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Popular Inc (NASDAQ:BPOP)
Q4 2019 Earnings Call
Jan 28, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Popular, Inc. Q4 2019 Earnings Conference Call and Webcast. [Operator Instructions]

I'd now like to turn the conference over to Mr. Paul Cardillo, Investor Relations Officer of Popular, Inc. Please go ahead.

Paul Cardillo -- Senior Vice President & Investor Relations Officer

Good morning, and thank you for joining us on today's call. With us today is our CEO, Ignacio Alvarez; our CFO, Carlos Vazquez; and our CRO, Lidio Soriano. They will review our results for the full year and fourth quarter and then answer your questions. Other members of our management team will also be available during the Q&A session.

Before we start, I would like to remind you that on today's call, we may make forward-looking statements that are based on management's current expectations and 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. You may find today's press release and our SEC filings on our web page at popular.com.

I will now turn the call over to our CEO, Ignacio Alvarez.

Ignacio Alvarez -- President & Chief Executive Officer

Good morning. And thank you for joining the call. Today's results reflect another solid quarter and an outstanding year in which we achieved record core earnings. Before I discuss the highlights for 2019, I'm very pleased to report that in January, we announced a series of planned capital actions that we intend to execute this year. These actions include an increase in the Company's quarterly common stock dividend from $0.30 to $0.40 per share beginning in the second quarter of 2020, and a common stock repurchase program of up to $500 million. We also announced the redemption of our 8.25% Series B preferred stock, of which $28 million is currently outstanding.

Additionally, on December 31, 2019, we acquired a $74 million credit card portfolio in Puerto Rico. In a separate transaction, we also acquired the rights to issue credit cards under the JetBlue co-branded loyalty program in Puerto Rico. And we plan to launch this new product in the second half of 2020. These actions evidence the strength of our capital position, which allows us to return capital to our shareholders, while we continue to invest in our franchise.

Please turn to Slide 3. We reported core earnings for the full year. Our annual net income of $671 million reflects an increase of 38% from our 2018 adjusted net income of $487 million. 2019 results benefited from strong deposit and loan growth in both Puerto Rico and the US. Credit quality metrics continue to be positive in 2019. In Puerto Rico, most indicators were better that are close to pre-hurricane level. In the US, credit quality was solid throughout the year and reduced our exposure to the taxi medallion market to $19 million.

Our capital levels are strong, with year-end Tier 1 capital and Tier 1 common ratio at 17.8%. Our tangible book value ended 2019 at $55.10, a 17% increase year-over-year. In Puerto Rico, we grew loans by 1.5%, increased our deposits by 10%, and our net interest margin was 4.3%. In our US operation, we grew loans and our deposits, each by 9% and our net interest margin was 3.32%.

Please turn to Slide 4. Our reported core net income of $167 million, which included an $18 million tax benefit was slightly higher than the previous quarter and $33 million or 20% higher than the adjusted net income for the fourth quarter of 2018. Fourth quarter results were driven by lower taxes and higher non-interest income, partially offset by lower net interest income, higher provision and higher expenses. Net interest income was lower compared to the previous quarter. The fourth quarter was the first quarter to reflect the cumulative impact of the three recent interest rate cuts. As such, the lower yield in our loan and investment portfolios were only partially offset by increases in investment and money market balances.

Credit quality results continue to show favorable trend. The credit metrics of our BPPR operations reflected lower non-performing loans, lower NPL inflows and stable net charge-offs. The increase in net charge-offs in the US operations was related to the taxi medallion portfolio, which has now been largely resolved.

Please turn to Slide 5 for an update on the environment in Puerto Rico. Economic activity stabilized in 2019 after a post-hurricane rebound in 2018. This occurred despite the macro and political uncertainty that persisted throughout the year and has continued into early 2020. With respect to migration trends, the most recently released passenger data from the San Juan Airport reflects that the net number of people who left the island through September was approximately 55,000. Excluding 2018, which was substantially impacted by the inflow of people coming back to Puerto Rico, following the hurricane, the data for 2019 reflects a favorable variance compared to the same period in 2015, '16 and '17, which averaged outflows of 109,000 people. We will need to see with the recent seismic activity in the south will have an impact on this trend. Additionally, the US Census Bureau recently estimated that as of July 2019, the population of Puerto Rico remained flat versus 2018. This compares favorable to the 1.7% average annual decline in the population since 2010.

Employment trends remain stable throughout the year. In December, total employment, which includes self-employed individuals, was down 1.4% versus December 2018. The unemployment rate was 8.4% in December, which is consistent with levels seen early in 2019. Salaried employment was flat year-over-year with both private and public employment essentially unchanged compared to the same period last year.

The auto industry continued to perform well in 2019. 106,000 new units were sold, down 1% compared to 2018, but up 27% and 24% versus 2017 and 2016. Cement sales were down 6% in 2019 when compared to 2018, though there was considerable surge in activity in early 2018 following the hurricane. 2019 sales were 31% and 17% higher than in 2017 and '16.

The dollar value of our customers' debit and credit card transactions in the fourth quarter grew by 6% compared to the third quarter and by 2% versus the same period in 2018. Our consumer loan origination trends in Puerto Rico have also remained solid, especially in the auto and personal loan segment. Our mortgage originations, while still at historically low levels, were 7% higher than the previous quarter, driven primarily by higher home purchase activity.

On the commercial loan side, balances increased sequentially. We continue to expect the incremental lending opportunities will be tied to the performance of the local economy, an ongoing recovery effort. Popular's customers in Puerto Rico grew by 8,400 this quarter and have increased by 45,000 since December 2018.

As we have commented before, the sustainability and pace of further progress in the Puerto Rico economy will be heavily dependent on the magnitude and timing of federal recovery funds flowing into the island. This purchase of the funds has been slower than many had hoped. This delay is related to concerns regarding the appropriate oversight of the disbursements of federal funds. Recently, HUD authorized the use of $8.5 billion of CDBG-DR fund subject to strict oversight requirement in addition to the $1.5 billion previously released. While this is definitely positive, recent controversy relating to the distribution of emergency supplies may increase concern over local oversight. It is difficult to predict whether this ultimately will impact the amount and timing of recovery funds received. However, we continue to believe that these funds will be significant and have a positive impact on the economy.

I will now offer a brief update on matters related to the seismic events that have impacted the southwestern part of the island, including a magnitude 6.4 earthquake on January 7. I want to emphasize that this event does not compare to the widespread destruction and damage caused by Hurricane Maria. The damage is mostly concentrated in 60 municipalities, which with the exception of Ponce are relatively small. Fortunately, none of our employees suffered physical harm, and our facilities are in sound condition. Unlike Maria, telecommunications were unaffected, and power was restored within days. We resumed operations on the day following the earthquake and have provided uninterrupted service then. All, but three of our 164 branches, in Puerto Rico are operating normally.

We are in constant communication with our employees and working closely with our customers to help them with their specific needs. While the impact on our operations was limited, many of the residents in the south suffered significant damages to their homes. Public schools remained closed, and then ensuing aftershocks have made it extremely difficult for people in the region to regain a sense of normalcy. As we have done in the past, we swiftly responded to our foundation, which has close ties with non-profit organization and communities in the south to bring immediate assistance to those affected areas.

A little more than two years ago, Puerto Rico faced and managed through the impact of Hurricane Maria. Although the scale of these events is not comparable to Maria, we remain attentive to the impact it could have in certain sectors of the economy, principally in the hospitality industry. Puerto Ricans are once again demonstrating overwhelming solidarity and support and are facing the situation with the resolve to move forward. We will continue working with them, confident that Puerto Rico will once again demonstrate the spirit and ability to rebuild.

I will now turn the call over to Carlos, who will discuss the financial results in greater detail.

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

Thank you, Ignacio. Good morning. Before we turn to fourth quarter results, let me expand on Popular's full-year 2019 performance. Our net interest income increased by 9% year-over-year to $1.9 billion, due to solid loan growth along with robust though lower net interest margin. In 2019, our provision expense decreased by approximately 37% to $166 million on the back of improved credit trends. Excluding the FDIC-related benefit in 2018, non-interest income increased by approximately 8% year-over-year, driven by improvement across most segments. Operating expenses increased 4% in the year to $1.48 billion. Higher personnel costs and professional fees were the primary drivers.

Our capital position was robust and ended the year with tangible book value per share increasing by nearly $9.00 per share to $55.10. And Common Equity Tier 1 ratio improved by 88 basis points year-over-year to 17.8%. This improvement was achieved even after the repurchase of $250 million of common stock and an increase in our common stock dividend. As Ignacio mentioned, overall an outstanding year.

Please turn to Slide 6 for fourth quarter results. As usual, additional information is provided in the appendix to the slide deck. Today's earnings press release details variances from the third quarter. Net interest income for the quarter was $467 million, down $10 million from the third quarter. The primary driver of this decline was a decrease in rates that occurred during the third and fourth quarters of 2019, which along with our asset mix led to a 17 basis point contraction in NIM. This impact was somewhat offset, but higher commercial loans in both Puerto Rico and in the US, higher auto and personal loans at BPPR, and lower interest expense. This result is consistent with our commentary last quarter that lower interest rate negatively impact our results by $4 million to $5 million per quarter for every 25 basis point drop in rates. Other factors like asset mix and the shape of the yield curve also impact this estimate.

We expect our margin to improve from fourth quarter levels, as a result of present expectations of stable rates, the gradual reduction in our asset sensitivity and the eventual normalization of the levels of Puerto Rico government deposits. If government deposit levels exceed our expectations, the margin improvement could be less with our net income will benefit. As of the end of the fourth quarter, Puerto Rico public deposits were roughly $10.5 billion, which is down from the end of Q3, but consistent with the balances communicated in our last webcast. In 2019, our loan portfolio grew by $907 million or 3% despite a run-off or $420 million in our legacy mortgage and Western Bank portfolios. In 2020, we anticipate slight growth in loan balances for Popular. In Puerto Rico, we expect to see growth in most segments, including commercial, auto and personal loans, despite continued run-off in our legacy mortgage and commercial portfolios. In the US, we anticipate commercial lending to be the primary driver of higher loan balance. Our provision in the fourth quarter increased by $10.6 million sequentially. Lidio will expand on this during his credit commentary.

Non-interest income increased by $9.7 million in the period. The improvement was due to a $3 million [Phonetic] increase in insurance fees, driven primarily by higher contingent commissions, which usually happen in Q4. We benefited from a $3 million improvement in mortgage banking results mainly due to MSR valuation adjustment and finally, a $4.7 million variable variance in the adjustment to indemnity reserves on previously sold loans. Total operating expenses were $391 million, $14.1 million higher than the prior quarter. Personnel costs increased by $10.6 million in the quarter. These increases were partially offset by lower other operating expenses by $9.5 million, mainly due to lower operating losses and the non-recurrence of a $2.6 million loss related to an undeveloped corporate site, which was placed for sale during the third quarter.

Profit-sharing expenses were $9.4 million in Q4 and totaled $28.8 million for the year. If we exclude the 2019 profit-sharing expense, which by definition is not budgeted, our average quarterly expense for the year was $362 million, consistent with our original guidance of $364 million. For 2020, we expect average quarterly expenses to be around $383 million. The increase from 2019 is mostly driven by higher expenses in the following categories: Personal, as we continue to invest in training and compensation with the related benefits also increasing, a tight labor market in Puerto Rico, the areas where we operate in the mainland contribute to this increase. Technology, as we continue to modernize our digital capabilities, pure obsolescence and address regulatory, cyber and compliance needs, some of the increase results from the completion of multi-year technology investments that now start to be amortized. And finally, business promotion, especially expenses related to rewards programs for our clients. Many linked to our revamped credit card offerings in Puerto Rico and growth in our digital channels. Part of these higher technology and rewards expenses are related to our expectation of higher levels of activity by our clients. Obviously, we will strive to come in below this expense -- this level of expenses if possible. My internal objectives for 2020 reflects this goal.

Our effective tax rate for the quarter was 8%, which includes a previously disclosed benefit of $18 million related to revisions of the amount of exempt income for the years 2015 to 2017. Excluding these adjustments, our effective tax rate would have been 18%. For 2020, we expect the effective tax rate to be within a range of 19% to 21%.

Please turn to Slide 7. Our capital levels remain strong relative to Mainland peers as well as with respect to well-capitalized regulatory requirements. As Ignacio mentioned, at the start of today's call, our announced 2020 capital plan includes three actions. First, an increase in Popular's quarterly common dividend by 33% or $0.10 to $0.40 per share. We expect to implement this increase for our next quarterly dividend in Q2. Secondly, we will be implementing a common stock repurchase program of up to $500 million. While our recent buyback programs have been executed via ASRs, the detailed implementation plan for this buyback is still under consideration. Finally, on Friday, we announced the redemption of the remaining outstanding balance of Popular's 8.25% Series B preferred stock as these securities represent high cost liabilities.

Our Common Equity Tier 1 ratio was 17.8%, up from 17.5% and tangible book value increased in the quarter by $1.69 per share to $55.10. The increase was driven by our quarterly net income, partially offset by lower unrealized gains on investments and the impact of our common and preferred dividends. Our return on tangible equity was 12.8% in the fourth quarter and 13.4% in 2019. We will continue to pursue our target of maintaining and improving our double-digit return on tangible equity.

Please turn to Slide 8. We have continued our evaluation and implementation efforts for CECL. Based on our analysis, we estimate that the allowance for loan and lease losses would increase by a range of $320 million to $350 million or 67% to 73% of the existing reserves. This estimated increase slightly lower than last quarter is driven by the Puerto Rico mortgage, credit card and auto loan portfolios. Based on this estimate, the day one impact of the adoption of CECL would result in a decrease in tangible book value of approximately $2.00 per share or 4%. Popular's allowance already exceeds 1.25% of loans. The incremental allowance resulting from CECL will be excluded from total capital. In accordance with present regulatory guidance, we plan to phase-in the day one effects of CECL on regulatory capital over a three-year period. As such, we estimate day one impact to result in a reduction of CET and total capital of approximately 25 basis points. After the adoption of CECL, Popular will continue to be well capitalized.

As part of the adoption of CECL, the corporation has made the election to break the existing pools of purchase credit impaired or PCI loans previously accounted for under SOP. Under CECL, these loans will be accounted for individual loans instead of pools of loans. Up to now, PCI loans have been excluded from being reported as non-performing, due to the estimation of cash flows at the pool level. Upon transition to the individual loan measurement, this loan will no longer be excluded from non-performing status. This change in accounting treatment would have resulted as of 12/31/19 and an increase of $283 million in reported NPLs. This increase is composed of $156 million in loans currently reported over 90 days past due though not as NPLs and $125 million in loans that are not delinquent in their payment terms, but will be reported as non-performing due to other credit quality considerations. Again, these adjustments in reported NPLs would be as of December 31, 2019 and could change by the time we report our 03/31/20 results under CECL.

Let me stress that this reporting change does not in any way alter or increase the credit risk containing Popular's loan portfolio. However, the accounting treatment of the loans will result in higher reported NPL levels. The corporation will pursue renegotiations, resolutions and loan dispositions that may reduce this post-CECL reported NPLs further. We are still refining our simulations of the effects of the CECL models on the provision for 2020. So we are not in a position to provide additional insights on provision at this time.

With that, I will turn the call over to Lidio.

Lidio V. Soriano -- Executive Vice President & Chief Risk Officer

Thank you, Carlos. And good morning. The credit quality metrics for the corporation continue to show favorable trends. In Puerto Rico, our credit metrics reflected lower non-performing loans, lower NPL inflows and stable net charge-offs. In the US, we reached agreements with the majority of our taxi medallion borrowers, resulting in an increase in net charge-offs. Excluding this impact, credit quality metrics in the US remain favorable. We continue to be attentive to the performance of our portfolios and related credit metrics. In terms of our exposure to earthquake area, approximately 8% of our mortgage and 11% of our consumer loan portfolios pertain to areas declared as major disaster. So far, customer inquiries and request for modifications have been limited. In terms of our outstanding direct exposure to the Puerto Rico government, municipalities and other instrumentalities, at year-end, the balance was $432 million, a decrease of $26 million when compared to last year.

Please turn to Slide number 9 to review credit metrics at the end of the year. Non-performing assets decreased by $26 million to $650 million this quarter, driven by a non-performing loan decrease of $30 million, offset in part by an OREO increase of $4 million. The decline in non-performing loans was mainly driven by improvements in both Puerto Rico and the US. In Puerto Rico, NPLs decreased by $22 million with a $90 million reduction in commercial and a $12 million reduction in mortgage. The decrease in commercial was mostly the result of two commercial loan relationship, while the decrease in mortgage was mostly due to the continued improvement in the portfolio. These reductions were offset in part by higher consumer NPLs of $9 million mostly related to auto loans. Following the Reliable acquisition, we have experienced an increase in early delinquency, NPLs and net charge-off in our auto loan portfolio, mostly driven by the seasoning of the acquired portfolio and higher originations in lower FICO segments. While we are attentive to this trend, we are not overly concerned. As some deterioration was expected, following the acquisition of a current portfolio and changes in the original mix, we remain pleased with the result of the acquisition.

In the US, NPLs decreased by $8 million mostly due to an NPL construction loan sold during the quarter. At the end of the year, the ratio of NPLs to total loans held in portfolio was 1.9% compared to 2.1% in the third quarter of 2019. The increase in OREO was mainly in the Puerto Rico mortgage portfolio.

Please turn to Slide number 10 to discuss NPL inflows. The NPL story is positive. So I'll be brief. Compared to the previous quarter, inflows of NPL, excluding consumer loans, decreased by $23 million, driven by improvements in the Puerto Rico commercial portfolio as the prior quarter included the impact of certain troubled debt restructured commercial real estate loans. The improvement was offset in part by a slight increase of $5 million in the mortgage portfolio. In the US, inflows of NPLs were relatively flat quarter-over-quarter.

Turning to slide number 11. Net charge-off amounted to $82 million or annualized 1.21% of average loans held in portfolio compared to $68 million or 97 basis points in the previous quarter. The increase of $14 million from the prior quarter was primarily related to net charge-off to our taxi medallion portfolio of $19 million reflecting agreements reached with the majority of our taxi medallion borrowers. At the end of the year, net of reserves, the current value of this portfolio was $19 million or approximately 19% of its unpaid principal balance.

Of the remaining exposure, 80% is under settlement agreements. Excluding the taxi medallion impact, the corporation net charge-off will have improved by $5 million or 4 basis points. Net charge-offs in Puerto Rico were flat quarter-over-quarter. The corporation's allowance for loan losses decreased by $35 million from the prior quarter to $478 million, driven by a decrease of $18 million in Puerto Rico, coupled with a decrease of $70 million in the US. In Puerto Rico, the decrease was mainly related to a decrease in the commercial qualitative reserves, offset in part by an increase in reserve to the auto loan portfolio. In the US, the decrease in the allowance was driven by the previously mentioned charge-off to the taxi medallion portfolio. The provision for loan losses increased to $47 million from $37 million in the prior quarter, with an increase of $6 million in Puerto Rico, an increase of $4 million in the US.

To summarize, credit quality metrics continue to show favorable trends for the fourth quarter. In Puerto Rico, results were better or stable on a quarter-to-quarter basis, while in the US, we reached settlement agreements with our taxi medallion borrowers impacting charge-offs. Excluding this, results for the US were strong.

With that, I would like to turn the call over to Ignacio for his concluding remarks.

Ignacio Alvarez -- President & Chief Executive Officer

Thank you. Lidio and Carlos for your updates. 2019 was an outstanding year for Popular. We achieved record financial results and accomplished important milestones. The integration of our auto business, the asset purchases in Puerto Rico and our recently announced planned capital actions reflect that strength. We began 2020 on a solid footing and excited about our prospects for the year. Our Puerto Rico franchise is unrivaled. We've consistently grown our retail and commercial customer base and now serve 1.8 million customers. However, we do not take our leadership position for granted. And we remain focused on enhancing our customers' experience across all our channels.

Our unmatched branch network is enhanced by our innovative digital solutions. Approximately 915,000 of our clients are active online and 80% of these clients use mobile devices to interact with us. In December, 52% of our deposit transactions in Puerto Rico were processed through smart ATMs and mobile devices, a figure that has been growing consistently. The breadth and depth of our retail and commercial product offerings in Puerto Rico allow us to meet the evolving banking needs of our customers. Our operation in the Mainland United States, while more focused, provides diversification to our footprint. We have a strong commercial lending unit that is complemented by two specialized national lending businesses, condo association banking and healthcare. Our investments in Evertec and BHD Leon contribute to earnings and represent unrecognized value. We are encouraged by our results and remain focused on enhancing shareholder value. We are now ready to answer your questions.

Questions and Answers:

Operator

We'll now begin the question-and-answer session. [Operator Instructions] First question comes from Alex Twerdahl, Piper Sandler. Please go ahead.

Alexander Twerdahl -- Piper Sandler -- Analyst

Hey, good morning guys.

Ignacio Alvarez -- President & Chief Executive Officer

Good morning.

Alexander Twerdahl -- Piper Sandler -- Analyst

First off, just wanted to drill in a little bit more to CECL and I appreciate Carlos, your commentary on not being in a position to provide guidance on future provisioning at this time. But just with the reserve now approaching 3% and losses conceivably being incorporated already in that reserve, is there really a scenario where that reserve does not start to come down in some sort of fashion as 2020 approaches or progresses?

Lidio V. Soriano -- Executive Vice President & Chief Risk Officer

I think as we mentioned or mentioned by Carlos, we are not providing guidance on it, but I -- two things are expected to affect the levels of allowance. One is whether the portfolio growth or not. So -- that's a factor. And the other is charge-off. We expect to have charge-off and there's might be slight growth in our portfolio. So, everything else being equal, that should lead to a slight growth in the allowance.

Alexander Twerdahl -- Piper Sandler -- Analyst

I'm sorry, can you say that again, you said the allowance should grow?

Lidio V. Soriano -- Executive Vice President & Chief Risk Officer

Everything else being equal, growth in the portfolio and charge-offs should lead to additional growth in the allowance. Yes.

Alexander Twerdahl -- Piper Sandler -- Analyst

Okay. And then switching gears to talk about loan growth a little bit. We saw some nice commercial loan growth this quarter. Was any of that tied to specific post-Hurricane Maria recovery money flowing to the island?

Ignacio Alvarez -- President & Chief Executive Officer

This is Ignacio. It's hard to time directly. I mean, some of the construction clients probably have some, but I would say was not directly tied to the recovery efforts. Again some of the lines for our clients to do work were increased and they use some of those lines, but I would not attribute it primarily to that. I would attribute it primarily just to general economic activity.

Alexander Twerdahl -- Piper Sandler -- Analyst

Okay. And then just a final question for me. As we think about expenses for 2020, the $383 million average, is that include profit-sharing or is that something that, if you have a pretty good year would wind up increasing expenses again?

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

No, it does not include profit-sharing because obviously we have to beat a whole set of targets to -- for the profit-sharing to start coming in. So it does not include any profit-sharing, Alex.

Alexander Twerdahl -- Piper Sandler -- Analyst

Okay. Thanks for taking my questions.

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

Thank you.

Operator

Next question comes from Gerard Cassidy, RBC. Please go ahead.

Gerard Cassidy -- RBC Capital Markets -- Analyst

Good morning, everyone.

Ignacio Alvarez -- President & Chief Executive Officer

Good morning. How are you?

Gerard Cassidy -- RBC Capital Markets -- Analyst

Good. Carlos, can you share with us. If I recall in the past when you've returned the capital to shareholders through the stock repurchase programs, you seem to have been able to kind of do it in the beginning, right after the approval in an accelerated fashion. With this $500 million that you were approved for this time around, is it going to be spread out more evenly over a 12-month period or should we expect more of it to be upfront? How are you guys thinking about that?

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

It's a good question. We are in the middle of consultations with all our team, investment banking and coverage teams. So we -- it's not finally decided yet exactly how we're going to do it, Gerard.

Gerard Cassidy -- RBC Capital Markets -- Analyst

Okay. And then another question, you guys seem to have some good success on engaging your customers in the digital transformation, you've given us additional statistics. Can you give us an idea, are half of your customers now in digital or two-thirds or how much more you have to go and then what kind of benefit from a cost standpoint do you possibly see in the horizon where may be you need fewer branches or smaller branches, etc.?

Ignacio Alvarez -- President & Chief Executive Officer

Yeah, I mean if you look at our total number of customers, we cite them as 1.8 million. And so 915,000 are active online, which means that they transact at least, I think, once a month, so more of them are online. Obviously, we continue to work on digital. We have found in Puerto Rico, our customers, although they are active online, also appreciate the proximity in the branches. We will continue to experiment on our branch size and how we can incorporate digital into the branches, how we can use our smart ATMs and also we just opened up a branch in The Mall of San Juan, which is sort of the digitally based branch where we don't take -- we don't process any deposits or do any transactions.

Lidio V. Soriano -- Executive Vice President & Chief Risk Officer

No tellers.

Ignacio Alvarez -- President & Chief Executive Officer

No tellers. So we'll continue to working on that what the branch looks like, but again if you ever been to our branches, the number of transaction, our branches are still high. The number of digital transactions have grown exponentially. But the number of regular paper transactions have only decreased slightly. So there is not a correlation between the exponential growth of the digital. So we'll have to wait. But we're looking at closing. We're experimenting. If you come to San Juan, you ought to see that branch in The Mall of San Juan, it's really cool.

Lidio V. Soriano -- Executive Vice President & Chief Risk Officer

That's one of the -- probably one of the interesting differences between our business in Puerto Rico and the business of most of our peers in the Mainland. Gerard, as you know, in the Mainland, mostly what banks have seen is a transfer of transactions out of the branch into the digital channel. As Ignacio mentioned, our branch channel continues to be very, very robust and is really not going down very much. But all of the growth is happening on the digital channels. So we are doing more transactions as our clients take digital. But they do not stop going to the branches, when they are digital clients and that might be slightly different than the Mainland.

Ignacio Alvarez -- President & Chief Executive Officer

Yeah. And interesting enough, even when you ask customers, one of the most important elements they look at when they pick a branch, it's still -- when they pick a bank, it's still the branch network. And one thing you have to keep in mind is that there is a tremendous consolidation in Puerto Rico over the 20 years and the number of branches in Puerto Rico as a whole has reduced dramatically. And Puerto Rico, the number of branches per 100,000 people is still well below the US.

Gerard Cassidy -- RBC Capital Markets -- Analyst

Very good. You guys obviously talked about the success of the Wells Fargo auto portfolio acquisition and the integration into your organization. You mentioned this quarter, you purchased a credit card portfolio $74 million in receivables. Two questions, one is, are there potential for more portfolio like acquisitions that you see in maybe 2020. And then second, is there any interest in building out the density of your New York or Florida franchises with actual whole bank acquisitions?

Ignacio Alvarez -- President & Chief Executive Officer

I think to the first point, we -- I think we'd like to characterize ourselves as opportunistic buyers. So I don't think there is a lot of Reliable auto transactions left in Puerto Rico. But we keep finding and digging and other institutions are willing to sell. We are opportunistic buyers. So we'll keep looking. In terms of the US, probably, I think we're pretty comfortable with our footprint in the New York area. Any place we should be looking for probably to grow the South Florida, but again, we're opportunistic. But we're not going to do anything that doesn't make economic sense, just for doing a transaction.

Operator

Thank you very much. [Operator Instructions] Our next question comes from Glen Manna, Keefe Bruyette & Woods. Please go ahead.

Glen Manna -- Keefe Bruyette & Woods -- Analyst

Hi, good morning guys.

Ignacio Alvarez -- President & Chief Executive Officer

Good morning, Glen.

Glen Manna -- Keefe Bruyette & Woods -- Analyst

So last Friday's announcement for the redemption of the Series B. Was there anything else in your capital plans that had redemption of any of the straight preferred or the trust preferreds out there?

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

No. We are -- our -- all the components of our capital plan are now public.

Glen Manna -- Keefe Bruyette & Woods -- Analyst

Okay. And just a follow-up on Alex's question. Within ALLL, that looks like it's around the 3% range post CECL day one and maybe charge-offs going down to 75 basis points and 2% loan growth, I guess the way the Street is kind of thinking about it, assuming the portfolio mix doesn't change, it would kind of indicate that the provision -- the Street's provision for next year of around $220 million to $225 million is a reasonable methodology under those parameters. Would you kind of agree with that or not?

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

Yeah, I mean we've heard -- Glen, we've heard a lot of people are approaching this in different ways. Probably the most common approach we've heard is the one you just described, so that sounds reasonable. Unfortunately, on the CECL the part that this approach cannot incorporate any way is any change in the input variables to the model. So my answer is that, yes, it sounds reasonable. But despite the fact that it reasonable, it could end up not being accurate because again it is impossible for anybody to serve being able to gauge the input variables into the models of each bank reporting. So, yeah, it sounds like the right ballpark. But it doesn't mean it's going to give you the right answer.

Glen Manna -- Keefe Bruyette & Woods -- Analyst

Okay, fair enough. And then just a couple of more on -- it looks like BPPR's deposit beta on average fed funds movement was around 6% last quarter and BPNA was 11%. We probably have a little remaining deposit repricing. Would you expect the betas to stay in that range in each geography as we kind of get that like some period of deposit repricing after the rate cuts.

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

I mean our deposit beta, the components of our deposit book are the ones you know well. Glen, we have a public sector deposit book, which is about 30% of deposits in Puerto Rico that has the beta outflows to one. We have the rest of our book in Puerto Rico that has a very low beta and the US book that is probably half and half, high beta, low beta. If there is not change in mix, which is always the catch here, then the changes I think might be similar for additional change in rates. But it looks rates are going to be flattish. So I would expect our deposit cost to reflect the flattish rates more than anything else.

Glen Manna -- Keefe Bruyette & Woods -- Analyst

Okay. And the last one, the cost of borrowings, it looks like it went up by 14 basis points quarter-over-quarter. I know three-month LIBOR was down a bit, but what are the dynamics there on the borrowing side?

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

Yeah, it's a small component, Glen. I was actually -- I can get back to you with an answer on that because I have on top of my head, there isn't a lot of change on the line, and we are speculating that it may just be that some parts of the line that were low cost fell off or matured and were something like that. So you're left with a little bit of the more expensive stuff or we may have extended some pieces of that line. Again, it is a small line that did not change much in magnitude, but it's about the question. I'll owe you an answer on that.

Glen Manna -- Keefe Bruyette & Woods -- Analyst

Okay, thank you. Have a great day, guys.

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

Thanks.

Operator

This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Ignacio Alvarez for any closing remarks. Please go ahead.

Ignacio Alvarez -- President & Chief Executive Officer

Thank you for joining us today and for your questions. We are pleased with our results and look forward to sharing our results for the first quarter of 2020 in April. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Paul Cardillo -- Senior Vice President & Investor Relations Officer

Ignacio Alvarez -- President & Chief Executive Officer

Carlos J. Vazquez -- Executive Vice President & Chief Financial Officer

Lidio V. Soriano -- Executive Vice President & Chief Risk Officer

Alexander Twerdahl -- Piper Sandler -- Analyst

Gerard Cassidy -- RBC Capital Markets -- Analyst

Glen Manna -- Keefe Bruyette & Woods -- Analyst

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