Timur Braziler

Timur Braziler inquired about the continued improvement in Return on Average Tangible Common Equity (ROTCE), which reached over 14% in Q3, and whether further increases are possible in the coming quarters despite anticipated rate cuts.

Answer

CFO Derek Meyer stated that the opportunity for further ROTCE improvement exists, with the long-term margin side being a significant lever. He expressed confidence in the ability to continue grinding ROTCE higher, citing positive early responses to deposit repricing after the September rate cut.

Timur Braziler asked about the expected acceleration of C&I loan growth once the remaining relationship managers (RMs) come off their non-compete agreements, the drivers behind the impressive Q3 fee income, and the sustainability of the return on average tangible common equity (ROATCE) improvement amidst potential rate cuts.

Answer

President and CEO Andy Harmening indicated that C&I production is up 12% and the pipeline is up 31%, expecting strong C&I growth above market in 2026, with commercial deposit production also showing significant growth. He explained that Q3 fee income included a one-time asset gain, making it less repeatable at that level, but expressed optimism for 2026 due to capital markets and commercial production. CFO Derek Meyer added that the opportunity for ROATCE improvement remains, driven by market response to rates and deposit pricing, expecting it to continue grinding higher with some quarterly fluctuations.

Timur Braziler followed up on José Rafael Fernández's comment about new onshoring investments in Puerto Rico, asking for details on these investments and their progression.

Answer

José Rafael Fernández, CEO and Chairman, described announcements from 10-11 multinationals in medical devices, pharmaceuticals, solar panels, and textiles, indicating a broader scope than in the past. He noted that most are existing companies expanding production lines, with a few new operations. This trend is driven by onshoring benefits, tariff threats, and Puerto Rico's status as a U.S. jurisdiction and manufacturing hub. He highlighted the encouraging long-term benefits of well-paid jobs and indirect suppliers as federal funds eventually recede.