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First Bancorp
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Good day, and welcome to the First BanCorp's Third Quarter 2018 Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [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 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 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 issued by First BanCorp, you can access them at our website under Firstbankpr.com.
At this time, 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 was $36 million, was up 17% from the prior quarter and our pre-tax, pre-provision for the quarter again at $60 million. Importantly, we achieved progress in three critical objectives. Number one, we continue to derisk 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 if Puerto Rico economy continues to show improvement in key economy 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. On employment ratings improving, gasoline consumption is improving, cement sales are up, sales tax collections are up, retail sales are up. So there's a lot of components here that demonstrate that the core economy is moving in the right direction.
The new fiscal plan approve 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 next year's. While we view this as a positive we do expect a slower pace on the inflow of funds that's why because we believe the reconstruction activities ahead with actually demand more time for execution, obviously due to complexity and compliance requirements. But the funds will be deployed you know basically over the next you know one to five years.
Our portfolio grew this quarter, I think it's important to highlight that was achieved even with meaningful organic reduction in the resolution of non-performing assets. They perform loan in Puerto Rico by itself grew approximately $107 million and over $50 million in Florida. There is definitely – we’re continued to see increasing investor demand. When we look at you know when we take into consideration the progress on reducing the NPA, definitely the excellent work done by our credit and special assets teams. And the investor demand led to the non-performing asset reduction of $98.6 million for these quarters. 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 also positive they continue to sustain stable trend for the third quarter in a row after the hurricane. And definitely our existing strategies continue to get traction driven by investor interest and demand.
During the quarter, we achieved sales. We also moved some additional loans to held for sale to continue our derisking path. With capital continues to build now you know three of the four key capital ratios are now almost 20%.
Yeah please now move to the loan portfolio slide 6. As reflected in the bar chart on the right, increasing trend in origination activity continues if we go back to the fourth quarter of 2017. Now we see the third quarter of 2018. Every quarter we being able to show, further improvement and we actually expect this trend to be sustained.
Long 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 stronger relation activity to this overall growth.
The overall corporation loan portfolio increased $61 million this quarter, but we'll have to consider this was impacted by a $30 million reduction in our mortgage book driven by our focus on confirming mortgage origination and actually sales to the secondary market.
Please let’s move now to deposit, slide 7. Core deposit were up slightly this quarter, excluding government, they were relatively flat. We actually continue to focus on optimizing the use of excess liquidity. At the same time, improve our mix. If we look at the progress over the past years, since the hurricane, our core deposits grew approximately $1 billion or 13% over the past four quarters. We have materially transformed the makeup of our deposit mix with non-interest bearing 25% of our deposits and brokered now reduced to 7%. Definitely you know deposit betas still remain low in Puerto Rico. Our cost of total deposit excluding brokered 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 it obviously remains a top priority for our management team and the board. 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 over 70 anniversary as a Puerto Rico corporation. It also marks our 25 anniversary as a New York Stock Exchange listed company. You know 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 this milestone on October 31. Also, I want to highlight, September mark, the one year anniversary of the devastating storms that impacted our market and have to say 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 communities. We originated and renew approximate of $30 billion in loans and credit facilities. We grew our core deposits by $1 billion. We have reduced our non-performing assets 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 continues 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 a fiscal plan and its execution to achieve final fiscal stability in the island. There are also ongoing discussions on the proposal of tax reform, we’re monitoring those discussions. We’re also monitoring deposit in performance of insurance companies that are supporting our market. We have to closely monitor the pace of inflows of a construction of funds. I think importantly there is you know we are closely working with the opportunities and 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 I will call back later for questions.
Good morning everyone. So I'll touch on some of the key highlight that are more detailed on the earnings release we sent out this morning. As 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 $10 million charge, which is tied to non-performing commercial loans that we're transfer to held for sale. And also reflects a $2.8 million reserve release from the qualitative allowance for storm related losses.
For September 30 is 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 risk that have been identified in the portfolio and specific research have been allocated. Taxes for the quarter remain at basically at same level 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 portfolios 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 for repayment of brokered CD's, repayments of repo agreement from 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 4.54% was the change in mixing deposits that we've seen over the year as non-interest bearing accounts have grown significantly, as a percentage of total deposits.
Overall, deposit cost, what Aurelio also mentioned is 64 basis points. Its only $0.01 up. Betas in Puerto Rico have remained very stable. Even though, we're seeing a little bit of pressure in some of the time deposits that the overall doesn't show. And with significantly liquidity reducing the need of wholesale funding, which clearly has been more volatile, has improved the margin. Other income components, the key thing there was it non-interest in general was down to $2 million, which was largely due to $2.7 million loss we had on the sale of non-performing commercial and construction loans.
We of the two loans, one was sold at a small gain and the other at a loss. The other items were we had -- we sold the facilities of one relocated branch we had and made a $500,000 gain and we see $500,000 in insurance proceeds this quarter that were booked, that’s part of the other non-interest income components.
The other items were; fairly in line or slight improvement in the case of service charges on deposits, as we have grown the non-interest 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. This are not expense that recur every quarter, so 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, with an 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 and we have significant amount involved in there. So, also saw some in some increases on occupancy costs, mostly electricity and some items that are – 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 non-performing that were down $98.6 million and non-performing side at 4.3% and it's a total of almost $523 million. This improvement include sales of $25 million on non-performing. There were $44 million of loans restored to accrual status or collected. We did collect in the commercial portfolio, we did collect our $8 million. We had reductions 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.
At the end of the presentation, you could see some details on inflows and outflows for the quarter. Inflows were down $73 million, largely related to a -- took large cases that migrated or commercial cases that migrated last quarter, which were approximately $7 million, but we also a reductions in inflows of $4 million consumer portfolio. Early stage delinquency slightly down from second quarter and continue to show to same pattern we've seen throughout the year, after the year hurricane which has been consistently lower than what we had prior to hurricane levels.
Charges for the quarter were higher, were $33 million, which is 152 of average loans compared to $23 million we had last quarter, was driven by $12.5 million of charge-offs that we took on the commercial loans and we transferred to held for sale. This represent our 57 basis points on average loans out of the 152 increase, so would 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 non-performing. And as we have disclosed in the past, the carrying amount out of commercial non-performing it got to have 51.7 cents per dollar, which is reflection of the charges and reserve we have on these loans.
With that, which are some of the key components, I'll open up the call for questions.
[Operator Instructions] The first question comes from Ebrahim Poonawala with Bank of America Merrill Lynch.
So, just the first see if we can talk about the NPAs decline, so they went down about 70 basis points this quarter. 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 steps you need to get to to get capital return going. So, if you can talk 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?
Yeah, I think first of all you know there's no specific number and make sure that we're clear that. You know there's a co-relation, but there's no specific civic number. Remember, the other relationship with excess capital is also a consideration here. So, when you look at the risk profile, its two side of the equation, so capital also counts. With that, I think it's important to, obviously it's a function of inflows and outflows that we have now. You know we are optimistic that the pace that we will be able to show is positive, the way things look today. Based on investor interest definitely some point next year, we expect to be at that mark that you mention. You know obviously, we're working towards expediting as we could with reasonable judgment and use of capital. But it's a very interactive process. You know we maximized the value of the assets while we protect our capital. 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, the 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 have been having in the first part of the year?
Yeah, it's also remember, that’s the function of migration in. So, if things continue the way they are, if you be on the lower end or your estimate on the higher end, but it’s a functional migration and 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 could support that 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?
Yeah, we think so, this quarter clearly was over $1 million higher than that. 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 the average size of the loans in Puerto Rico for servicing and some of the expenses incurred in moral valuations. We do have additional expenses for while that at this stage we're dealing with [indiscernible] implementation and 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.
Thanks for taking my questions.
Thanks.
Thank you. And the next question comes from Alex Twerdahl with Sandler O’Neill.
Hey good morning guys.
Good morning Alex.
A couple of 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 adversely classified bucket looks in the kind of what would be reasonable to expect for inflows in the future?
We don't disclose that much detail, but definitely, if we look at what we had at hand, you know two years ago, one year ago, and when we have at hand today. There's less significant loans in that classification with some other size that could be a potential. But we still have a couple of that relationships that we continue to monitor. Probably two years ago they were in the 20s not in the couple. So, definitely the forward looking migration, not only because of the environment and the debt capacity. But for what is in the portfolio today it should be less. Obviously we have to take into consideration that interest rates are coming up. We also look at this activity to all borrowers to that, but taking into consideration the cleanup that we have achieved in the portfolio, the remaining large cases are at minimum now.
Is there any -- as you saw adversely classified came down, but in the quarter non-performing 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 and the provisioning needs.
Great. And then just on the other side of the NPA, reduction calculation, I think you’ve kind of highlighted the REO and the held for sale as the low hanging fruit. Is that still the case and how long generally, you know from the demand that you're seeing today. Would you expect some of the held for sale loans to come stay in the held for sale bucket?
I think 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 one to two quarters in some of those, the way we’ve seen things now, yeah. We move more this quarter. Again, driven by the same interest that we moved last quarter. There is incoming enquiries on asset. There is prices that are closer to lower expectation. Again, there's a cost 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. So, it’s a very interactive process and I think obviously, the fact that we're moving things for sale is that we believe we have certainty on – certain level of certainty of moving the asset out of the balance sheet and then 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 each of this quarter. Is that related to specific time period from the end of the moratoriums? I mean, is that something, I think we've kind of expected the charge-offs to pick up at some point following the hurricane. But just you know, is this something that's kind of a one-time to the third quarter. Or should we expect additional clean up in the fourth quarter.
It was the 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 we realized that it's more of a grey area at times, but the charge-offs that we have for the quarter included items like on the credit card portfolio that we saw were current before the hurricane and once the moratoriums expire, we saw some of those loans or a chunk of this loans start moving from bucket to bucket every month. Typically, we charge up credit cards at 180 days.
So, that was clear and some of the other portfolios in the auto and personal loans portfolio, which also were cases that were current before the hurricane and once the moratorium expired. It takes a little bit of time before you see whether private business is going to be a parent and eventually showed up. There could be some other related, but I don't think that because of the timeframes of of the six month timeframes after the six months to eight 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.
Yeah, well there's really nothing in the horizon that leaves us [ph] that as a trend when you look at early delinquencies and NPA levels of those portfolios.
Great. Thanks for taking my questions.
Yeah. Thank you, Alex.
Thank you. 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 average yields on the loan portfolio and all of the yields on the largest segments in the portfolio we're either flat or down in third quarter versus second quarter. Just wondering if you could talk a little bit about the percentage of – remind us sort of percentage of the portfolio and its adjustable and variable rate and talk about interest sensitivity and what you're seeing is or what you expect as far as loan yields going forward.
So, it all depends on the portfolio as you mentioned and we view, 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. What we originating it's a higher percentage of conforming paper that is being sold. So, that number at this level is not changing much. On the commercial side, we do have an amount of loans that are floating, about two-thirds of the portfolio is floating and we should see some improvements. But there is a relationship of what’s performing or non-performing and the growth and repayment, we can even though we've grown we continue to see some levels of your payments on the portfolios with the excess people have. This quarter we had about $32 million of repayments of loans that were large components. So, that affects the margins, but clearly with rates going up, we've seen some pick up on the floating rate portfolio of the commercial side with a clear – now customers want fixed rate on, so you have to deal with that as we can understand.
The auto and personnel loans portfolio, there are higher yield portfolio. They will move, but not at the same pace. You don't see the same pace because of the rate already, so the fact that LIBOR goes up 25 basis points, I mean, prime goes up 25 basis points, 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.
Also Joe, it’s also that makes us important, where we grow in the portfolio. The quarter move on the loan yield from 6.41% to 6.43%. We go back a year and it was 6.09%. So, you see that repricing effect on base rates. But as Orlando say, we grow more in the consumer, which is more fixed. We grow more in CRE, which is also, some of them are fix versus the other component of commercials and mortgage it's a lower yield. So, we're not growing the mortgage as you saw the movement in the low portfolio. We're trying to focus actually on the gain and sale of conforming mortgages in that component.
Just generally on the – in the commercial portfolio if our, yeah, new loan originations, I’ll take it they're being put on at higher yields than sort of the average portfolio yield.
That's the correct assessment, obviously new originations are at current rates yes.
All right. Thank you.
Thank you. And the next question comes from Brett Rabatin with Piper Jaffray.
Hey guys good morning.
Good morning, Brett.
I 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 CD's. How you’re thinking about managing liquidity over the next few quarters? 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 you know kind of linked quarter trends and inflows?
Yeah, I think it's going to be -- it's something that you know it’s a day-to-day management. Very dynamic, what's happening in the market, you know the inflow of funds, obviously, it’s a catalyst, but the timing is unpredictable. So, obviously, we had inflow of funds in the first six months of the year, that was significant and that was reflected in the bank. You know there's 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 doing opportunistic on that specific segment.
But you know as we move on, you know that we've been carrying excess liquidity for some time. So, we continue with the objective of reducing brokered, improving our [indiscernible] very products with services and products linked to it. On the CD's -- on the typical deposit money markets, with money towards the market we adjust accordingly. Obviously, everybody knows that the Puerto Rico betas remain low. And the [indiscernible] betas are high. So it's really to optimize the three reasons that we have. It’s very dynamic and as I say we have to make decisions, you know almost every day based on what we see you know comes in and goes out. You know this quarter was also impacted by -- we had good -- we have more account, 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 reconstruction on the commercial clients that will still taking place.
So, that also impacted some of the flow in the quarter. You know our goal is to continue to improve our core. There's going to be increases in the consumer interest-bearing side. Hopefully we can mitigate some of that with the interest-bearing growth. When you look at it the growth that we achieved, the quarter was related to the areas of the government deposit structure that we're looking after.
Okay. And then wanted to talk about loan growth for on that, I mean, I think about the loan portfolio you kind of implied for the past two years and you know I get that as a quality clean up it may have had part of an impact on that. But if I think about 2019, you know 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?
Yeah, I think I did mention, its important when obviously because our derisking activity, you also have to look at performing loans growth, how its moving, that's what I mentioned. If you look at what happened the quarter you know in Puerto Rico we grew $107 million in the performing book, which obviously that gets kind of hidden because of the fact that we saw notes and we've got famous on NPA and we got you know and we got also, you know some charges. So, obviously the cleanup will continue to impact the overall portfolio, but I think you should monitor how the performing book is moving because obviously we're starting the quarter with you know $150 million borrowed loans and we started the prior quarter when you look at loans that would generate revenue.
So, that's a metric that we continue to monitor. We expect that we would continue to achieve the trend. Obviously the share 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, you know some of these deals that we’re looking for today should be an opportunity of growth for 2019. But that way we see the pipelines, most of the growth actually should happen in Puerto Rico.
Okay. And then maybe just one last one on the overall outlook, I mean, with the new fiscal plan. 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. As I mentioned before, I think the timing of the funding is kind of unpredictable. You know 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 monies there is not going to go away, it’s just you know a little difficult to predict when the projects will come to fruition. We know the demand for construction workers continue to increase. We talked to developers we talked to some of our clients. We're starting to see some of these projects committing to us.
More obviously they're not necessarily going to be closing 2018. Well 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 that really obviously the political discussions are taking place to what the demands minds of the board are, I think that's not going to stop. I think that would continue as a normal, it's probably the expected reaction of the situation. So, I think on the other hand, also I have to mention the opportunities on initiative. Now final guidance was published a 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 seize the opportunity. But we believe that those could be significant capital Puerto Rico, almost all Puerto Rico classifies an opportunity so qualified. With a number of projects that we see the recent opportunity for also additional private capital to play in the reconstruction.
Okay. Great. Appreciate all the color.
Thank you.
Thank you. And the next question come from Glen Manna with Keefe, Bruyette & Woods.
Hi, good morning guys.
Good morning, Glen.
Congratulations on the bank’s anniversary.
Thank you.
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 non-performers. Who is the incremental investor now that's kind of buying in Puerto Rico? I wanted to just ask another part on that because I think I saw on the tape that you're in a new alliance. I think with RESNET [ph] and cut the kind of, of course, some of your REO online? And what are your expectations out of that program? Maybe if you just give us some details around that?
Well, they probably turn on our alliance, we just you know implemented the software and make it more easier and agile to be able to display our inventory with additional information and tracking mechanism. So, is what really you know a more effective process to dispose our REO inventory which more you know wider access, more pictures, more information on the properties. You know that's really what it is. It’s a new technology platform. So, you know 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 participating in prior transactions in Puerto Rico. And they have the capabilities of money in 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 also see some local investors that want to put some of their capital to work based on the opportunities that they see on a specific assets.
Okay. Maybe or whether you could 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 two-thirds of that specific reserve? Or that special reserve for the hurricane? Is my math right on that?
No, the $25 million it's correct, the $14.5 million included charge-offs that we’re taking against the reserve this quarter. And some loans that -- some balances that we're allocated to specific components. But a large chunk of 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 the big reserves on the loans, is already part of the specific portfolio reserves and the remaining its $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 DFAS submission and normally you've kind of release the results around the end of October. So will that be the case again this year or you're not required anymore?
No, we're not required, that was eliminated for basically for all banks that are on the $50 billion or a little bit higher -- $100 billion. So, we no longer require to do a DFAS submission or run a DFAS process. We do our internal stress testing for our own purposes. But -- and we're not required to do anything specifically. I mean, yeah the exercise for this year would not have been that different from all years.
Okay. Would you be voluntarily disclosing the results of that internal study or not?
No. Because some of those are idiosyncratic at scenarios that we put in for our own purpose to analyze industries or behavior. So, you know it's very difficult to try to explain why X or Y. It's more of a capital management and capital planning kind of a exercise.
Okay. Thank you.
Thank you. [Operator Instructions] And the next question comes from Arren Cyganovich with Citi.
Hi, I wonder if you could just talk about what your plans are to mark the kind of the trans capital 20%, CET1 is very high level and if you can have it returned, what other options do you have in terms of M&A or other portfolio acquisitions that you can utilize some of that excess capital?
Fortunately, 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, you know the capital is there if you stay struck to the review, but we have obviously, we see some growth opportunity organically. There could be some organic opportunities 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 you know obviously dividends or buybacks. So, everything is on the mix I have to say and there's very active discussions on the matters. I wish that I could give you now a more specific, 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.
Okay. Thank you.
Thank you.
Thank you. And as there are no more questions the present now, 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 listed NYSE Company on October 31st. In addition, we have a number of conferences and investor tours the next couple of months. On November 5th, we’ll be attending the Bank of America Merrill Lynch Future 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 7th. KBW has planned their Annual Investor trip to Puerto Rico on December 17. Additionally, Bank of America will be coming down 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.