OFG - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Crystle and I will be your conference operator today. Thank you for joining us for this conference call for OFG Bancorp.

Our speakers are José Rafael Fernández, President, Chief Executive Officer and Vice Chairman; Ganesh Kumar, Senior Executive Vice President and Chief Operating Officer; and Maritza Arizmendi, Executive Vice President and Chief Financial Officer. A presentation accompanies today’s remarks. on What’s Relations the New and Files found homepage on Webcasts, be Other the in Box page. can the website Investor the Presentations It or on plans forward-looking about certain feature may call management’s This goals, and expectations. statements statements outlined the uncertainties Securities Exchange risks risks OFG’s in Commission of subject filings. various section These are and and to factor results differ materially may from Actual those currently anticipated. of any in this a result disclosed to afterwards. call, occur information developments, update obligation may We disclaim which as any background placed been on prevent mute have lines noise. to All And the will a after remarks, speakers’ be question-and-answer there session. I’d to now call like to turn Mr. the over Fernández.

José Rafael Fernández

Good will Q&A. morning. Maritza results. Thank will you the and for joining us today. Ganesh the review I join for us quarter’s

done we similar key on that turn strong quarter We questions. we’ve quarter prepared Please per X% recent grew the then is reported XX% our $X.XX results. across the Slide Earnings from ago. call performance focus to were year remarks than experienced quarter. last highlights This X. higher strong for an As to on first basis fourth morning, annualized calls, loans we’ll in we’ll a Net and open share, and Board. the

to, margin from loan the quarter. X% credit were moratoriums loan million quarter. generation levels. of $XXX and the Credit Most pre-hurricanes December returned performed basis XX better in our XX, metrics all was net increased deposits New of our points. Customer more than, interest also expanded nearly than well, expired or during

Slide Total share exceed capital to strong X. X.X% Our ratio to continue $XX.XX. to Tangible Please per capital position risk-based turn XX%. increased value build. year-over-year to book common continue

by day-to-day marks return island. months Rico’s electric and success is in other increased to wide of power, reflected benefiting Puerto emerging led from improvement of payment since of banks, Maria stability. Our recovery. our which strategies both has of the moratoriums results loan and factors, the all first variety a Oriental communications, now availability Rico of hit Puerto seven Today quarter

is to a benefiting of OFG island FEMA, the of start funds. addition, of spending claims, amount to by This enabled growing the federal from every confirmed In prospect setting the return Nearly the rebuild insurance growth. of and performance the payments stage and first has metric X. Please hurricanes for progress. future to in the turn Slide quarter to our potential our is prior

production levels, less loan competitor. and repair second more buy rebounded the homes items record replace but homes. growth Auto, than reflected originated XX% lending quarter, than again. more the retail For loans. down XX% consumers’ Commercial the Mortgage fourth one damaged ago consumer acquired more production customers auto became quarter exceeding to in need than XX%, to XX%, rebounded than more to as production auto year-over-year. as it a demand, Rico lower year and at fourth loan $XXX mortgage quarter increased effort million, row, pent-up million, market’s loan adjust our from of loan $XXX from the up was than the a to and At in outpaced replace to the Puerto production Consumer and quarter. and XX% needed pay pre-hurricane vehicles, easier began also loan sell

participations established Our industrial-related loans. or on participate industries array and recovery. consisted of commercial to across the program participating and to in are in broad businesses OFG build million Puerto our themselves with geographies a $XX bankers positioning On continuing Rico’s added mainland. recently These relationships of USA

direction. while levels. Services sequential the Customer increase cost steady Banking. investment boost in balances. the Mortgage Core $XX turn declined originated net deposits from While positive in X held to higher-yield back Slide got a margin Please cash and Fee heading with trends a in pre-hurricanes and Wealth to pricing portfolio million, were X. Other decline. from on interest Management increase basis XX% right points, revenue of loans in business at came Banking deposits a or continue XX% increased

we We were to the levels, fourth are expenses efficiency to the net that pleased time. quality note some rate totaling ratio more from $X first there than pre-hurricane Slide benefited Credit level to The seasonality but Please remains also stable. non-interest returned accounts higher X. charge-off there. billion quarter. turn for with bearing The remained

increased we consumer due off but returned in to its as commercial mix, returning $XX.X rate credit lending while remained pre-hurricane coming Non-performing current the moratoriums Within non-accrual placed other to loans moratoriums. post-Maria. The loan the points loan is rate in or to the deterioration for and levels categories auto one due delinquencies the million, commercial most to levels, it rate increased monthly pre-hurricane XX declines. is expired. basis it flat loan of payments, for Total for

turn delinquencies to lower offered, You we Slide to moratoriums reflecting during might the recall, fell Please and loans. quarter X. due moratorium lesser fourth automatic to the degree, payments on inflows, received a

incremental million Even to fourth the to for fourth included provision $X.X quarter retail quarter included the first hurricane-related replenish first you without In the on fell provisions decline, from $XX.X provisions allowance allowance than for charge-offs hurricane. third quarters more the to recall $X If total impact loan and million the related loans. to the increase quarter, million.

in related and loan mentioned placed included auto First for allowance loan I an to growth increase that in that non-accrual also earlier. one quarter commercial portfolio provision

in to to continue we result, turn of Please increase for our held a allowance, Slide X. investments. both in As percentage loans dollars and

strategy. Oriental success our banking Another been Vive has through our What factor technology. service in differentiate ongoing superior de we call digital and to efforts our la Francia

loan-only Mis Pagos, standing we line online of branch. quarter, a customers to This Payments, enabling at in pay instead our My introduced

With XX like our of of Slide to accounts full-year it annualized our customer Please X% These affected proud for at rate this, the the hurricanes result which the out significantly net and that to stabilizing our our We’d efforts for metrics not close continued significantly grew power capital ratios. Slide which life restoration telecom we getting X% outlook. new complete, in also saw to consumers. an higher to XXXX, XXXX, at rate quarter. XXXX. a And and businesses X% and we’re the report please for to As first increase begun in were ago. by exceeds was five have turn years in exceeds has reliable, like although XX point than day-to-day capital high-levels our to for turn

on from of Short-term, insurance for independently I woods. also money and we’re said electric insurance We’re most Long-term, a we’re going still date. through optimism is a start being Rico’s we the money cost down flowing. to Puerto resilient, regulated more see from develop on to economy. some benefit beginning some Rico solution to of I’m PREPA, leaders the last the is reliable, personal federal waiting to to starting Puerto and On lower to what single spending trickling entrepreneurs. building and But business repeat level, the lasting important Puerto federal to call. Rico thing far really power out needs must have

resolve without problems. We also by opportunity. fiscal yesterday delays. provides the permanently approved the that that to for board fiscal plan most It execute plan fiscal The the time island’s government is

and leading to the and this from As we’ve play results, for businesses. seen OFG a way consumers role Oriental continuing major are quarter

and the confident in cautious on the island, Puerto remain the momentum are to will environment we positive uncertain we Rico. short-term the economic OFG, in long-term While prevail due Oriental, for

our our improve service sharpen goal to to we please our retail expand on this, levels, is open With build formal and and commercial clients, our end questions. presentation. focus Our the call business our for Operator, continue capital.

Operator

Brett with [Operator line Instructions] Piper Jaffray. the And of our first Rabatin question comes from

Brett Rabatin

everyone. morning, Hi, good

Maritza Arizmendi Díaz

morning. Good

José Rafael Fernández

Brett. morning, Good

Brett Rabatin

is quite have I and was probably – the and I’ve island this but the to a first probably to Wanted guess, just, optimistic when on wanted during few more than quarter. guys heard a the you probably most I start so in macro questions, I while

start guess, or in the that more, near-term? billion do the had heavier more plan Board. announced, from yesterday, But certified two, grow can monies not the or Governor’s on we help fiscal in to I the quarter mean, next Assuming this the $X insurance assuming I to the economy actually monies flow – plan island the HUD, flow

José Rafael Fernández

little a uncertainties There to early too there. many too tell. out think, I are Brett, it’s still

Puerto the government too between Rico. a the So yesterday, hide and quarter, terrific some very Board hide and we’re in are of And our particularly, we can there plan also results, a We had good had can many uncertainties But we there the that the results optimistic. still clash is fiscal quarter implementation reality. those given fact measures. fiscal in certainly first to that approved, that the we cautiously implement was difficult how where and

So it’s that going process. be speak, it’s to to in to do thing put in needs process – bankruptcy up protracted fiscal up seems going to she a And and in judge perspective. ring to me federal color, can a the to a that a of legal end that in around going the the the protracted is so of kind reality we right from hands so end

So going have and federal main little I seems say Puerto a because a Treasury – fight because fiscal of we funds. too the to going here on plan great fiscal – is have government in say it’s us the players from how the little economy simply, bit federal our business of the a protracted the bit wind grow funds, to two governor back fights there Rico in a this if a the to States – government uncertain to the with the will fiscal and are and the of we’re the for funds I’m And board. early also and among little the United is coming perspective, with me leverage flow it island, those plan, that

Brett Rabatin

one, have the said to of more X% or very And about see XX% to little on that your production assume And in U.S. year, – get But gain? was your you might we’re there? a maybe U.S. continuing heading give million the Okay. on bolster different just industries. that granularity know – on the thinking press across now How there? maybe if maybe and little strategy process a on was and could more and you for range that in guys little net the that then, the color outlook growth us you portfolio, this you piece XXXX color $XX to can loan I hoping loans just, the then that release get don’t production the different thought a why I we

José Rafael Fernández

So, and The and to again, you geographically certainly objective let a on here, picture. that give is – going Ganesh way the from quarter, that a main remains this so details had we area. the I’m on got we going diversify primarily big good

I’ll you some give Ganesh let the So of details.

Ganesh Kumar

Brett. morning, Good

only the So be different production that’s right? as there’ll pointed to loan is objective build purchases in the And form of José the well, is geography, credits of a course but add possibilities. on time. up diversified, plan participations not portfolio this and prudently in is primarily program As at of primary working a also industries during we point in year, made to the whole still are out,

leverage market very we credit And being So industries. – as in all hold the companies, those here trying market. between point understand to a ratios. time, and this million. credit the participations at are $X without are transportation Those businesses. have record we items, on the manufacturing, diversified well and any and any have in anywhere their ticket proven cautious across $XX million pick to those especially sizes that track quality, respective those In exposure ticket came, terms over to esoteric basic We of

future their So that about we comfortable performance as can well. feel

in we that, our team have not in this minds. we of quarter, we were do time, do the last has said what So, as said are But same having play able number, the at a to quarter. been I – target in terms specific happy

before We we credit are continue the it either or opportunistic going Yes. going of don’t, to earning we before probably be any level aspect prioritize number. after first continue – if at would – to same the

Brett Rabatin

fair Okay, one. last just Maybe enough. one

maybe from up? any Your delinquencies, delinquency go top showing you Should should out trends thinking What your go give insurance still or view, forward? portfolios, levels. you pre-hurricane your here, in are higher? various we you’re below would basically to money Can expect as

José Rafael Fernández

and And say So, with what areas make sure uncertainties the identify make consumers teams ourselves more that, But trends feel the sure is, I in the our that making we the we’re encouraged again, certainly we given help they the And areas servicing we one post-Maria right we’re want to we to direction. certainly proactively that are moving I post-moratorium. on delinquency Brett, out. to would There sure those them. are keep give encouraged focused to need and the trends. quarter on are an with them that – some work with eye trends

Brett Rabatin

right, Okay. All the great. all appreciate color. I

José Rafael Fernández

Yes, welcome. you’re

Operator

from Sandler Twerdahl comes of line question with the O’Neill. Alex next Our

Alex Twerdahl

Hey, good morning.

José Rafael Fernández

morning, Good Alex.

Alex Twerdahl

on $X.X during retail the related a specific million hurricane-related to to more first that “used” What charge-offs charge-offs that the color Just wanted was loans were for the there little ask made hurricanes. charged-off quarter? these off – versus other allowance characteristics replenish provision the to

José Rafael Fernández

to we our methodology. on So, answer again, – we you look going I’ll little the been in – consistent give let we picture we’ve – big And based with bit I’m Maritza as are remain, provisioning our that. But the and methodology. at that a past,

So I’ll let details. Maritza give you some

Maritza Arizmendi Díaz

the we participating most related and under moratorium that expires moratorium – to related quarter, who our this who speaking hurricane. are the of generally that charge-offs are and to So clients

Alex Twerdahl

Okay.

they then whatever charge-offs there were moratorium were of reason? on for charged-off and off were loans that So specifically came

Maritza Arizmendi Díaz

Yes.

Alex Twerdahl

think something know we come how and couple or $XX kind at actually reserves the of reserve aside in year, put mean, about charge-offs additional on of subsequent it fourth But down? you specifically hurricanes up, quarters point methodology? I So quarter amount to you do you’ve a third over that of we should replenishments, if in the of hurricanes. second. like an next start touched I you Should And put cause – what million allocated last there I equal think, I you expect the the of quarters, – for the that will towards to think million whatever $XX-plus you

Maritza Arizmendi Díaz

was that I suppose mentioned before.

the assessing to associated loan from the loan assess the consistently including hurricane. portfolio, losses quarter, the will – risk allowance each risk the for We the request

to we will goes need time behaves how would that assess we each So see portfolio and as by.

Alex Twerdahl

that the nice fiscal of following you blip did kind paces deposit see had nice of following you that I and a this is that for of these we’re least, pretty new the deposit then, seeing quarter a outlook of for about originations, some the strong normal still put is you’ve Okay. But could or think the next the quarters? that some lot loan a And levels out hurricane, José, flows. the still we these continue, origination and the appreciate uncertainty island type that and Do of you following at some pipeline do pretty hurricane, here you there kind some commentary the of more representative growth of for paces plan. a macro of up obviously, couple had of think

José Rafael Fernández

far. stupendous So good ongoing to the or we a address wouldn’t results uncertainties, results we If way operate results very differentiate think I to the uncertainties difference is, But know environment, we about have ourselves about this business we and bringing and do hard in XXX% ignore. in. a we due way the way very, had But the very basis, on we making and replicate uncertain we technology. say, we are so headline the happy be very going an are a difficult news the on we very, this are to quarter the the would the and hard operate we’re proud and given to very to concluded those and how quarter that it’s in things we’re that have

we how it could the we second be quarter we So Alex. many how that, all once but second goes. are of the more year. out about would after cautiously have is there, point there’s let’s we optimistic. you rest we the quarter see uncertainties And too happy grown still what to of results, out see are on the But results, I specific And our

Alex Twerdahl

questions. for Thank Okay. very my much taking you

José Rafael Fernández

You’re welcome.

Operator

question with Merion line Gladue next Group. Capital of Joe from the comes Your

Joe Gladue

morning. Yes, good

José Rafael Fernández

Joe. morning, Good

Maritza Arizmendi Díaz

morning. Good

Joe Gladue

I to the bit first I guess, I’d on a I was side, results. might loan fourth quarter. and little hurricane I’m about touch, at look that given production a you color from – ask guess, decline noted but Yes, the increase quarter, people for guess, first. wanted looking the the from recovering on I commercial side there I the – commercial at feeling some guess, businesses a I and from first increase But just looking expected about little have from you’re

I us fall the just pressures that that hand, other guess, the a On I wondering was, declines. you and hurricanes can out I you where guess, I’m number businesses the just help think out? guys was of following if know countervailing

José Rafael Fernández

No.

to even is, we given we of and market, an pricing need $XX we So, look our I have a of One we there to commercial on think, – recovery, is in some the of what we it’s good spot the call. that market, two to competitive side, forward. economy when which in middle things mind. going still million be aggressive too, have that middle loans. still showing going of how what in pipeline have cognizant also call, And though is we my pretty come a market, spoken pretty fierce. competition the $X that to earlier pricings particularly commercial – are admit these at But that, the very on signs type It’s sweet million the

that’s commercial to performance steady going business in here from for I you’re So see why more a Puerto Oriental. the Rico think,

I this a range the lower-end quarter. the probably that. to further probably next quarter’s on think, numbers But of go I you’re little our better while going wouldn’t be is in and see on

Joe Gladue

on Okay, was average And the down the, quarter. little the all there. quarter it first again, guess, loans a right. fourth to pricing next and from the on yes, I that was, noting But touched yield bit question you’ve non-acquired loan

related of that Just do might island? much going? see be is where the the much wondering that U.S. of And you how on portfolio? How competitive to pricing that

José Rafael Fernández

mix. a It has to the do with lot

of and the down U.S., components there participation then on when larger out. you the have and But auto the Puerto it pushes on commercial helps a average also us the yield more side, have production. the Rico we when it a So consumer,

So we additional of what’s added on remember, loans a pretty and But it. a some a that auto bit Puerto general, terms good moving pressure Rico yield also loan the But commercial and has that’s in had of that little in the U.S. we production. on quarter in production.

Joe Gladue

And I in inflows funds – you Okay. environment competitive deposit I’ll to the just this ask funds. touch just disaster on I’ll that guess, the insurance lot a given pricing? imagine deposit there’s the island, of ask. and on terms I of

José Rafael Fernández

bit of some little now. players starting that’s it’s say, see right pricing we’re seeing what more competitive kind to would I and a CD the and aggressive becoming on we’re

We’re seeing of – there’s of bit insurance depositing with the the a little in island. also little bit companies a on the the side, deposit volatility, a funds given banks

money retail So that start come is client side our going they as in we paying out to our at very But when deposit the the bank, claims. is doing general, well. in and of look that

clients good growing about in remarks. we’ve We’re prepared as talked our

tremendous We’re yearly good of that’s a deposit I adding and for new net of it. side is X%, think at the customers that a clip boost

On very non-interest we the years side, on that side, deposit and relationships encouraging on also the very many that’s dollars. commercial commercial for our we and And breaking the the the middle we’re commercial the so built have bearing encouraged relationships billion with larger small business, have.

quarters positive the row for side. or three so the trends deposit trends shown have in And on very a three

that. So happy we are very with

in you of – far level of say, in banks guys we pressure the cost seeing on the let’s States. increasing the we’re have some seeing funds, the as So are of, not

Joe Gladue

Okay. All right. Thank you.

José Rafael Fernández

Thank Joe. you,

Operator

Glen line from comes the Instructions] our Woods. Manna next with Bruyette And & [Operator Keefe, of question

Glen Manna

Hi, good morning.

José Rafael Fernández

Good morning, Glen.

Maritza Arizmendi Díaz

morning. Good

Glen Manna

could your would of paying quarter, in say that early in, moratorium after a look – significantly with quarter off customers delinquencies, came – what customers there compare is especially they stage that question, especially hurricane. have wanted just in migrate your favorably I because not had of showed the about have Would they took the after moratorium? up side, so a Investors kind the you to of this most a the still I advantage of delinquencies would happen your question second ask the think, at when on quarter? XXXX, portion you first credit all early-stage that or you been

José Rafael Fernández

No, we’re there waiting still on – fee.

we’re of numbers in are moratoriums quarter, optimistic the the but is almost in of most see to cautiously a just, would them moratoriums available. and have have the for in I trends really of confirmation which are quarter. quarter earlier, optimistic the where February, But this too, very moratorium going come here, of as of post-moratorium and We’re said encouraged they we the of will in said I’ve March, Remember, the still at prior aftermath talking ended And only slightly trickle delinquencies. with here – about moratorium year. the the so the the March. we’re the some done. call, all it the on second last we month we’re end about And say, Maybe we’ve the

Glen Manna

this had Okay, real the side $X bearing $XXX non-interest was the had great. kind of looks bounced and for around before million. billion And like And that, it high win you that a quarter. they mentioned the guys funding mark, you breaking deposits in

José Rafael Fernández

Yes.

Glen Manna

idea where us, And what stickiness tell if you hurricane-related? are? for have any you those those the expectation of your came from? deposits Were they deposits Can

José Rafael Fernández

Yes.

of of and is and money is So and There’s the are with some relationships clients economy. coming in lot some also those our from they’re the commercial existing consumers reflection side cash economy but we’ve and had into it ones, in money us. the of the going already the most of deposits the the spending a new are a commercial deposits making

in Rico. on to Puerto recovery I can reflection of see – said, it’s the confirm if move continue part we And I as in the early on these forward trends quarter So a after to with the to think, the economic like of Maria. second progress the front I

Glen Manna

Thanks my question. Okay. taking for

José Rafael Fernández

welcome. you’re Yes,

Operator

question Brett of Piper line the Rabatin from Our Jaffray. with next comes

Brett Rabatin

One, was strong numbers. it as hanging unusual? mean, from was banking, a perspective this quarter in been, was really basically fee that income I to those good I have wanted mortgage was last this was in than production on and much follow-up obviously, there it as – side lighter there then I fee which And anything was better XXXX year mean, quarter. the there? in but than could pre-hurricane every secondly, XQ

José Rafael Fernández

– Mostly volume bit and production, and hurricane, being originating little the after of a pullback on selling. had we us a the it’s

little has with we an So it and production quarter, But that do also, a had had fees. there to of in in bit the higher why seeing the that’s levels you’re we accumulation higher quarter.

Brett Rabatin

Okay. to to you I is quarter? account go account How population should market not just Rico X%. growth And about the wallet we taking that back then the want Puerto Is account this competitors? reflective by of obviously X%. growth, deposit growing growth your are from actually share, share think or

José Rafael Fernández

much So let than because But me answer bit that the a he I’ll here. give Ganesh very little of effort team. let with leading is retail a actually that, comment involved

more So to technology with and that. let bit in it’s a But we’ve in starting the on investments to I lot has past made I’ll little detail on do go on a off people think, and Ganesh to it the pay us.

Ganesh Kumar

have reputation do [ph] as We positive out. pointed José

channel in to namely efforts convert We’re customers customer a the the into well. also aggressive as having very customer, deposit our points loan service one

you’re bit those been here, So over paid off a little that’s Brett. have efforts and what seeing

if the increasing wallet market it’s Maybe share? taking me, market more share. asking taking we than So, of are share you’re

Brett Rabatin

of kind to on using have next have for an still for from hold this And the have then capital until Puerto any that. think your that capital develop Okay, maybe guess, thanks should banks real some year, been you I deployment. wait sort to And lastly, of investor Rico perspective, how of you do on prospects basically year or for excess front? we of anything the gauge meaningful just

José Rafael Fernández

last the fiscal the fiscal in on hopefully, to that continue doing as as alike. in been investors authorities Rico I results deliver think, Brett, businesspeople – that and and execute Maria, gives quarters to two a after we’ve the economy we Puerto confidence plan

come have the more think I and capital regarding dialogue the continuously that about capital comfortable into fray and management feel we deployment. also will regulators

So results too, repeating myself given the are again, cautiously far. that, optimistic we that by about so I’m, saying

Brett Rabatin

the color. appreciate all Thanks. I Okay.

Jos�� Rafael Fernández

Yes, you’re welcome.

Operator

there [Operator to closing I Instructions] further for the this to At questions. like time, would are no over now call turn management remarks.

José Rafael Fernández

and you, you listening operator, in Thank all for thank today.

conference on day be Tuesday XX. in ahead, to, everyone, Palm a we’ll Until the Piper and on our thank and call XX. – second May conference July Looking probably Conference Jaffray a And then, quarter have scheduling great for we’ll be Beach second you good Bank weekend. again participating

Operator

call. conference concludes This today’s

now may disconnect. Presenters please hold. You

OFG Bancorp (OFG) 20 Apr 182018 Q1 Earnings call transcript