provide access to what we consider a very nice segment and growing market for our Florida franchise. We saw improvement in almost all of our core metrics, with the exception of increasing NPA, which was driven by our commercial loans guarantee by the Tourism Development Fund. We have been discussing this relationship during the second half of 2015, a couple of quarters we covered this. We made the decision to move this loan to non-accrual status even though they're still current. Obviously, given the recently enacted moratorium law and executive order and the overall uncertainty on the fiscal matters and the GDB [indiscernible] situation. Had we not done so, actually, asset quality would have slightly improved, with NPA decreasing $1.2 million. On the other hand, our net charge-offs continued stable this quarter at 1.03% and early-stage delinquencies improved by $26 million or 10% compared to the fourth quarter. So there's a mix of asset quality metrics here that we have to consider. We're definitely pleased to show that we continued to improve core metrics while continue to operate in this challenged environment. Pre-provision earnings increased $2 million to $52.6 million, showing the core earnings power of the franchise. And definitely, we continued to enhance our strong capital base. Now our tangible book is $7.66 per share. Let's move to the next slide to cover some additional details. On the loan portfolio, we saw an $88 million decline in the commercial book, primarily 2 large commercial relationships that paid off this quarter totaling $99 million. I have to say, though, there's also some seasonality here. In traditional in the first quarter, we have lower originations and renewals than prior quarters. We also experienced a reduction of $40 million in the consumer portfolio, primarily in the auto segment. We continue our cautious lending practices, which, on the other side, are reflecting lower delinquencies and charge-off across the consumer segment. And it's important to highlight that. On the other hand, Florida operations contributed nicely to our loan portfolio, with a $54 million increase or 5% growth in the loan book. Origination volume was basically down in Puerto Rico in most categories. And again, some of it is seasonal, but also we continue with tight credit standards in the face of the uncertainty, which also contributed to some of this low originations and approval rates. And again, Florida market contributed to over $100 million, $105 million in origination volume this quarter, up again from the prior quarter. Regardless, we will continue to work hard to sustain our loan portfolio at current levels. Obviously, sustaining Puerto Rico is harder and obviously, we are counting the Florida and the VI will bring also some additional growth. Please let's move to the next slide. The deposit mix, as we discussed before, this is a very important strategy for us. We had a nice growth in our core deposit base. Net of government, non-brokered deposit increased $137 million, savings DDAs in both Puerto Rico and the VI, not in Florida. We -- and we further reduced the reliance on the brokered CD book by $91 million this quarter. Noninterest-bearing deposits increased to 15%, slightly [indiscernible] when compared to the prior quarter. Now let's talk about the most interesting topic for everyone, which is our government exposure. I think everybody has said before, uncertainty is still dominating the macro and the resolution of the fiscal matters, there's no timeline, no definite timeline in Puerto Rico, or we have to say, or D.C. I know a lot of people are working very hard on bringing this item to resolution on both sides. But now we come into crunch time, with the May 1 payment and the July 1 payment, so for sure, we're going to see some additional actions in the remainder of the quarter as they relate to these 2 items. The -- our government exposure declined by $20 million, primarily from the repayment of lines that we had with central government. And as I mentioned before, with the recently enacted moratorium law and executive order, we're concerned that GDB will not arrive at a solution prior to next week. We're only a couple of days away from May 1. And again, given these recent events, you saw in the numbers, we took an additional OTTI charge on the debt securities and made the unfortunate decision to move the [indiscernible] guaranteed loans to non-accrual status. Again, as I mentioned before, these loans are current. Our allowance, a question that we get asked when this commercial loan to the Puerto Rico government, excluding municipalities, is approximately 20%. Municipalities, we continue to feel comfortable with our exposure. They are a well-managed entity, as I said before. They have a strong cash flow, consolidated payment from the property taxes. We have to continue to be vigilant, closely monitor what's going on, work together with the government on this. Again, we're very confident that we have the capital strength and the diversification of the franchise from a geographic perspective, from a line of business perspective, to continue consistent and persistent executing our business plan in these still rough waters. And again, our team have experience and the focus to continue navigating. So I'm sure we'll go back to this during the QA, but for now, I'm going to hand the call over to Orlando to discuss more details on the quarter. Orlando Berges-González: Good morning, everyone. As Aurelio mentioned, the results from core operations were very good for the quarter. We posted a net income of $23.3 million or $0.11 a share, which compares to $15 million or $0.07 a share we had last quarter. Total assets were just slightly higher, $12.7 billion compared to $12.6 billion last quarter, mostly on the liquidity side since there were some reductions in the lending side that Aurelio mentioned. If I summarize, we saw basically a stable net interest income, reduced provision for loan losses and slightly lower expenses, but also, results do include some unusual items that affect comparability. To mention them, on the positive side, we realized the $4.2 million gain on the repurchase and cancellation of the trust preferred. Aurelio mentioned that on the highlights of the quarter. This gain was realized at the holding company level. Therefore, it has no income tax effect based on available operating expenses at the holding company and NOLs at that high level. On the other hand, going back and forth, and you're going to hear this a few times, as you know, the government of Puerto Rico enacted a moratorium law, which has, at this point, mostly targeted to GDB obligation. The inflation adds an additional level of uncertainty to the valuation of the Puerto Rico government bond that we have in our investment portfolio, and as a result, we ended up taking an additional $6.3 million other-than-temporary-impairment charge on these securities. No tax benefit was recognized on these OTTI charges because of the capital treatment of the items and the fact that we still have some -- the valuation allowance. Therefore, there were no tax benefits. Over the last 4 quarters, basically, we have taken $22.2 million in OTTI charges on these securities. As you saw in the prior slide, the par value on the securities is $65 million, and they're on the books at $43 million. Fair value of the securities is lower based on market expectation going through OCI. The net impact of these items on the quarter was $2.5 million for an adjusted net income of $25.8 million. Prior quarter did have some also unusual items. The net impact of these items was much smaller. We had the $7 million gain associated with the long-term marketing alliance we entered with Evertec in which we sold our merchant contract portfolio. After tax, that has a $1.3 million impact. We had a 3-point -- a $3 million OTTI charge on the Puerto Rico government securities. Again, like in this quarter, there was no tax benefit related to that charge. And we had $2.2 million in costs related to our voluntary early retirement program that we put together last quarter, which have an after-tax effect of $1.3 million. The net impact of all these items was $100,000 for an adjusted net income of $15.1 million. So we had a nice pickup in the quarter and the main driver being the provisioning. For the first -- for this first quarter, we had a provision of $21.1 million, which compares to $33.6 million. And as you might recall from last quarter, the main item there is the net impact of 2 components that affected the commercial construction reserve, which went down -- came down, the provision, meaning by $8.2 million. First of all, we had an increase of $19.2 million last quarter in the general allowance for loan losses related to adjustments to the qualitative factors that stressed the historical loss rates we applied to exposure to government loans, either directly or indirectly. And on the other hand, we did have some relief of -- $8 million relief in construction reserves, given the stabilization of the assets that were behind. So the end result was that $12 million reduction on the reserve -- on the provisioning for the quarter. Regarding net interest income, GAAP net interest income was $124.6 million. It's $600,000 lower than last quarter. GAAP net interest margin increased 11 basis points to 4.18%. To remind you that a portion of this increase relates to the temporary government deposits we had in the fourth quarter. That lowered the margin of the quarter -- of the fourth quarter by approximately 5 basis points. Average loans on the first quarter are down $84 million, which impacted interest income by $1.5 million. Aurelio mentioned the 2 prepayments we had in the quarter. The average consumer portfolio was down $35 million, with a $1 million impact in interest income, while the average commercial portfolio was down $36 million, with a $400,000 impact on interest income. The overall yield on the loan portfolio increased by 8 basis points for a $1.3 million pickup in interest income. Approximately $700,000 of the increase results from the higher LIBOR rate applied to commercial loan repricings on the floating portfolio. But also, we collected also $700,000 on fees on loans paid off during the quarter. This quarter had 1 less day, which represents an impact of about $600,000 in net interest income. On the funding side, we saw 1 basis point increase in the cost of interest-bearing deposits, mostly time deposits. But our total deposit cost remained flat, as a result increasing the demand deposit accounts in Puerto Rico and the VI. Aurelio made reference to the growth we had in those portfolios. However, due to the increase on the short-term market rates, we saw increases in the average cost of brokered CDs and other borrowed funds, mostly the repos that we have outstanding on the trust preferreds. Average brokered CD balances for the quarter were $188 million compared to average balance for the fourth quarter. But the average cost increased on brokered fees like 6 basis points based on the market cost for new issuance and increasing in the average term of new CDs that are being issued. To the extent possible, we have been expanding the terms of the brokered CDs for interest rate risk management purpose, which had some impact on the cost of those CDs. The interest rates on all interest-bearing liabilities was up 4 basis points, but the average balances were down $267 million, for a net impact of only $45,000. So it wasn't a large impact combined. The key is, again, continuing to execute on the strategy of growing non-brokered deposits, mainly demand deposits, and improving the overall funding mix. Aurelio made reference to noninterest-bearing deposits. They have been growing steadily. Now they are 15% of our deposit base, which is a key component. Noninterest income for the first quarter was $18.5 million versus $23.2 million in the fourth quarter. Adjusted noninterest income for this quarter was $20.9 million. This excludes the $6.7 million in the OTTI charges on Puerto Rico securities and the $4.2 million gain. For the fourth quarter of last year, adjusted net interest income was $19.2 million, which also excludes the OTTI charges of $3 million and the $7 million gain on the merchant contracts. The pickup -- so the $1.7 million increase was basically $2 million increase in insurance commissions, which is related to contingent commissions that are received seasonally based on prior year's production of insurance policies; a $300,000 increase on service charges on deposits, which basically reflect the full quarter impact of new service and transaction fees that were put in place in November of last year. On the other hand, we had some reductions in fees, $600,000 reduction in fees from merchant transactions, which is a combination of a full quarter impact of the merchant contract sales and volume seasonality that we see on credit cards comparing fourth quarter and first quarter. Expenses have continued to behave very well. Noninterest expenses in the quarter were $93 million, which decreased $3 million from the fourth quarter. However, the $96 million last quarter did include the voluntary -- the $2.2 million in voluntary early retirement program expenses. If we exclude those, noninterest expenses decreased $800,000. Main drivers being a decrease in FDIC insurance by $1.4 million, which is a combination of our higher liquidity levels for the period, the average assets had some decreases in the period, the decrease in the brokered CDs that I previously mentioned. So all of those affect the calculation. Also, OREO expenses came down by $700,000, which is primarily an increase in rental income, which is the result of rental income on an income-producing property we've repossessed at the end of last quarter and higher income on some of the existing OREO inventory that we have. Obviously, part of the strategy is trying to get those properties to be higher income-producing to improve ultimate disposition. On the other hand, compensation and benefit expenses increased $1.5 million if we exclude the $2.2 million, which is basically higher seasonal payroll taxes and bonus accruals that we had in the quarter. The other expenses went up a bit. It's basically additional provision for unfunded loan commitments in some -- in floor plan lines. But it was only a $800,000 impact. The one negative, as Aurelio mentioned, we had in the quarter was unfortunately the level of nonperforming assets increased this quarter as a result of the inflow of the $128.6 million exposure to commercial loans that are guaranteed by TDF. Again, this decision was driven by the uncertainty surrounding GDB's ability to continue to make payments upon the enactment of the moratorium law, which at the end could impact its subsidiary, which TDF is a subsidiary of GDB. These loans were current in payment, contractual payment as of March and continue to be current. We have been receiving payments, from the borrowers and TDF as guarantor, sufficient to cover all contractual payments. TDF payments were $600,000 in this first quarter, which compares to $5.3 million that they made during the whole 2015. This quarter, most of the payments came directly from the borrowers. However, this leads to our second decision because of the uncertainty, we have decided to put all principal interest payments in the future against principal. And therefore, it will have some impact on interest income going forward. Excluding the $128 million TDF exposure, nonperforming assets decreased by $1.2 million in the quarter. Aurelio also made reference to inflows. Inflows of nonperforming were $48.8 million, an increase of $6.8 million as compared to last quarter, which was mostly in the residential mortgage portfolio, where we had $5 million higher in inflows. $3 million of those were in VI and Florida. We had some other smaller increases on the commercial side, which were offset by decreases in the consumer side. But still, the inflows are very much in line with the last few quarters. We haven't seen any major change in there. Adversely classified loans, commercial and construction loans, increased by $47 million in the quarter and basically driven by 3 commercial loans that added 3% at $48 million. These loans were previously classified as special mention. TDRs went down slightly by $2.5 million in the quarter. Our net charge-offs for the quarter were $23.6 million, annualized 1.03%, compared to $21.9 million last quarter or 95 basis points. The increase of $1.7 million was mostly on 2.2 -- $2.1 million increase of residential mortgage charge-off related to loans that are individually evaluated for impairment. Net charge-off ratios have been fairly consistent over the last few quarters. If we take out the bulk sale that we did last year, they're very comparable. The allowance for loan losses was relatively flat at $238 million at the end of the quarter and the ratio of the allowance to total loans was 2.61% compared to 2.60% as of December. The ratio of the allowance to nonperforming was 41.4%, down from 54.4% in December, which reflects the migration to nonperforming of the $128.6 million of loans guaranteed by TDF. As Aurelio mentioned, these TDF loans, these loans guaranteed by TDF, have been adversely classified since the third quarter, and the general reserve was increased in the fourth quarter, as I previously mentioned. The migration of the loans to nonperforming status did not result in any significant increases in the allowance since most of the required reserves have already been taken. The total coverage related to commercial loans extended to or guaranteed by the Puerto Rico government was 20% as of March. The portions related to the TDF guaranteed loans is north of that 20%. On the capital front, ratios remain strong. Tangible common equity stands at 13.1%, Tier 1 at 16.6% and total capital at 20%. Important to mention in the quarter, we did see some impact on the capital ratio reduction, meaning resulting from the full phaseout of the trust preferred securities from Tier 1 capital. In addition, a smaller impact on Tier 1 common was the additional phaseout of a portion of the DTA related NOLs, which did impact the ratios a bit, but obviously offset by the earnings for the quarter. So with that, I will now open the call for questions.

[Operator Instructions] Our first question comes from Brian Klock of Keefe, Bruyette, & Woods.

So Aurelio, I looked at 2 things that I thought were -- or nice positives were the expense control still and the margin expansion. So Orlando talked a lot about the expense items, and again, good job on the expense control. Maybe you can talk a little bit about what you saw with the margin expansion, actually, the good commercial loan yield expansion. So maybe you can talk about that? And then the second question is after some lumpiness with those big payoffs, how are you thinking about loan growth in Puerto Rico, Florida, Virgin Islands for the rest of the year? Aurelio Alemán-Bermúdez: Okay. On the first one, obviously, you basically see the benefit of the short-term rates LIBOR moving. We have a significant portion of the portfolio, the commercial, which is viable. So that has been supporting it. The -- on the other hand, we had some big payoffs this quarter, some of them voluntary and some of them meaning that we decided not to participate in the loans. We have a good pipeline, in Florida, you saw the numbers. The pipeline continues to build and it's healthy. Puerto Rico will be more cautious, obviously, as we continue to move on. But when you look at the 3 main line of businesses that we have: mortgage, consumer and commercial, we feel pretty good about being able to sustain the loan book, okay? We have to work harder, and that's why we ask our teams to do. But definitely, we're out there looking for volume, looking for business. I think if we see a better outcome from now to June 30 of the potential intervention of Congress or resolution on the negotiations of the debt, obviously, there's a lot of activity right now waiting on the sidelines that could -- and definitely would generate additional volume and would make that portion of the challenge much easier for the local markets. So, but we -- I think we still have 3.5 million people out here. A lot of businesses, a lot of activity, retail sales continue at healthy levels. Auto sales adjusted, but a healthy level and still attractive rates on the mortgage business. So there is a lot to do. And obviously, if things get resolved in a positive manner, it will even look better, the chance to grow the portfolio.

Okay. And just a quick follow-up. So maybe right now, with everything somewhat in limbo on the fiscal front, so there might still be a little bit of, I guess, pent-up demand that might just be waiting, and to the extent that there could be some resolution, you may see something maybe towards the end of the second quarter that could show up as some -- maybe some increased demand? Aurelio Alemán-Bermúdez: Yes, there is demand, obviously, but they're on the sideline, including investors, including new investment in new business, including consumer making decisions for buying a house or not. So this macro uncertainty hurts every business segment. But there's a healthy -- still a healthy volume. We did over $700 million between both, and it's not that far from the first quarter last year from a seasonality perspective. And when you add the 3 line of credits, the 3 regions, we expect to be above that number in the second quarter. So obviously, the opportunity for growing the portfolio in Puerto Rico will definitely depend on that macro cloud recovery from that perspective. There is still some -- remember, there's still some noise in the moratorium law, for example. There is still a project in the Senate being discussed about some additional modifications to the law. So we don't have full clarity of the extent of the moratorium, yet. And again, that brings -- that's what is today in the newspaper, those changes, for example. So obviously, we hope that gets clarified in the next couple of weeks. Also, we can put a framework into that segment of events, just the moratorium law by itself. So -- but again, there is still a lot of activity, a lot to do, a lot of business to look after. Orlando Berges-González: Yes. On the net interest margin, Brian, again, the one pressure it's going to come from putting these loans in nonperforming, that adds a bit of pressure. But on the other hand, we continue to -- we ended up the quarter with $800 million in cash and money markets. So we continue to reduce the size of the brokered CD portfolio, which would save some money there to compensate for some of the impact.

Our next question comes from Alex Twerdahl of Sandler O'Neill.

A couple of questions here. One, you mentioned in the press release that there was a decrease in the provision for residential mortgages that was driven by lower underlying loss severity. Is that lower underlying loss severity specific to the first quarter? Or is it something that you've seen kind of trending in the right direction over 2015? And how often do you kind of like reconsider how much of a reserve you need for residential? Is that something that's done annually? Maybe you can give us a little more color surrounding that thought. Orlando Berges-González: The reserve, it's analyzed quarterly. We look at that quarterly. In this specific case, what's happening to them, the loss severity on loans end up in foreclosure stage and end up being foreclosed, that we were using on the assumption was higher, that the experience has shown over the last 12 months. That one we don't change every quarter. Obviously, we like to see a trend and the number was a bit smaller. So we ended up adjusting some of the reserve components on those items that go to, to obviously, the latter part of the foreclosure stage.

Okay, good. And then the 2 big loans that paid down during the quarter, were those local Puerto Rico loans or were they national loans? Orlando Berges-González: They were -- one is a VI loan, one is a Puerto Rico loan, but they were based here, I mean, either VI or Puerto Rico.

Okay. And those are... Orlando Berges-González: No national credits or participation spreads or anything like that. Those were loans originated by our credit groups.

Okay. And they're refinancing away to other local banks? Orlando Berges-González: One of them was -- the VI was a full payoff that they did. The other one was, yes, there was some refinancing locally done on the commercial loan in Puerto Rico.

Okay. And then you kind of broke out the loan growth somewhat in Florida versus -- and the Virgin Islands, et cetera. Deposit growth, is that also pretty strong in Florida? Or is the deposit growth more Puerto Rico, the core deposit growth? Orlando Berges-González: The core deposit growth has been mostly Puerto Rico and a bit in the VI. Florida, probably you have seen in there. We are seeing very stiff composition for deposits in the Florida market, with pretty high pricing being paid, and we are not willing to go at those levels. So in fact, we have seen some reductions in Florida, but more than compensated by growth in Puerto Rico and the VI. The good thing being that we're growing a lot in most markets in Puerto Rico and the VI in DDA accounts. And even though the base in Florida of demand deposit accounts is smaller, in reality, we did grow in that account -- in that category, but it's a small category compared to the level of time deposit maturities we had in the quarter in Florida, meaning Florida.

Okay. And then just finally, on the margin, kind of a nitpicky question, but you alluded to the margin being somewhat pressured in the fourth quarter due to some temporary deposits. I can't remember if I read the headlines right. But are some of those deposits back in the local banks and maybe back at FirstBank and would pressure the margin in the second quarter? Orlando Berges-González: No, these were -- if you remember, there was the entity, the government entity that controls all property tax collections, those monies used to be at GDB at some point in time. They were on sort of a legal case with GDB to try to get segregation of the funds, and they moved the money on a short-term basis to the banks. We ended up with $140 million or so of those deposits, which we knew were only going to be there for about 2 or 3 months, so we couldn't invest in anything higher yielding. Therefore, you have the earning asset, but a very low earning asset on the books. We made a small amount on the spread but not significant. So those deposits, the ones that were going to go away were withdrawn at the end -- in the fourth quarter. So that's why there was an impact in the fourth quarter, but we don't have that this quarter nor it's going to affect the future quarters.

Okay. So there's no other government agencies, whether it's CRIM or something else that have, given the turmoil with the GDB, have decided to park funds with you guys that would have similar impact in the second quarter or the third quarter? Orlando Berges-González: No, we don't know of any, specifically. There always could be movement. But those specific ones, we knew they were going to be short term. We knew it's going to be 2 or 3 months. So that's why there is a direct impact.

[Operator Instructions] Our next question comes from Brett Rabatin of Piper Jaffray.

Wanted just to go -- I got distracted for a minute, so you may have talked about this a little bit, but just want to go back to kind of managing the balance sheet from here and you've lowered the brokered CDs and obviously, growth is a challenge, commercial originations, seasonality, et cetera. Just thinking about managing NII from here, will you guys continue to lower the cost of funds enough to keep NII flat to slightly possibly higher? Or how do we think about the management of the balance sheet vis-à-vis the margin going forward? Orlando Berges-González: So the margin going forward, it's 2 things. One, we -- I mentioned a bit before that we're going to get some pressure from the NPAs, the loans going into NPA. On the other hand, we ended up the quarter with $800 million in cash and money market investments. So that gives us some space to continue to lower the size of the brokered CD portfolio. What we have been doing with the brokered CDs, it's -- obviously, the plan is to continue to reduce them. We've been successful on the deposit strategy. So that opens space to continue to execute on the brokered CD reduction. We focus more and try to extend the term a bit for interest rate risk management, which increases the rate, but overall, decreases the expense component because of a much smaller average balance on brokered CDs. So that's how we've compensated a bit. Clearly, the amount of cash that we have at this point, at stipulated [[ph] points on the Fed, it's something that depends on how interest rates move to be able to pursue something. So we're constantly looking for ways to make that money work a little bit better. So that's also a component that should help compensate any other pressures we have. So we don't see -- the margin should stay within this level, with some of this impact that I just mentioned. But not -- obviously the pickup on LIBOR going up helps us on the volume of floating rate loans we have on the commercial portfolio. So we did see some pickup in there from the repricing. So as some of the loans continue to reprice, they will reprice at slightly better rates from the increase in LIBOR.

Okay. And then the other thing, I totally understand that moving that TDF to nonaccrual based on kind of what's happening, but how do we think about impairment of that exposure from here? What do you guys think about the future of that individual credit? Aurelio Alemán-Bermúdez: There's several components to it. Obviously, we have the underlying collateral, which is an important component. And obviously, we have to work on determining what is the value, at the end of the day, of the guarantee. And it's a combination, as Orlando also mentioned, we have provision for these assets for the last 3 quarters in a row. So I think for now, we still, as I mentioned before, the moratorium law is still undergoing some changes. There will be negotiations with GDB on the matter. And basically, I think during this quarter, all those events should unveil. But I think we have made some statements that we were not expecting a significant item after we did the provision in December on this portion of the assets. Orlando Berges-González: What we did with this, obviously, as Aurelio mentioned, there is a collateral value that is part of the analysis of the impairment. And then on the TDF part, we make some similar assumptions on probability of default and probability of recoveries, that we use market information such as Moody's and some of the things that we see. We do think that, that the TDF guarantee at the end has value, value more than it's been given, but under the circumstances, we're applying some discounts based on the probability of default and recoveries that we see on the GDB side.

Okay. And then just last, and you may have addressed this, I heard you talk about it somewhat. But just thinking about the growth in the Florida from here, will you guys ramp up what you're doing in Florida to try to mitigate more of what's going on in terms of the Puerto Rican... Aurelio Alemán-Bermúdez: We are, we actually are. And some of the investments that I highlighted, entering the Brickell market which we were not, looking at it from the 3 business segments, the deposits, commercial segment, the mortgage segment. We will continue to improve talent and increase the capacity of the teams. And we're looking after growing that market, definitely. Orlando Berges-González: You saw the originations in the Florida market were higher than last quarter. And if you compare it to the first quarter of 2015, they were significantly higher, they were about 60% higher. So we've been -- we have been picking up the originations in that market.

This concludes our question-and-answer session. At this time, I'd like to turn the conference back to John Pelling for closing remarks.

Thank you, Nan. Thank you, everyone, for your interest today. We will be attending the Piper Jaffray Conference in Orlando, Florida next week, May 4 through 6. So hopefully, we'll see some of you there. Again, we thank you for your interest in First BanCorp., and this will conclude the call. Thank you. Aurelio Alemán-Bermúdez: Thank you to all.

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