First Bancorp

NYSE:FBP

Earnings Call Transcript 2023-Q1

[Operator]

Hello, everyone and welcome to First BanCorp's First Quarter 2023 Financial Results Call. My name is Daisy, and I'll be coordinating your call today. [Operator Instructions]

I'll now like to hand over to your host, Ramon Rodriguez, the Corporate Strategy and Investor Relations Officer at First BanCorp to begin. So Ramon, please go ahead.

[Ramon Rodriguez]

Thank you, Daisy. 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 2023. Joining you today from First BanCorp 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 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, you can access them at our website at fbpinvestor.com.

At this time, I'd like to turn the call over to our CEO, Aurelio Aleman.

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Thanks Ramon. Good morning to everyone and thanks for joining our earnings call today.

Please turn to page four to go over the highlights for the quarter. Very pleased to say that we begin the year with very encouraging results for our franchise. The resiliency of our business model was evidenced during the quarter as we earned $70.7 million in net income or $0.39 per share, which translated into a strong return assets of 1.5%. On non-GAAP basis, pretax, pre-provision income was $118 million, up 6% when compared to the same quarter last year, and 3% below last quarter, mostly driven by a reduction in net interest income during the quarter. The margin contracted slightly by 3 basis points, primarily to higher cost of funds.

I have to say that credit metrics remain very stable, total loans in early delinquency decreased by 10% during the quarter, and non-performing asset decreased to just 68 basis points of total assets. The provision for credit loss remained relatively flat at $15.5 million and the ACL for loans increased 4 basis points to 2.29%.

During the quarter we decided to take certain proven actions to further strengthen our liquidity as a precautionary measure. Obviously, considering the recent volatility in the banking sector. At the end of the quarter, we ended with $4.8 billion in uninsured deposits while having on use available liquidity of $5.5 billion or 114% of the uninsured portion. In terms of capital deployment, we continue our journey. We purchase $50 million in shares of common stock and increase the common stock dividend by 17% to $0.14 per share.

We opted to pause share buybacks during the second quarter, obviously, given recent market events, but we do expect to resume buyback activity in the second half of the year. Just to remind, we still have pending $75 million in authorized buybacks under the 2022 approved plan, and we also expect to announce our updated capital plan when we report our second quarter earnings in July. We were expecting to that this quarter as we announced last time, but we decided it was proven to move it up just one quarter.

As we have said in the past, we continue to aim to return approximately a 100% of annual earnings to shareholders during 2023 through buybacks and dividend as part of our capital management program.

Please let's move to the balance sheet section on page five. We registered our fifth consecutive quarter of loan growth driven by healthy loan origination activity primarily in Puerto Rico. Consumer loan balances increased by $80 million during the quarter, up 2.4% linked quarter, in line with our loan growth guidance for consumer loans, even though commercial loan growth in Puerto Rico was also by $92 million or 2.6% linked quarter. The commercial loan growth decreased during the quarter by $19 million. It was driven by larger unexpected payoffs and paydowns of certain commercial loans in the Florida region of around $108 million.

Finally, residential mortgage loans were down $33 million, slightly below or flat growth guidance for 2023. We do remain optimistic of our loan growth prospect in our main market, and we iterate our mid single digit loan growth guidance for 2023.

I would like to spend some moment discussing the composition of our commercial book. We added some additional information into this slide, particularly our exposure to office real estate in Puerto Rico and the U.S., which has been a carrier focus for the industry in recent months. At the end of the first quarter, we had $2.4 billion or 45% of our commercial portfolio in commercial real estate. Out of this total, $414 million is in the office real estate exposure or 8% of the total commercial book. We believe credit quality of our share book is strong with just 0.92% of loans non-performing and minimal to no losses recognized over the last years. We believe refinance -- refinancing risk for office real estate is nominal with just $85 million and $18 million of loans in Puerto Rico and the U.S., respectively scaled to mature or reprise over the next two years.

We do oversee well diversified commercial loan portfolio across the multiple industries and property types, multiple regions with adequate reserve that we believe are sufficient to cover expected losses and has performed well during multiple business cycles.

Please let move to page six to cost deposit trends and liquidity. Core deposits, which exclude brokered and government deposits, decreased by $143 million during the quarter, reflecting reduction of $139 million in Florida and $15 million in the Virgin Islands, partially offset by an increase in Puerto Rico region of $11 million. Over two thirds of the deposit reduction, it actually took place in the first two months of the quarter and it was primarily driven by customers looking for higher yielding deposit alternatives in the Florida market that were traditionally outside of the banking sector, and also some liquidity was used to paydown some commercial loans.

On the government deposit side, which are fully collateralized, amounted to $2.7 billion, decreasing by $96 million during the quarter. I have to say that our deposit base remained very stable following the March industry events. We actually opened more new deposit accounts within March than any of the prior 12 months.

Our diversified deposit franchise is comprised of an attractive mix of commercial and retail customers deposit of which 70% are FDICs insured or are fully collateralized. In addition, the government [ph] the deposit base is evidenced by average deposit balances per account. Retail clients of approximately $10,000 an average deposit balance per account for non-government commercial of about $97,000. And obviously we still -- we carry a healthy non-interest-bearing ratio, deposit ratio of 38%.

Now let's cover some highlights of the operating environment in our main markets. Please to say that microeconomic conditions in our main market remain stable. Total nonfarm payroll employment continues to improve. Over 60,000 jobs have been added to the workforce since February 2020, a 6% increase. The economic activity index continue to trend above pre-pandemic levels and even though out those sales have decreased somewhat compared to last year, which was a record year. Higher retail sales and government tax collections are evidence or strong consumer sentiment and increased economic activity.

The fiscal board publishable reset plan on April 3rd. It outlines recent projection for disbursements of disaster and pandemic relief funding. During the first two months of the year, over $600 million disaster relief funds have been dispersed already. This is an 83% increase when compared to the same period last year, and the board is actually projecting over $5 billion in additional disbursements to take place during the year. We believe these funds will continue to play a key role supporting Puerto Rico economic stability and are very encouraged by the potential impact they will have on the island infrastructure.

Finally, the franchise continue to perform well. Our omni-channel strategy continue to advance during the quarter. We currently interact with over 55% of our customers through digital after service channels, primarily to our digital banking applications. We reached this quarter 400,000 register users in March, an increase of 3.5% versus prior quarter, and we continue to invest in our digital capabilities to continue enhancing the experience of our clients.

Now I will turn the call to Orlando to go over some more details on the financial result. Thanks.

[Orlando Berges-Gonzalez]

Good morning, everyone. Again, as disclosed this morning, net income for the first quarter was $70.7 million, $0.39 a share. That compares with a $73.2 million or $0.40 a share last quarter. Pretax, pre-provision for the quarter decrease slightly to $118.1 million, which is 3% lower than last quarter, but it's 6% higher than what we achieve on the same period in 2022.

Profitability metrics were strong with a 1.55% return average assets and a 49% efficiency ratio. The provision for credit losses for the quarter was basically flat. However, we did achieve increases of $5 million on the allowance for credit losses. I will touch upon that a little bit later on the presentation.

Net interest income, the key component here, decreased $4.7 million during the quarter, approximately $2.5 million of this reduction it's the impact of two fewer days in the quarter. Overall interest income was higher by $8.9 million, while interest expense grew $13.6 million.

On commercial loans, interest income grew $4.8 million and the yield improved 43 basis points. And the average portfolio also grew by $58 million for the quarter. In the case of consumer loans, interest income grew $2.1 million, primarily related to $100 million higher average balances for the quarter. But we did achieve 17 basis points improvement in the deal on consumer loans for the quarter.

Interest expense on deposits grew $8.8 million, 38 basis points increase. During the quarter, we clearly saw a shift in deposit mix with time deposits growing $168 million while non-interest-bearing deposits decreased $89 million. The interest expense on retail and commercial time deposit increased $4.8 million for the quarter and the cost went up from 110 basis points last quarter to 187 basis points this quarter. In fact, new originations are being issued at a higher rates.

The cost of public funds that we touch upon that on last quarter and the impact its having increased $2.4 million in the quarter. And the better on this public funds was 95% in the quarter as compared to the 75% we saw last quarter. However, the future movement on this deposits obviously will be a function of whatever happened on rates and they will move up or down much faster than other deposits as rates move. On the other hand, when we look at the cost of the remaining interest-bearing deposits, they only increase seven basis points with beta of just under 11% for the quarter.

Interest expense for the quarter also reflect the increase in wholesale funding. Expenses increased $4.8 million mainly in FHLB advances in part to provide for the additional liquidity that that Aurelio mentioned. Margin, again, decreased three basis points in the quarter, as expected to some extent with some impact related to the additional funding we took. As compared to last quarter, the margin was 434 versus 437 we had at the last quarter of 2022. The impact in margin, it's a lot related to the change mix of the funding structure.

We expect to continue to see net interest income pressure in the near term as interest rate rights on the budgets, with some normalization later in the year. And as I mentioned on the last call, based on the current balance sheet structure, we expect net interest income to remain close at current levels with lower yielding assets such as investment portfolio being repaid, being replaced by higher yielding assets, and improvements will come with the future growth on the loan portfolios.

On the non-interest income side, we did have a pickup of $2.9 million. We collected $2 million in an annual and continuing insurance commissions, and we did have some improvements in fee base based on the adjustments on last quarter.

Expenses for this quarter were $115.3 million, which compares to $112.9 million in the prior quarter, $2.4 million increase. This quarter, we were able to achieve a $2 million gain under dispositions of OREO properties, which was higher than we expected. And we also received $1 million in annual credit card incentives that happens at the beginning of the year. If we were to exclude these items, expenses for the quarter were $118.4 million, which compares to $115.5 million last quarter is basically just under $3 million increase as compared to last quarter.

The expense growth includes a $4.2 million increase in payroll expenses, basically related to payroll taxes and bonus accruals as had been anticipated. But it also includes increases on the FDIC [ph] insurance costs related to the higher assessment rate that was effective this quarter, and we did have some additional increases in some operational reserves. On the other hand, business promotion expenses were lower in the quarter based on the seasonality of marketing efforts.

Expenses for the quarter, excluding OREO, were below our $120 million guidance, but we continue to believe that rents will be in the $120 million range in the next quarters as we continue to execute on the additional investments we are putting out on our franchise, particularly those related to improvements of the delivery of banking services to customers. Efficiency ratio remains very low at 49.4%, although it's slightly higher than the 48% we achieved last quarter.

In terms of credit quality, as Aurelio mentioned, credit metrics continue to be very stable. Non-performing assets, again, decreased just slightly by $200,000 to $129 million and represent just 68 basis points of total assets. Reduction in MPAs include $6.3 million decrease in non-accrual residential mortgage loans. Mainly loans that were restored to accrual status in the quarter, and that was partially offset by $4.4 million within non-accrual commercial loans, which basically relates to one case in the Florida region, $7.1 million commercial loan participation we have on a loan to a borrower in the power generation industry.

Inflows to NPLs increased $5.6 million to $29.7 million compared to the $24 million in inflows last quarter. Again, driven by this case. Otherwise, inflows would've been slightly longer. Early delinquency, meaning 30 to 89 days past due loans decreased $10 million as Aurelio mentioned. And it was across all different portfolios.

Net charge-offs for the quarter were $13.3 million, which represent 46 basis points of loans. Basically the same at last quarter, and again, mostly related to the consumer portfolios. Consumer loan charge-offs were 1.54% of loans in the quarter, which is still lower than pre-pandemic levels.

In terms of the allowance for credit losses, and there are about $278 million, which is $5 million higher than last quarter. The allowance on just loans and finance leases was $266 million and $5.1 million increased as compared to prior quarter. The increase in the allowance includes the effect of the previously mentioned case in the Florida region that went into NPLs, as well as we are anticipating some less favorable longer term outlook on several microeconomic variables which affect the allowance calculations.

Also, this quarter we did adopt the new accounting standard for TDRs and elected to discontinue the use of the discounted cash flow methodology for restructure accruing loans that resulted in $2.1 million increase in the allowance to credit losses for residential mortgage loans. The ratio of the allowance to loans held for investment was 2.29% at the end of the quarter, which compares to 2.25% in the prior quarter, which is a healthy coverage.

On the capital front, our regulatory capital ratios continue to be very strong. As you can see on, on the chart, the changes are very small compared to last quarter, as basically revenues have offset all capital actions that have been executed in the quarter. The tangible book value per common share increased 8% during the quarter from 6.93% to 7.50% all related -- mostly, basically all related to the $87 million improvement in the other comprehensive loss adjustments, as the fair value of the securities increase based on the changes in market rates. Tangible common equity ratio increased to 7.12% compared to 6.81% last quarter.

As of March, for your information, the OREO comprehensive loss adjustments included in capital was $711 million. It came down from about $800 million last quarter. That represents a reduction of about $3.95 in the tangible book value per share. And this is the tangible common equity ratio by approximately 336 basis points.

Again, as we have mentioned before the other comprehensive loss adjustments affecting this ratios, we -- will reverse over time, and we have the intent and based on our liquidity position, we have the ability to hold the securities until maturity. In reality, the investment portfolio has not been growing and our most recent estimates of repayments expect -- $1.8 billion repayments in 2023 and 2024, which is over 30% of the portfolio and another $1.6 billion in 2025, which is an additional 27% of the portfolio. So in essence, 57% of the portfolio will pay off over this timeframe. Duration remains at a 3.6 or so we had mentioned in the last call.

Before we finish, I just wanted to expand briefly on the liquidity discussion, Aurelio mentioned before. As he said, in light of the recent banking sector events during the second half of March, we decided to tap on some of our available funding sources to increase our cash position as a precautionary measure. We took an additional $250 million in advances from the Federal Home Loan Bank and increased the third-party short-term repurchase [ph] by another $98 million ending March, with approximately $824 million in cash on hand and at the Fed account.

We also had available at the end of the month additional funding sources in the form of $2.4 billion in good quality securities that could be pledge. We have $882 million available for credit at the Fed Home Loan Bank, and we had $1.4 billion available in the Feds discount window. All of this combined with the cash make up the $5.5 billion of available liquidity sources Aurelio mentioned before.

We also enrolled on the Feds short-term funding program, but so far we have not used this funding source. In general, we feel very comfortable with the level of liquidity that we have and the way that the deposit components have behave over this timeframe.

With this, I would like to open the call for questions.

[Operator]

Thank you. [Operator Instructions]

Our first question today is from Timur Braziler from Wells Fargo. Timur, please go ahead. Your line is open.

[Timur Braziler, Wells Fargo]

Hi. Good morning, everyone.

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Good morning.

[Orlando Berges-Gonzalez]

Morning.

[Timur Braziler, Wells Fargo]

Maybe just following up on the last line of commentary from Orlando on the liquidity position, I'm just wondering how you're thinking about liquidity going forward, not only in the borrowings that were added, but then also in some of the cash flows from the bond book. I guess, how long are you planning to keep those borrowings on the balance sheet? And with some of the plan maturities over the next couple of quarters, what the plan is for those as well?

[Orlando Berges-Gonzalez]

Yeah. The - there are two uses for the funding. It's -- one of it is -- some of it is more longer term, which is based on needs on our Florida market based on what has been the behavior for customers. The short term components we took for this, was an immediate action just to increase cash. We ended up, as I mentioned, with our $800 million in cash and had -- at the Fed and clearly we don't need that much cash to operate. So, we are tracking deposit behavior throughout April, has been very consistent and in fact, we have already started to cut down in some of those short term funding components and get back to normal levels if we don't see any significant variants on behavior like it's been the case on the month of April. So, in essence, it would be very short term based on current circumstances. We have the flexibility to move that up or down, fairly fast if needed. So, that's why we don't think it's necessary just to keep those levels sitting there for a long timeframe.

[Timur Braziler, Wells Fargo]

Okay. And then on the bond book, it looked like the average balances were higher than the period. And I'm just wondering what your thoughts are on the bond book, and what your planned actions are on some of those planned maturities coming due over the next couple of quarters.

[Orlando Berges-Gonzalez]

The bond book is not a higher. The movement on the bond book, it's a function of the repricing of the fair value. So, what happened is that obviously as the market value came up, we had that pickup of $87 million of market value. But in reality, the book has only -- the only move that we've had recently on the investment side has been on Federal Home Loan Bank stock that we have to buy as we take some advances. We do buy some Federal Home Loan Bank stock as -- which is a requirement. But other than that, the book came down about $105 million -- $105 million over the course of the quarter in terms of repayments that we have.

So, we do expect that that book to continue to come down. As I mentioned, the estimate we had done for, it was about $650 million this year for the full 2023. And the remainder of -- the remainder of what I mentioned before in terms of repayments of $1.8 billion. So it would be about $1.2 billion coming in 2024. So, that's the estimate we have on repayment. And we don't have any plans to put anything on the investment portfolio at this point. It would be used for funding, the lending side.

[Timur Braziler, Wells Fargo]

Okay. Got it. That's good color. Thank you. Maybe switching to the deposit side, it's very encouraging to see the stability of the deposit base more broadly in Puerto Rico. And kind of the lack of panic that we saw maybe in some of the more localized banks on the mainland. I guess more specifically on the government deposit book in Puerto Rico, it seems like the first quarter should be seasonally stronger, but we did see lower balances for both you and then the smaller competitor that reported earlier. I'm just wondering, was there some flight to the larger bank and the government deposit book, or I guess what was the dynamic that drove those balances lower this quarter?

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Yeah. No, there's no real flight. It's just -- some of these accounts have a lot of activity in and out. It's a timing issue. We have to say that they're stable. They use some of the liquidity for either projects, capital investments or different payments that we process as part of the accounts that we have. When it comes back, goes out. On average it, I would say it's stable.

[Orlando Berges-Gonzalez]

And also keep in mind that there is a large component that comes in on the government side during the month of April not before that because of property tax. I mean, municipal taxes and property taxes and income taxes, they all kick in. So, that big movement we normally expect in the second quarter if it's going to happen rather than the first quarter. But as Aurelio mentioned, a lot of it was related to some of the agency accounts that had movement in the quarter as they normally do up or down.

[Timur Braziler, Wells Fargo]

Great. Thanks. So then just lastly from me. Just looking at the Florida component of the story, it seems like that's a little bit more under pressure than maybe the Puerto Rico component we saw a charge-off there. We see incremental deposit pressure, the loan origination activity is slowing down. Can you just maybe talk about Florida? In the longer term, is this kind of the cost of doing business and getting more geographic diversity, you have to kind of take the good times with the bad? Or is this enough to kind of make you tap the brakes maybe a little bit more on what you're doing on the mainland?

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Well, I think, first of all, our concentration in Florida is really Miami-Dade County. And if you see the economic trends are very, very positives in terms of inflow of residents and demographics are just positive trends.

When you look at the behavior of the customers, it's different. And I think you can see that in some of the neighbor banks that operate with us, I have to say that we're doing similar -- we say similar trends across what we consider our peers there. It's a market situation where some of the monies moving out to treasuries to really non-bank competitors. We do have an -- we had an niche business with commercial clients primarily. Some of this money was sitting there for a long time, started to move last year and it's moving -- it move.

I have to say, the impact actually was prior to the March event, which we saw and it was really yield driven. And actually some of that money was used to -- there's a lot more sensitivity in the market to pay what we consider our current market rates for loans, especially, on some of the CRE and the facilities. Some customers are just paying down with their own liquidity. There was significant excess liquidity accumulated over this year.

So, I think, we monitor ourselves. It's a cycle. We're moving with it. We're committed to the market. As you say, you have really good times there. Good as a quality. We feel we have a solid book, and obviously, margin is compressing differently to what we see in our main market. So it's part of the -- regional diversification is important and we expect to sustain at our franchise at the current levels. Yeah.

[Timur Braziler, Wells Fargo]

Great. Thanks for all the questions and nice quarter.

[Orlando Berges-Gonzalez]

Thank you.

[Operator]

Thank you. Our next question today is from Kelly Motta from KBW. Kelly, please go ahead. Your line is open.

[Kelly Motta, KBW]

Hi. Good morning. Thanks for the question. I think maybe I'll go back to the funding side of things. In your release, you mentioned that new account openings were actually higher in March and they had been in the prior 12 months. I'm just wondering if you could take us back to the month of March, if what you saw there was maybe some proactive, kind of defensive move on your part in the -- well, like market uncertainty was going on, or if there was any sort of specials that was irrespective to the March volatility? Just very interested in what drove that?

[Orlando Berges-Gonzalez]

Okay. When the events happen over that weekend, we prepare ourselves with communication and scripts to answer client questions and we do have a high end portfolio, a high balances portfolio, that obviously we expected some contraction and concerns. Some of that happened, but very limited number of clients move out to other sources because specifically concerns very limited numbers.

On the other hand, we've been building capacity to grow the deposit franchise. Remember, we were very busy last year, Kelly, doing consolidation of branches and things that distract, managing the attrition, managing the vacancies. So, that is in the past. So, we have built a capacity to increase, to our targeted levels of new accounts, new customers coming into the bank. So, actually, March was a month that we achieved the highest number of accounts open, very close to our goal that were based on our capacity plan and the network that we have. So, noise, I think we all have to do the proper education, explain why the franchise is different to the banks that fail in the U.S. during those -- during that event. It's a very different profile. We have the ground variety, the excess liquidity, the protection of an insured deposit. So, I think, we were proactive in managing it and these are the results.

[Kelly Motta, KBW]

Thanks. And then, on the other side of the balance sheet, I think in your prepared remarks, you reiterated kind of mid single digit loan growth as the outlook. And I believe on last quarter's call, you talked about the potential of public/private partnerships being additive towards that. Just wondering if you had an update on how potential projects like that were trending and if that's contemplated in your loan growth outlook ahead that you updated?

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Yeah. That continues to be on top of that. They are -- those trans -- there's a couple of transactions in the market today that I will say most banks in Puerto Rico are looking at them. We believe those are -- some of that will be second half of the year, even though they're taking traction, they're in the process of obtaining bids and RSPs and being working the financial markets, fairly large deals I have to say. So, moving -- they continue to progress and yes, I heard -- as I mentioned before, that will be on top of our mid digit target.

[Kelly Motta, KBW]

Got it. Appreciate that. And maybe last question for me. On the capital front, I appreciate the commentary that you'd revisit the buyback in the second half of the year. Obviously, with what's going on in the banking industry, people are looking closer at, capital fully baked for unrealized losses. Just wondering if any of these events is changing the way you view optimized capital levels, and how you're managing capital in the balance sheet ahead?

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Well, definitely, we decided to pause in this quarter to reassess what are the newer risk that are in environment -- what could be potential changes to regulatory ratios, we don't know that and the people are talking about. So, we are reassessing all the potential new risk.

On the other hand, we do have a lot of capital, and obviously, remain -- our goals is to distribute a 100% will be basically stay at the same capital level that you are today, as we move on through the year. So, there's -- when events like this happen, it is the most -- actually is to pause, understand the items. We do stress testing considering new potential scenarios. We feel if we are where we are today and these trends continue on a flat scenario or we are today, things will continue to perform well. So, we believe that we will conclude on that and we'll form the market in July unless new things come, that should be the outcome.

[Kelly Motta, KBW]

Great. Thank you so much for all the color and congrats on a great quarter.

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Thank you.

[Orlando Berges-Gonzalez]

Thank Kelly.

[Operator]

Thank you. [Operator Instructions]

Our next question is from Alex Twerdahl from Piper Sandler. Alex, please go ahead. Your line is open.

[Unidentified Analyst]

Good morning, guys. This is Beter [ph]. I'm just filling in for Alex Twerdahl today. I just wanted to touch on loan growth. I know you've mentioned previously. We've seen commercial and construction growth in Puerto Rico, and as you mentioned, unexpected paydowns in Florida. Could you give us more color, maybe by geography or by segment, if we should expect to see more of that in the coming quarters where we see growth in Puerto Rico more in some declines in Florida, or any color on that would be helpful? Thanks.

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

First of all, pipelines continue to look healthy and -- in both regions and actually in the ACR region also. So, we -- obviously, our guidance on long growths have been single digit. It varies by sector and by region. We calculate the guidance based on the overall portfolio. And when we say consumer 10%, we talk about the overall franchise, independent of regions. When we talk about 5% means based in commercial, is across the region. So -- and then, the mortgage, we guided flat obviously where market -- where rates were during the quarter, that was a challenge, but we still believe that some of that can be recovered.

By region, I think, Florida is being more sensitive to rates, so it's going to be more difficult to grow in Florida. But on the other hand, when we look at the pipeline, the portfolio should be sustained and we don't expect it will surprisingly high the number of payments. So, hopefully that doesn't happen going forward, because of rate. And we do expect more stability.

In Puerto Rico, we do -- we have more certainty on the growth because of less volatility on the paydown side. So, I think, we look at it overall by portfolio, by asset class. We don't necessarily look at individually by region in terms of how we provide the detail, but that's what I can share with you.

[Unidentified Analyst]

Got it. And then one more question. I know you guys said that you expect more pressure on the deposit side. Do you have any update? I know you guys said that you expect cycle to date betas, or expected betas to be 18% to 22% in that range. Does that still stand? Or do you have a expectation for what you think betas could peak at this cycle?

[Orlando Berges-Gonzalez]

Well, what -- on the 18% to 22% was the average on all the other deposits excluding public funds that -- during the last quarter. We split it in this quarter in three components. Basically because of what we have seen in terms of shift to time deposit, that change a bit the mix of how deposit portfolio -- its behavior has been happening lately. The non-interest-bearing accounts, excluding the time deposits and the government, was only 11% beta this quarter, and that should be more or less like that.

The only thing that's been difficult to predict, it's the fact that we saw that large movement into time deposits. In reality, the time deposit levels came down dramatically from 2019 to 2022, 2021, with rates being so low, we saw people as time deposits mature, just keeping the money on their regular transaction accounts. And many of those peoples are starting to go back with higher rates and putting deposits on time deposits.

So, that -- the acceleration of betas on the time deposit side has been more difficult to anticipate because of the shift in mix on terms and the kind of funding invoice it coming from. Some of it's coming from non-interest-bearing, which obviously has a bigger impact. Some from other lower yielding non-interest-bearing accounts. So, again, the government side, should be in that 90% to 95% range. Time deposits is a different story, and all the accounts should be in that 11% to 12% range that I mentioned.

[Unidentified Analyst]

Got it. That's all for me. Thanks for taking my questions.

[Orlando Berges-Gonzalez]

Thank you.

[Operator]

Thank you. [Operator Instructions]

We have no further questions, so I'd like to hand back to Ramon for any closing remarks.

[Ramon Rodriguez]

Thanks to everyone for participating in today's call. We will be attending Wells Fargo's Financial Services Investor Conference in Chicago on May 16th, and look forward to seeing you -- a number of you at this event. We greatly appreciate your continued support. At this point, we will end the call. Thank you.

[Aurelio Aleman-Bermudez, President and Chief Executive Officer]

Thank you.

[Operator]

Thank you everyone for joining today's call. You may have disconnect your lines and have a lovely day.