I’ll now turn the call over to Mr. Richard Carrión.Richard L. Carrión Good morning and thank you for joining the call. Please turn to the second slide. For the first quarter, we’ve reported net income of $48 million compared with the profit of $3 million in fourth quarter of 2011 and $10 million in Q1 of 2011. The results met our expectations and were driven by a lower provision expense. Most credit trends during the first quarter were encouraging. We have lower charge-offs, lower NPLs, and lower commercial NPL inflows. We are reaping the benefits from the numerous actions we have taken since 2009 to de-risk our balance sheet, which are being helped by improving economic conditions in Puerto Rico. We are in a better position today than we were at this point last year and we expect our institution to continue to get stronger. Revenue generation was again solid in the first quarter with continued strong production from our Puerto Rico mortgage business, stable fee income and our continuing efforts to reduce deposit cost. The yield on the covered loan portfolio remained strong at 7%. The substantial decrease in our funding cost has helped maintain our margin above 4%, well above our peer average. The cost of deposits in Puerto Rico, where we hold a considerable share of the market, fell to 87 basis points. That’s a 48 basis point drop from the year ago quarter. Even with this considerable drop, we’ve been maintaining key customer relationships. To ensure we maximize the value of our covered portfolio, as well as our special loan portfolios, we created a new division specifically dedicated to commercial loan administration. Headed by our former Corporate Controller, Ileana González, the Commercial Credit Administration Group includes a special loans division, the commercial credit operations division, and the loss sharing agreement administration group. We are confident that this reorganization will help streamline decision making in those three critical areas, reinforce our credit administration and allow the lending side of our commercial group to concentrate on generating business.
During the quarter, we also revised our loan loss allowance methodology by extending the look back period used to better calibrate recent loss trends and by further segmenting our commercial and construction portfolios into more categories. The longer period provides more observation points and the greater segmentation allows us to better refine loss estimates in the commercial portfolio.Lidio will address this in greater detail later in the call, but the key here is that the revised methodology along with the reorganization of the commercial group are part of our continual efforts to improve our risk management processes. Critical to our business is the state of the economy in Puerto Rico and our perception is that it is gradually improving. There have been year-over-year increases in the number of non-farm jobs in Puerto Rico for the first time in several years and cement sales, which are a proxy for real investment and infrastructure spending are rising. Auto sales and hotel occupancy are also trending positively. Our view is that this contraction in Puerto Rico’s economy seems to be over and we are transitioning from recession to stability. While this is a positive development, we do not expect to see a sharp recovery. Puerto Rico still has some headwinds to deal with, including a relatively high level of public sector debt and energy needs, which are highly dependent on oil. Nonetheless, we are in a better position now than at this time last year. Read the rest of this transcript for free on seekingalpha.com