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Executives

Jorge Junquera - CFO

Carlos Vazquez - SVP, President of Banco Popular North America

Enrique Martel - Manager, IR

Richard Carrion - President, Chairman and CEO

Vanessa Rodríguez - VP of Banco Popular North America

Analysts

Joe Gladue - B Riley

Ken Zerbe - Morgan Stanley

Brett Scheiner - FBR Capital Markets

Derek Hewett - Keefe Bruyette & Woods Inc.

Popular Inc. (BPOP) Q2 2011 Earnings Call July 20, 2011 2:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011, Popular Incorporated Earnings Conference Call. My name is Jonathan and I am your operator for today. At this time, all participants are in a listen-only mode. We will be conduct a question-and-answer session after the prepared remarks. (Operator Instructions). And as a reminder, this conference call is being recorded for replay purposes.

I would now like to hand the call of to, Mr. Enrique Martel, Manager of Corporate Communications. You may proceed, sir.

Enrique Martel

Good afternoon, and thank you for joining us on today's call. Our Chairman and CEO, Richard Carrion; and our CFO, Jorge Junquera will review our second quarter results and then answer your questions. They will be joined in the Q&A session by other members of our management team.

Before we start, I would like to remind you that in today's call, we may make forward-looking statements, which are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release and are detailed in our SEC filings, our financial quarterly release, and supplements. You may find today's press release and our SEC filings on our webpage, which you can visit by going to www.popular.com.

I will now turn the call over to Mr. Carrion.

Richard Carrion

Good afternoon, and thank you for joining the call. Please turn to the second slide. For the second quarter, we've reported net income of $111 million compared with net income of $10 million loss in the first quarter and a loss of $44 million in the second quarter of 2010.

Second quarter profit was mainly driven by higher net interest income and an extraordinary tax benefits of $60 million, which were partially offset by higher loan loss provision related to the non-covered loan portfolio.

This is our second consecutive profitable quarter and we continue producing strong and consistent levels of revenues. While the level of credit cost remained elevated we continue to make progress. The most telling sign is our top line revenues which remained steady despite the economic challenges we faced in our market.

Net interest income increased by $31 million to $375 million when compared with the previous quarter and our net interest margin remains well above 4%. We drew down the reserve for non-covered loan losses for the fourth consecutive quarter albeit at a reduced pace. Loan loss provision of $144 million includes $49 million related to the Westernbank covered assets, which represented higher recognized, credit losses in certain pools of loans. Keep in mind that an amount equal to 80% of the provision related to this covered loans flows back through net interest income due to the FDIC loss sharing agreement.

Excluding covered loans, held-in portfolio and non-performers increased by $17 million. While we would like to see this number down every quarter we are encouraged by the fact that NPL inflows in our commercial and construction loan portfolio at Banco Popular de Puerto Rico have declined in the last two quarters.

The FDIC assisted transaction has been instrumental in broadening and supporting our revenue streams amid the slowest economic environment. Each quarter we review expected losses and cash flows from the covered loans and results have consistently been positive. While quarterly variations in the loan loss provision related to Westernbank may occur, the performance of the covered loans continues to exceed our expectations. We continue to seek additional opportunities to raise our top line revenue.

During the second quarter we completed our second purchase of high quality Puerto Rico mortgages in the last six months adding an additional $282 million in mortgages to our loan book. The purchased mortgages including a $236 million we acquired in the first quarter have an average FICO of 718 and a loan to value of 81%.

As I said in the first quarter, the overarching scene here is that we have the machinery to add these assets with very little marginal cost from an operational point of view, so if potential asset purchases make sense we are going to go ahead and do them.

On a smaller scale we acquired certain assets and liabilities from the local retail branch of Well Fargo Advisors, which should strengthen our retail brokerage business. This transaction was closed in July, right after the end of the second quarter and should be immediately accretive.

The tax agreement was the main significant event that had an impact on second quarter results. There are number of significant items in the previous quarter widening the difference in pre-tax ncome.

So if you please turn to slide 3, we will review some of these items. We reached an agreement in June with Puerto Rico Treasury Department that reduced the tax expense we had recognized in previous quarters.

The tax reductions related to certain loan charge-offs recorded in the years 2009 and 2010 would be deferred until the year 2013 to 2016. As a result we made a payment of $89 million to the Puerto Rico Treasury and recorded a tax benefit of $54 million, for the recovery of the tax benefits we were then able to recognize under GAAP.

We also recorded a tax benefit of $6 million related to tax-exempt income for the first quarter of 2011. The different in non-interest income between the first and second quarter was largely widened by two events in the first quarter. In Q1 we recorded a $17 million net gain from the sale of our processing operations business in the Dominican Republic and changes in the local tax laws led to a $14 million equity pick up from our 49% interest in EVERTEC.

As you see on this slide, first quarter results also included an impairment related to the Venezuela processing operation and penalty for the extinguishment of high cost debt among other events.

Jorges will expand on the financial results shortly but first turn to the next slide for an overview of the Puerto Rico economy during the last three months. The economy in Puerto Rico has seen some improvement. The recently implemented tax reform has led to higher government revenues, while retail sales increases 4% during the first two months of the year compared with the same two month period a year ago.

Job growth continues to be a challenge and the unemployment rate on the island is still very high. There were three developments in the second quarter that merit mentioning. The government award of the first public-private partnership to a consortium last June, effectively monetizing the future toll stream of a highway strip in the northern part of the island for the next four years, in a deal valued at $1.4 billion.

The administration also sold $304 million in general obligation bonds at June, to fund infrastructure projects, among them the completion of the remaining expansion of highway that runs in the north eastern coast, road improvements and municipal projects.

Thirdly, the government expanded the housing-incentives law until October 31st, originally inactive with sunset of June 30th, the broad package of incentives has been a catalyst for mortgage originations.

As recently reported by the Puerto Rico secretary of housing during the first 10 month of the incentives, home sales totaled 12,491, of which 3,076 were new homes. New units sold in this period were 91% higher then in the previous year.

The second quarter was particularly strong for our Puerto Rico mortgage operations. Mortgage originations at Banco Popular reached 367 million in the second quarter an increased of 18% when compared with the previous quarter and 40% when compared with the same quarter a year ago. The economy is certainly not what we would like to see it, but there is increasing evidence that it may be evolving now.

We will reiterate however what we’ve said in previous calls there are still structural challenges much as it depends on time to fuel that still need to be worked out but there is certainly less uncertainty clouding the local economy.

With that, let me now turn it over to Jorge for a more detailed explanation of the financial results.

Jorge Junquera

Thank you, Richard. Let’s move to Slide 5 for an overview of our consolidated financial results for the second quarter. The three big moving parts in the quarter were the tax benefit, the increase in net interest income and the increase in the provision. On top of the tax agreement reach, we also benefited from a lower tax rate that was introduced when the Puerto Rico Tax Reform was enacted at the beginning of the year. The effective tax rate for Banco Popular de Puerto Rico for 2011 is estimated at 22%.

Actual and expected increases in cash flow from covered loans, higher interest income for mortgages and lower liabilities cost drove net interest income higher in the second quarter increasing $31 million to $375 million when compared with the first quarter.

Our net interest margin rose from 4.15% in the previous quarter to 4.48%. Reducing funding cost has been a major initiative of the corporation this past year. Our average cost of funds is falling over the last 12 months by 47 basis points to 1.9% while our average yield on loans and leases has increased by 41 basis points to 6.73%. The high cost debt will be paid in previous quarters, helped the margin in quarter two. And the major drive behind the improvement was a reduction in our cost of deposits.

We have continued to make progress in reducing our Puerto Rico deposits as deposit costs, as a result our interest expense on the profits declined by $6 million or 8% in the second quarter. We will continue to take advantage of opportunities to further reduce our deposit cost primarily in our Puerto Rico business.

The provision expense increased by $69 million with $33 million of the increase related to covered loans. The main point I would like to make of our covered loans is that they are performing better than initially expected. Our regular second quarter loan review found that overall expected credit losses declined versus the previous estimate.

A minority of the pools of covered loans did show increases from expected losses. And the loan loss provision was increased to reflect it. However, on an aggregate basis actual unexpected cash flows from covered loans increased and the benefit will be recognized in future periods through higher loan yields.

The FDIC loss share income this quarter amounted to $39 million an increase of nearly $23 million when compared with the previous quarter. Despite the rise in loss share income consolidated non-interest income fell by $40 million to $ 124 million. The decrease was principally the result of various special non-interest income items in quarter one and $13 million negative adjustment in the valuation of disbursements on the unfunded commitments of construction and commercial loans held-for-sale.

Expenses were up $7 million in the second quarter when compared with the first, however if we exclude the impact of the significant items in the first quarter expenses increased by 24 million, mainly due to higher FDIC assessment.

Please turn to Slide 6 for an overview of our Puerto Rico business. Gross revenues in Puerto Rico amounted to $439 million in the first quarter, up $22 million from the previous quarter. Net income amounted to $140 million for the quarter, compared with a profit of $4 million in the previous quarter.

Excluding the tax benefit mentioned before, the Puerto Rico business earned $80 million in the second quarter. Net interest income increased by $30 million to $325 million. The margin in the Puerto Rico business improved to 5.19% from 4.78% in the first quarter.

Operating expenses increased by $17 million to $217 million, mainly because of FDIC assessments. The loan-loss provision excluding covered loans rose by $19 million to $71 million in the second quarter driven by a rise in commercial non-performing loans.

As an update on the Puerto Rico construction loan sale, there are currently several buyers interested in the commercial and construction loans held-for-sale which are reviewing loan information and conducting due diligence work. We will actively pursue those deals that make sense for the corporation.

Let’s turn to Slide 7 for a closer look at the performance of the covered loans. There are several takeaways from the performance of the covered loans portfolio. The discount amortization from the revolving loans is running off, netting only $9 million and the equity appreciation instrument issued to the FDIC which expired without further exercise produced only a gain of almost $600,000 compared to a gain of $7.7 million in the previous quarter.

The two main revenue drivers in covered loan portfolio are the interest on the non-revolving covered loans and loss share income. Both came higher this quarter. The interest on non-covered and non-revolving covered loans increased by $29 million to $107 million.

The FDIC loss share income increased by $23 million to $39 million, while the provision amounted to $49 million, a $33 hike over the previous quarter. The later two are intertwined as any change in provision is offset 80% by the loss share income.

This quarter we revaluate our loss estimates. The provision recognized this quarter is related to a minority of the pools of loans that make-up the covered loans and is recognized immediately, whereas increases in the estimated cash flows are prospected to be reflected to interest income in future periods. Looking at it through a wider scope, the opportunity for us lies in securing viable long-term relationships and meeting the financial needs of additional clients.

Please turn to Slide 8 for an overview of our U.S. bank. The U.S. bank basically broke-even in the quarter as we continue to work hard to improve financial performance. Gross revenues were steady at $94 million for the quarter compared with $92 million in the previous one.

Our margin expanded slightly by 4 basis points to 3.64%. The bank provision $25 million for loan losses compared to $8 million in the previous quarter. The increase was caused by the first quarter event in which the bank recaptured $14 million after the price for the sale of the non-conventional mortgage portfolio came in higher than expected.

Excluding the impact of loan sale in the first quarter, the provision increased by only $3 million. Excluding loans held-for-sale, non-performing loans fell in the quarter by $23 million mainly in construction portfolio. Expenses increased by $4 million primarily due to variances in OREO expenses between quarters.

We will roll out the Popular Community Bank Rebranding program in August to California and Florida regions. As you know the program seeks to appeal to a broader base of clients.

Please turn to slide 9 to review credit performance and the allowance for the second quarter. Non-performing loans excluding loans held-for-sale increased by $70 million though largely to $30 million increase in Puerto Rico commercial loans.

As mentioned earlier, credit metrics in the US continues to improve for the most part with non-performing loans falling by $23 million. Non-performing loans in our held-for-sale portfolios declined by $65 million, mainly due to payment received from construction loans in the held-for-sale portfolio in Porto Rico. Mortgage non-performing loans in Porto Rico, the primary driver of increases in previous quarters rose by $10 million which is lower than increases in recent quarters.

Porto Rico mortgage charge-offs remained low at less than 1% for the quarter. We have boosted our mortgage collection and loss mitigation efforts to closely monitor the performance of the [structural] loans.

As of the second quarter, 75% of restructured mortgages in Puerto Rico were still performing at the one-year mark. Non-performing loan inflows in commercial and construction loans in Puerto Rico fell again this quarter, down $16 million when compared with the first quarter.

Inflows in these two portfolios have declined during the first six months of the year when compared to the previous six months. As we have pointed out in the last webcast, the ability to maintain the strength depends on future economic stability. The reduction in non-performing loans inflows in Puerto Rico was offset by a $17 million increase in the US. The increase in the US was primarily attributed to one large relationship that went into non-performing status during the quarter.

Excluding covered loans, net charge-offs for the corporation fell $6 million on a late-quarter basis to $133 million mainly due to construction recoveries in Puerto Rico and declines in consumer losses in both Puerto Rico and the US.

The reserve for loan losses for non-covered loans declined by $38 million from the previous quarter, which was at a slower pace than in quarter one, this being our fourth consecutive quarter in which we have been able to drawdown the allowance. Excluding covered loans, the loan loss ratio stood at 3.34% for June versus 3.52% in the first quarter.

Now by turning to slide 10, we will briefly review our capital ratios. Our capital which started the year at robust levels continues to rise due to our return to profitability. We already exceeded the full phased in BASEL III requirements and are well positioned for a challenging environment, economic environment as well a heightened regulatory expectations for capital. The slight decline in regulatory ratios was driven by the deferred tax assets generated by the tax benefit, a portion of which it is allowed for regulatory capital ratios. For Tier 1 common capital, we exceeded the BASEL III requirement by approximately $1.1 billion or over 400 basis points and for the other measures, the margin over the requirements were even greater. Since we’re expecting balance sheet growth to be modest over the next few quarters, capital ratios should continue to rise. Now, I would like to turn over the call to Richard for some final comments.

Richard Carrion

Thank you, Jorge. If you please turn to the last slide, I’ll wrap it up by reviewing the key takeaways from this quarter and key issues to focus on in the coming months. The consistent production of growth revenues, amid the headwinds is reassuring heading into the second half of 2011. We have a unique franchise in Puerto Rico and a Bank in the US focused on growing its community banking business under improved credit conditions. The rise in NPLs in the quarter reflects a still-sluggish economy in Puerto Rico, yet there are encouraging signs such as new public investments and the six-month decrease in NPL inflows. We suggest the cycle here could be bottoming out, albeit we will remain cautious.

The performance of our covered loan portfolio continues to exceed expectations and has elevated our revenue generating capacity at a time of limited loan demand. We’ll continue to manage credit costs and pursue transactions for our held-for-sale portfolio. We’re also seeking opportunities to broaden our business through asset acquisitions that can be absorbed by our existing business platforms without undue added risk.

Above all is our return to sustained profitability. It lessens problems and creates opportunities. We had a good forecast in 2011 and we’re working hard to finish the year even stronger. We thank you for your attention and I would like to now open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question is coming from the line of Joe Gladue with B Riley. You may proceed.

Joe Gladue - B Riley

A question or two on the net interest margin, I noticed that the yield on mortgage loans was up a good bit from the first quarter. Just wondering, is some of that due to some of the purchase loans or the loan share originating coming in at higher yields or what?

Richard Carrion

No in fact what you said, the improvement is due to the new loans coming in that we acquired, a little over $500 million that we acquired in the first half of the year, those getting in at nice yield and bumped up the portfolio yield.

Joe Gladue - B Riley

And on the funding side, you did have decrease in deposit costs, can you just touch on the competitive environment as are I guess other banks in Puerto Rico following your lead on the general competitive level getting more rational?

Richard Carrion

Rational is always in the eyes of the beholder. We still think there is somewhat of a disconnect, between the prices being paid for deposits vis-à-vis LIBOR and we think there is still you know room for improvement in loan pricing but all those three market types hate competition I guess. But it’s gotten better than certainly a year ago but we think there is still room for improvement.

Joe Gladue - B. Riley

Just ask one more. How much in a way of loans repurchased on the recourse agreement? Is that a significant amount in the second quarter? What’s the trend there?

Jorge Junquera

I don’t have that number. I mean, we can dig it up for you, Joe, but I don’t think it’s been a significant amount. It was not really a significant during this quarter.

Joe Gladue - B. Riley

Okay, alright, thank you.

Jorge Junquera

Okay.

Operator

And your next question is coming from the line of Ken Zerbe with Morgan Stanley. You may proceed.

Ken Zerbe - Morgan Stanley

Great, thanks. I guess, just to follow up on the funding cost question. I there anyway you can quantify how much further you think that your overall funding cost might decline over the next year so. I understand this is a general question to ask, but just trying to get a sense of magnitude?

Jorge Junquera

Well I guess, when we look at the overall cost, I think we have a very low base. But when we look on the margin generating additional deposits, we are still somewhere around 30 to 35 basis points north of LIBOR so or the brokered loan rates, brokered CD rates.

So, you know, we think there is some improvement we could see there as the market continues to exercise a little more discipline. That’s the only metric we really use. We look at cost on the margin, vis-à-vis, what comparable brokered CD rates would be.

Ken Zerbe - Morgan Stanley

Alright, and then the other question, your commercial and mortgage non-performers have been turning up the last couple of quarters, obviously the concern is that would those continue to turn up, it could result in the incremental losses or higher provision expense. What, I mean what can we on our side of the table look at or how do we get comfort that the trend doesn't continue to go up, provision expense follows?

Richard Carrion

I think well, obviously the overall level of non-performers, but I think its more relevant perhaps to look at the trend and look at the inflows of C&I loans and broken out by both the U.S. and Puerto Rico and there you know we do begin to feel a little more easy about it.

Ken Zerbe - Morgan Stanley

Alright, thanks.

Richard Carrión

So it’s the inflows number that we are looking at.

Ken Zerbe - Morgan Stanley

Okay.

Richard Carrion

Okay.

Operator

And your next question is coming from the line of Brett Scheiner with FBR. You may proceed.

Brett Scheiner - FBR Capital Markets

Hi guys nice to see the internal capital generation, just a couple of quick questions. One with the firmed out squarely and profitability, I mean you are showing excess capital in excess of TARP under BASEL III. Can you talk about timing of even a potential TARP – TARP repayment?

Jorge Junquera

Okay, I will take that. It is true, you know we have now as we were anticipating our two quarters of profitability and that is definitely the first step, but we do not have right now a specific plan for any TARP repayment. And it’s probably premature to engage in that. Having said that, I want to tell you that we are continuously looking our capital and different ways of enhancing our capital structure including the repayment of any of the trust before securities on any of the securities that are the composition of capital in order to enhance it. So this is -- it’s a live situation that we are continually over-viewing.

Brett Scheiner - FBR Capital Markets

Okay. And then do you have the accretable yield balance at the end of quarter?

Jorge Junquera

Pardon me.

Brett Scheiner - FBR Capital Markets

The total accretable yield balance at the end of the quarter?

Richard Carrion

Yeah. The total accretable.

Brett Scheiner - FBR Capital Markets

Yeah.

Richard Carrion

Because to give you -- if you look at the yield on loans, the yield on the covered loans goes up and therefore your FDIC assets is accreting at a much slower rate.

Brett Scheiner - FBR Capital Markets

No. I am saying do you have the total aggregate balance.

Richard Carrion

And…

Brett Scheiner - FBR Capital Markets

I can follow up with you off line.

Jorge Junquera

The total aggregate balance of – the total that will be accretable yield during the second quarter on our covered assets?

Brett Scheiner - FBR Capital Markets

Yes.

Jorge Junquera

Okay. I think we have it, it should be here. Yeah, it’s in the preliminary yields in the part of the press release or. The yield on the covered loans went up to 991 in the quarter.

Brett Scheiner - FBR Capital Markets

Okay. You know how far could you guys outline the number in aggregate though, but we have got say thanks again.

Richard Carrion

Sure.

Brett Scheiner - FBR Capital Markets

Okay.

Jorge Junquera

And may be it’s the dollar amount, it was in a page 8 of the presentation and the total interest income from covered assets was 94 million during the quarter.

Brett Scheiner - FBR Capital Markets

Okay.

Operator

(Operator Instructions) Your next question is coming from the line from Derek Hewett with KBW.

Derek Hewett - Keefe Bruyette & Woods Inc.

Good morning gentlemen. A follow up question to the accretable yield, what was the net interest income contribution from Westernbank for the quarter?

Richard Carrion

Well, its difficult to say, we are not showing that and if you estimate you know you have the revenue sources that we have shown but then if you estimate cost of funds based on FDIC notes and any access of the FDIC notes that is funding forward assets at you know short-term rates of quarter to half a point, its probably around $20 million of cost estimated you know. This are with a wide brush that run $20 million of interest costs for the quarter, if you want the net yield but the net interest yield you want?

Derek Hewett - Keefe Bruyette & Woods Inc.

No, just the net interest income. It would be – would it be the 100 million minus 20 million costs?

Richard Carrion

Then I assume to the page that we showed in page seven you put out some cost of funds which is you know roughly around $20 million and then estimate expenses that has already been reduced through synergies throughout the year. And it could be estimated anywhere between 20, $25 million and again you know these are very rough estimates.

Jorge Junquera

You got the gross numbers there you know it’s roughly 100, 107, 106 in gross income for quarter. You got to take some interest expense of that and some operating expense of that so you know it is certainly north of $60 million for the quarter closely and apply some tax rate of 30% to that.

Derek Hewett - Keefe Bruyette & Woods Inc.

Okay. So 60 million pre-tax and then whatever that is after an effective tax rate of roughly 30%. I recall you guys mentioning that was roughly a $40 million contribution last quarter

Richard Carrion

Yeah.

Derek Hewett - Keefe Bruyette & Woods Inc.

So okay.

Richard Carrion

You are right. Nothing has changed, nothing changed much.

Derek Hewett - Keefe Bruyette & Woods Inc.

Okay, great. And then what is your guidance, outlook for the US Mainland franchise going forward? I know last quarter you thought that you might be in the red for BPNA and essentially you broke even, are you expecting a loss in the third quarter or do you think you will remain either kind of breakeven to may be slightly profitability going forward?

Richard Carrion

Well, we have Carlos Vazquez here, so we’ll put him on the slot and I'll be taking notes.

Carlos Vazquez

You know, we are still working through our de-levering and cleaning up our historical, discontinued business portfolio. So we will continue to be challenged to show profit for the year, but we’re giving it a try and heading that way.

Operator

You have a follow-up question from the line of Joe Gladue with B. Riley.

Joe Gladue - B. Riley

I'm just wondering if you could give us an idea of what was going on with early-stage delinquencies loans 30 to 89 days, is that improving any?

Richard Carrion

We have credit risk management on the line, Vanessa Rodríguez, so Vanessa you want to tackle that one?

Vanessa Rodríguez

Yes, in US region, the delinquencies in the early stage continue to show improvement. In Puerto Rico, some of the portfolios, consumer portfolios on doing well. We are cautious with our commercial loans, but delinquencies are still a little bit high.

Operator

[Operator Instructions] Then there is a question from the line of Ken Zerbe with Morgan Stanley.

Ken Zerbe - Morgan Stanley

You just mentioned that you are looking at trying to sell the Puerto Rico construction loans, is there any risk or may be not even a risk but can you just talk about kind of process you are going to go through to determine if there is any incremental marks that you are going to have to take or write down on that portfolio. I mean do you need to see where the bids are before you write it down or do you, I guess what are we looking on that?

Richard Carrion

Thank you for that and can I and if I may let me correct because I saw a note you wrote earlier today and you mentioned that we had increased our loan marks there, that is not the case. What that refers to, that amount referred to was advances we have made on loans that put in held-for-sale.

So we advanced an amount, we have to write it down the amount we advance, once the loan has already been put in held-for-sale and that’s what that number referred to. It is not that we increased the mark.

Now once you put a loan in held-for-sale, you must every quarter do an analysis of the loans and make sure your marks are where they should be. We did that this quarter and we found no difference, so we are comfortable with our loan marks, we are talking to some groups of people there you know. We have given them the list, they had been looking at it, some have done some onsite inspections and hopefully we will see something that makes sense and we will move ahead.

Ken Zerbe - Morgan Stanley

So on the advances, it’s a dollar for dollar writedown?

Richard Carrion

Well if you say mark them down to 48 and you advance a dollar, you have to write down $0.52 of that dollar.

Ken Zerbe - Morgan Stanley

Got it. Okay.

Richard Carrion

Irrespective of the fact that whether you made the advance, you think you will get it all back, you have to write it down at the value of the loan market.

Ken Zerbe - Morgan Stanley

And how much is there, potential advances that’s currently outstanding that you could be losing money on? Meaning that do you have, is it another $100 million of potential advances that could be either.

Richard Carrion

No, no. You know, again, it depends on you know, when we get these loans of the book. So the judgments you make on whether you are going to get this money back or not before you make, most of these are construction and development loans and you will make that decision before you make loan. There is some commitment outstanding that you know, we have to respect but it is not a significant number, probably in the order of.

Jorge Junquera

$15 million to $20 million

Richard Carrion

$15 million to $20 million.

Operator

And with no further questions in queue, I would like to turn the call back to Mr. Richard Carrion, Chairman and CEO for closing remarks.

Richard Carrion

Again, thank you very much for joining the call. We hope we’ve cleared up again. You know, the little noise in the quarter, with the taxing, which we think is favorable and we decided to go ahead with it and you know we look forward to communicating with you in the near future.

Operator

Ladies and gentlemen, thank you for your participation in today’s call. The presentation has ended. You may now disconnect. Have a good day.

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