OFG - Earnings call transcript Q1 2020

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Operator

Good morning and thank you for joining OFG Bancorp’s Conference Call. My name is Crystal, and I will be your operator today.

Our speakers are José Rafael Fernández, President, Chief Executive Officer and Vice Chairman; and Maritza Arizmendi, Executive Vice President and Chief Financial Officer.

A presentation accompanies today’s remarks. It can be found on the Investor Relations website on the home page in the What’s New box or on the Webcast, Presentations & Other Files page.

certain about feature and goals, may expectations. call forward-looking management’s statements plans This subject results risks, from statements to These are and anticipated. those may currently materially differ We in information result to developments disclaim as of afterwards. call a disclosed occur that any obligation this update on placed to prevent been have background lines mute All noise. speakers’ remarks, session. be a will the After question-and-answer there

to pleasure my over is the call to Mr. It turn Fernández.

José Rafael Fern��ndez

COVID-XX I healthy. Good morning. X, pandemic safe and and I their get numbers. start participants and to talking Thank you situation about hope for we’ll then families all joining Page will us. on the are

spread The is and the rapid everyone around coronavirus world of financially. affecting the personally

bad heart or in the of Puerto those, suffering Puerto Our spread on other who Rico ill Puerto world. Velasquez first announced making States XX, Governor, In early ones measures. Rico as to Rico, in curfew the are the not to a jurisdiction as out implement monetarily. United such March has strict of areas lost goes COVID-XX Juan loved us the hit

so to okay. economy. the attempt is under doctors of such of safety for As extremely XX there these about done slowly on habitants testing plan all and reopening the everyone XX XXX,XXX based reopen and assure Governor Thankfully, numbers The testing are X,XXX to deaths, an and advice all. and than of per It positive far to were level OFG fact, the scientists present but of of in is lowest critical Sunday, Oriental is that the knowledgeable a health at States. strict low cases less are

goal nimble situations. unencumbered management to the In our successfully, a CETX to Coming employees doing into team with externally so, going is with XX.XX%, first has more a safe securities. crisis than capital liquid cash not of done capitalized and of created dealt crisis highly or strong one We and we position in to from was this and priority entered strength. $X.X Our This remain as the and our and business. ratio past, maintaining maintain we faced billion pandemic liquidity. approach have and is our proactive out well keep of of time this the the

to may the help throughout inevitable continue now recovery. we customers and So,

in of quarter put performance going this sheet the our business, confirms forward. balance and first proactive Our the result position strategies the and critical we’re developed, strength believe customer we franchise culture of our This strong to during focused and ongoing we the a work. direct is have have in investments effective technology, time. We

year, loans. closing addition the higher acquisition large In amount a non-core Scotiabank and of last to cost non-performing we funding significantly reduced sold

safety, first During significantly March, increased In and workforce of a quarter the comprehensive our implemented technology year, program losses. allowance combining we benefits. for employees, special for we our this loan

customers, and increased that retail payment electronically. launched be withdrawn programs, can and we our waived amounts transferred For relief charges business fees, and or

result, As XX% remote. our working are employees a than of more

appointments. channels. safe ATMs, achieved The ATMs, levels all drive inside nine centers. through on closed and for XX all service or open that branches superior to are have We through access of closed interactive are branches are shopping interrupted

do We on have early helping in made digital safety and and and clearly, continue investment customers the social maintained employee distancing customer to are banking. we their

done Our SBA business retail so of new loans teams small have requesting digitally. requesting also than develop customers also work XX% of quickly More tools. PPP XXX% digital to applied digitally, have forbearance

financial us need navigate has facilitated customers. resources of this advice provide time. have to they All and These the our challenging to with this communication close enabled

million access in more PPP, more than $XXX For XX,XXX example, XXX in small of than with the first held we loans. employees round businesses

goes to frontline dealing with professionals healthcare the Our coronavirus. first deepest appreciation and responders

an outstanding customers on Oriental to financial at have and done manage teams challenges during our businesses the crisis. frontline. We job this thank and helping OFG also They want the other

and Page immediately usage We that Please turn retail has by both starting in technology experienced in pickup customers continued. March, business X. to and it

For people transactions And the of quarter channels from XX% pay. payments first as XX% on coming banking of through branches the pay of went active first to customer of loan quarter example, and users increased this mobile to opposed the or received as them first we all as credit of to card year, XXXX. quarter, digital mailing

tools apply in mentioned, PPP loans. branches this forbearance we online COVID-XX our effort appointment and to used on the for and businesses more those to safe unique than enhance digital quickly X,XXX Along same conveniently consumers As by I have developing clients conditions. since existing tool mid-March first-to-market for help meetings lines, schedule

the originated in we at SBA loans Rico the and first total of granted Puerto PPP to disbursed program, XX% XX% Puerto the round amount Looking businesses. of Rico of

average was Our time five cycle only days.

new trends. see core corporate is to for our We’re our these Technology a help strategy and it to to very ways customers. continue innovative pleased to use look part and we of overall

Now, results let’s on presentation. through of X turn X our Pages our to

base start assets also and Let’s the acquisition That the Page management the much Net banking variable significant with from reflects increased core XX%. revenues Scotiabank rates on reflects cash our wealth increase and net commercial revenues. interest of loans. on on on larger interest the financial net our in X. of lower income, customer mainly highlights It effects interest earning

coronavirus based Due due Non-interest acquisition. we primarily to the to higher the provision ahead. on see change microeconomics scenario also were Scotiabank increased pandemic, much the expenses we

how pandemic service, clarity time, most critical the full order is we savings postpone out. of ensure this the decided During of to plans to plays more cost there coronavirus Scotiabank in on until

associated line was get year Scotiabank, to the and which book the Rico. efficiency, declined key ratio assets sequentially slightly of bottom sale large these return from value with charges quarter The on at of had a on return costs all The restructuring improved day fourth the performance primarily few offsetting from and breakeven gain on minutes. was Puerto of we securities. equity look effect we a due Tangible end to CECL, quarter. mortgage-backed the in added X when Partially I’ll merger acquisition

increased loan year-over-year due the income. an increased the excluding CDs XX% on of balances deposits Looking has broker result but due in increasing to was in X. a XX% also our acquisition, balances reduce to mainly deposits to Page core borrowing organic deposits. interest XX% year-over-year. at us was This year-over-year. the similarly core acquisition. net brokered This enabled increase Average operational Average contributing to more highlights The by higher overall cost lower-cost than increase and

slightly because start, the ahead due later of and the nicely was mainly was the COVID-XX. of the Volume noted this and It be quarter in should picked up of generation and first Loan earthquakes. affected year year from the a customer slow because ago. the fell February, base Scotiabank production acquisition January increased of in capabilities March, to eight expected, impact of as added by

well. two at factors. The X.XX% up year-over-year yield held decline reflected loan

mix, the which is X% The first this loan of the Scotiabank yield approximate loan fixed new our proportion a includes XX-year fixed portfolio mortgages approximately – acquisition. The range. residential is larger the on – residential rate from in

our The second was variable-rate loan portfolio. commercial factor

I XXXX second deposits are increased XX of the full experience partial basis, federal effect the the rate XXX to that interest fair rate. of points on Scotiabank deposits. loans basis out XX% March yield effect The the fed’s cuts XXXX value declined rate point our previously Approximately, reserve portfolio margin result, the this points. rate and of basis half on of I to commercial of core decline would the variable for as amortization before cuts that the as cuts a a includes of net our result year-over-year cash X.XX%. this cost balances lower year-over-year like a mentioned.

loan turn rate quarter was from The There little effect a basis up the to points from charge ago a rate NPLs was XXX in a commercial The down off loans. of to credit review Please was the sold X X basis due we page the net year XXXX. year as in first previously-reserved to result coronavirus. ago quality. points non-performing

of to is reserve loans, for capital and was loan $XX to important deteriorated It Day balances earnings net on allowance impact page the about allowance on a million X provides taxes. deteriorated no page with of CECL March through charge Day credit added adjustment. a X. the this made on resulted this non-purchase in please retained It made XX in bill. purchase against million detail CECL loans. and for we X $XX.X that capital. note our million $XX of impact turn

adjustments will the duration unclear sequential At $XX This outlook Rico increase incorporating for of $XXX a of continued uncertainty to that be regarding in added COVID-XX. result of effects the The remains modeling. credit CECL pandemic the million and our economic COVID-XX a extent; related of a future changes end economic million as various increase quarter our scenario initiatives the provision and we severity to for Moody’s in qualitative resulted use is what and Puerto incorporates and quarter, macroeconomic a and million. governmental mitigate $XX losses. it year-over-year in allowance of its able we

all communicating to for the date, as pandemic closely three-month with mid-March, been we available were customers have or is are To of Please what up $XXX a XX,XXX starting approximately deferrals opposed XX.X% Maria even business personal million loans. Hurricane but COVID-XX have case-by-case to months under over reviewed retail automatically granted more to each principle, interest on turn on and have retail when accounting effect XX. one customers is page will balances Moratoriums and This our for moratoriums. granted been three loan basis. situation. to

have and or interest of On the of commercial commercial loans of deferrals, granted payments. side, deferral $XXX of total received $X.X and a principal X.X% million billion been

for account the portfolio We escalated million of a to or hospital million and sectors clients, center for commercial of loans. restaurant which $XX clients, now have mainly more clients, our account sensitive. $XXX be X.X% X.X% chain or for X.X% consists and retail about which industrial hotel loans also commercial of about which $XXX account economically That considered loans, commercial of shopping monitoring in million of commercial or

page to to review turn capital our Please position. XX

have with we be XX above requirements continued entered capital well-capitalized earlier, this All from a capital significantly strong our pandemic to institution. position. mentioned we regulatory for increased I ratios December and As believe

turn solutions consumers have in provide the XX. to we Puerto well so Rico bank digital operated first Please to only online. we environment. this we Operationally, bank page and were related think conclude, in help to COVID-XX To very challenging far

while communication and safety. to uninterrupted order channels in this superior required well them of with navigate us to the advice customer employee resources service time. challenging their and keep in all our This provide provided has through levels enabled both to have understand and maintaining We and needs clients with close

are position. reserve capital and and their we in are ever liquidity helping capabilities with strong digital Financially, banking customer greater convenience. ease do Our a

add to that priority support our Scotiabank on technology the employees, ahead, continued to we our operations I’d is and Looking the thereby has protect and track. customers, communities like integration our serve. help

We originally for to invest ever year of stronger our our our strengths, success, financial it continuing with we than is planned. over faster continue Based build strong in on a course planned. Ultimately, digitize and anticipate business technology risk pace at an our completing to the this to agility management as resiliency to and demonstrate goal originally our operating company stakeholders. all anticipate

customers and for help their businesses, invest themselves to retirement. than insurance, century, and a cars, more protect build buy own half save with finances, we homes, been there have manage for

now for ready to them there are we We for and them continue be will help ahead. decades to

end Thank start let’s Operator, the you we Q&A. this, formal our for presentation. listening. With

Operator

with Twerdahl first the Alex Instructions] of Sandler. [Operator Your comes Piper question from line

Alex Twerdahl

Good Thanks. morning.

José Rafael Fernández

Alex. morning, Good

Alex Twerdahl

you I little remarks, in Puerto in stuff off, little it at COVID projected early about start just a we prepared you actually on but now, the right there? what you was to this and and happening sort Is what’s Just touched of down bit plan timeframe alluded with for non-essential governor’s on. your reopening could any first of businesses kinds point? open working a more of are the Rico kind a hoping Do talk that bit have it to maybe too

José Rafael Fernández

was March six or not part operate businesses. So, And I were started, Alex, seven executive the where the we’ve were they or been of think as only pharmacies, place. services I very for for allowed Governor homes XX do defining and were night, early people after not transactions, outside better strict, earlier, and were into or on, the that mentioned XX. their strict of Those institutions hospitals, weeks, was at payments very o’clock it put she to the he supermarkets financial on were allowed type allowing to loans as services lockdown of only businesses a financial deposit services essential and other order originate that very transactions

a not with started So, fact again, ground and early I on I’m been she the good. but has scientist, from that very I think, think, the this

considering economy it’s time, opening a COVID-XX. the And the needs right, where tricky the very she because point of in an contagious, issue, now, to it’s it’s start and

medical of say open decided and cautious is where side task is, force and they So, they an Puerto United everywhere and on was unfortunately, think governor, will has you on the also medical has can as published sector that bit. a States, the engaged a a basically delineate she opening and testing he I would they is here also force should very but be economy, imagine they’re how for only where the Sunday, The it’s paper, think task it. I and be of business about yet with are there’s opening the the started in also proceed. I three thing not I happening pushing there Rico, phases, little to task how the in force a She

the are is and per with lowest We along. it the United capita moving jurisdiction how the really the States give contagion on in visibility testing enough doesn’t

first, on our people will I are we, coming be of very cautious first and because, very customers us, at would to So, everything, a well-served. come cautious simply by be going for reopening and be Oriental, then our

medical I with a process And the on the hopeful as at be we road see I with discipline the peak So task in very end stage-by-stage. presented – how reopening little and think a will on that, other lockdown from ground. on And I out of a the the coming shape. that’s good the of early think by I of bit things am force,

Alex Twerdahl

in similar of macro $X,XXX Puerto Puerto And extra kind the related, That’s if includes details just the then helpful. including entails? I’m on stimulus week States else of has get the stimulus anyone mistaken, on sort $XXX same sort that. program. a of – And United federal and stimulus these us give treatment does separate of not a that then of just and you of the unemployment kind per things Can in what like as kind a equal also check, Rico question, some programs, some Rico

José Rafael Fernández

States prior mean, So, yes, and been completely. crises earthquakes.COVID-XX hitting like the as under the that, to or we’d Maria opposed a to the I honored crisis is serve global United

Rico, operating receiving of applied the States are that we’re So, all the in same the States. first that time, for one the to benefits crises in here Puerto United in we the

to going we’re So, be receiving the federal funds.

need we fact, that process. them, received of haven’t they in around dispersed yet of matter a already they’re And As $X billion there’s be deployed. checks – but to $X,XXX the the also funds it’s

And Supervisory governor put cash included funds between the $X teamed federal to Fiscal economy they as that added being And to the $X of slowly, or million will of probably incentives for surely. the Rico but so the the and from billion had billion that COVID-XX the billion around deploying in receive Puerto also $XXX in the to budget now. the is $X is they managing and that Board as part up, they’re also also while and the we’re out and it pandemic. emergency, lockdown being up

Alex Twerdahl

be what’s spent is that or businesses of on? the or $X to million workers for kind individuals for money for is And for sense $XXX what general will billion, small the that or healthcare

José Rafael Fernández

Rico workers, Mostly of a say the compared for the that level poverty States. remember healthcare States United individuals, I has individuals, Puerto would people, in to high

or then and the Puerto the primarily some those are healthcare small supplemental the to – applied fashion. are way, a being in shape being healthcare is out, government some that to also providers unemployment Certainly, certainly on governor affected help to held benefits businesses Rico side. and it’s the So, are adding

Alex Twerdahl

different worms with just Great. is you draw as for differences under And should on in major of about CECL obviously same some been given the you of playbook coming some for before then hurricane up draw through with are we you I methodology, of can obviously that the there Maria. on have guys of kind that but think able the able here, or considering? – Were reserve to Moody’s to that be crisis from playbook reserve, scenarios that sort we’re were

José Rafael Fernández

customer people high in that certainly, and a with the a from shape earthquakes, from Maria experiences in terms answer they’ve in gone level, certainly, perspective. I’ll through crisis not good perspective put us So, a but but the the addressing aspects, we’ve – old of perspective, a only provisioning, from financial and from

of crises experiences two this the So, the has for be us prior helped one. ready

picture, are deep that big provisioning, being some sense people given Now, there similarities are forbearances out. the regarding are the in there some are there locked and

is So, moratoriums. allow go we decided those the Maria, clients paying think, because decision industries this with I technology to central request forbearances. the to reasoning use letting of furloughing to their their a time particularly, on case-by-case salary. And the all they’re hearing the are automatic it and government paying municipality, were give and out when go was we for behind salaries, they’re to basis not employees, the all or around,

took but of to today terms to the from it we Maria, have experience realities also in we So, adapted that it. approach how the

Alex Twerdahl

me us expects of goes for shape then on I’ll to Moody’s recovery, and kind is final – the what quarter the back what alluded you the second and just, afterwards? That’s to Puerto GDP in the you the forecast question Can what Rico. in queue get – to share island sue with that Great. for of just suggests and

José Rafael Fernández

Yes, I’ll Alex. that let one, Maritza to answer

Maritza Arizmendi

morning. you? Hi, how are Alex. Good

Alex Twerdahl

Yes.

Maritza Arizmendi

make day an we in in idol Day mixed updated a before – a probably outlook that updated should we about day X the a a applied and predicted the their obviously when I as provision, and to allowance we back macroeconomic – we into an unemployment X probably, GDP used Alex to with the CECL, I negative under go When getting scenarios GDP when Well, X steady moderate would XX.X. in updated increase unemployment near-term the near-term. for growth microeconomic the immediate with think, growth

short-term. in shape we type if information U see will reaction, a So, of an type more immediate reaction of be B see have will monitoring the And recovery immediate will we of continue to type is a negative what have what we or we it an now shape. probably,

and So, but unemployment an the GDP negative now, initially, immediate right rises. we in have impact

Alex Twerdahl

a little impact us you immediate XX%? in quantify Can of it range of the GDP? help Is bit in negative that

Maritza Arizmendi

Yes.

about Now, is it X.X%. negative

Alex Twerdahl

my Thank back the queue. All right. Okay. you for taking get I’ll questions. in

José Rafael Fernández

Thank you.

Operator

comes question with next Your Securities. from line Alden Joe Gladue the of

Joe Gladue

Good morning.

José Rafael Fernández

Hi, Joe. are morning. you? Good How

Joe Gladue

Good at the do the the some balance on balance the morning. sizable on I I – like, on help of there. guess security I there’s think margin. a sales some environment there current start to just yes, with, the end of a guess, guess fairly just guess had deploy in profitably? the there interest more everything looks it after be little lot touch will of, that want and going sheet net I’ll cash to, quarter. first you on bit I a opportunities

José Rafael Fernández

I the acquisition. margin lower from So, funding, net say, the Scotiabank margin this first, let’s see than interest is and have effects interest way, we net deposits are a excess the it and core seems anticipated of, having wholesale what the

opportunity continue wholesale to have We go funding. let to, an the

drop it, balance one focused quarter, loans. kind out rates very sales around So, balances, And high has yielding one XX, cancel you two, something year. to in cash then a of to certainly, effects affected much it’s interest margin, the yielding points. cash those mentioned now in that’s wait order that on XX us the So of And basis we we’re on. the the variable-rate was is particularly, right? this commercial on that need them, for putting for a the maturity number the that on

had So to that we has crisis. scenario a different anticipated created the what than prior

that point scenario starts powder to program. PPP will Now, scenarios, no, to Maritza But cash having to prudently, the opportunities do, that great U a the said to, above the short with and us it that, in at as end. beyond job our reopen as dry for not or think there’s once SBA cash on deploy always on we the work. this that, ample deploy economy we a V And we’re and give doing necessarily us mentioned very that’s put shape time,

So, I in external shape very of think good we’re spite in the challenges.

and higher good that the recovery cash for – held yielding in very community shape a when the we We’re knows for expected, the and in deploy the assets have and clients.

Joe Gladue

Thank Okay. you.

program. of PPP the expecting comes course, what fee the of that course into the over how that from income of in mentioned income the year? you are You terms

José Rafael Fernández

accounted I’m a and not net part of accounting suspect I’m the that be but a not an interest – to yield is income. the to I going part So, going of it’s expert, fee be as the

X% X% with, is loan – the I of So, size size relatively of that yes, think loans the the small. it’s a yielding loans average – the

expeditious more end per loan, the range that be in So, doing after round, have or we indications they we probably the and there of probably dispersing in on days from in that the customers terms lower but the higher did loans get very show as to we’re we’re we the this balance money to will way. we’re a the PPP of with it’s what fee although actually. ability early the middle as the on of I approved get we’re And our first less, been second encouraged help than mean, program. five a well fees in able the generation very round

excited SBA perspective So, that’s our we’re just program our kind clients very happy that the help launched. to of and and from

Joe Gladue

Okay. Thank you.

probably not just little production, – And is any dealerships not on. business. if still most segments, wondering believe the doing environment, of the transactions outlook clearly, mortgage lot some there us a give Just a of auto sort loan I on the you wanting, maintaining loan segment, any could of going yes, by current in volumes. there’s just are you

but personal write sure were of little of loans of bit loans, a home and pipeline in auto course, bit of about we’re before the the So, that the loans nothing particular PPP apart lockdown, to from doing nothing a SBA be in to significant. for little

second think a have and effects we’re open given of the would and if you full parts he of the that going already the month March quarter lockdown loan is the still full during that how in So of will production, to April nobody that it you and saw it, very – we’re business them and of knows. – play still month then how April. expectant And terms of generation, on out depressed

lockdown, are and and funding rather we So, and tools and and December program think of foremost, them a also printing the excited and our other our core mentioning that position digital adoption I in we without paper. immediately SBA closed clients the piece in sure. adapted because also, strategic case digital run it them the good program good transaction XX, forbearance very play in conservatively first because and whole they right the liquidity – the for position our But remarks, in sure we’re that, they’re apply terms incrementally SBA very to in providing platforms we’re and how making a also other in how also the in digital we opportunities, clients, now, for very of with utilizing we’re are program, the services, and to we of

differentiating a work our disbursed, that done. and of proud digitally and So, the really done that and all I’m it teams is was factor have

Joe Gladue

me. All all Well, for right. you. That’s thank

José Rafael Fernández

day. good a Have Joe. you, Thank

Operator

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

Glen Manna

Maritza. José morning, good Hi, and

José Rafael Fernández

you? Hi, are how Glen.

Glen Manna

a of I guys the still doing that you a press How release, income. well. I but hope accretable you much that to doing that interest just yield see put that, In are on I’m was net the questions schedule today? in it. number would accretion well. need in past, you couple booked I have had

José Rafael Fernández

you could the could well. question? you We repeat Glen, hear not

Glen Manna

first release. a In the was had of in Sure. booked the yield included accretion the press you quarter? the in How number much accretable schedule past, in

José Rafael Fernández

is Okay. way my level, Maritza one. Glen, IQ let that answer I’ll that way, above

Maritza Arizmendi

the that accounting, At accounting accretion SOP are we remember and end, Glen, because that Yes. counting. of part Glen, type disappear Hi of changed the how the – was of you?

is what So, don’t in type loans, part income. to segmentation in that – we but a type acquired now books, the right not the the how that adjustment of did before it’s deal of different the bears of interest we figures I of the the have we interest adjustment precise that was have all if though general, have income. for the it’s each much deal like of

Glen Manna

I the on average? Okay, call relative it problems, you end had was where deposit And kind to thank of got the late, you. to where the was but I the some pricing of discuss quarter technology could at

José Rafael Fernández

Yes.

and we you you but proactive be at to ability relationships remember clients from now it So in more the our seeing is look at What core quarter, only we some that’s traction them. December a side. in we proactive for XX when good added were good those Scotia of looking point, accounts, the they’re – Glen. buckets not their that. look acquisition to process re-pricing a bringing the we’re that deposits also Thank parts Throughout at adding up. think, latter the of deposits the Scotia in commercial very closed the the in large and re-pricing retail whole I that and we’re see to also former But

So, we’re commercial the of March most end But we looking the at now the side market. them at at the we that have looked – commercial pretty and much deposits equation. priced quarter, to of of large

Glen Manna

line in an line it on gains But estimate kind the I like, fee the security variability in income, a like or looks $XX I that income And that that run there Okay. mortgage any anything it’s of other ex run anything using income or looked on this and forward, after it street going came should to is special rate be kind like that any million Was always difficult guess rate that and in the of the we’re bit the acquisition. was little banking? like down fee noting expecting about weighed we lower.

José Rafael Fernández

give on Yes. details will some you that. Maritza

Maritza Arizmendi

of because impact $X in two that think last general, transactionality. negative because adjustment. March, fees, there impacted that, activity was I MSR mortgage of lower up banking we service as of came fee lower million, the Glen, the probably revenues also valuation weeks Yes. the Probably, banking know were of

So, see you these little estimates. off probably that’s why of figures bit a your

would in this can the get the – see to And the we lockdown, normal in to more – normalized need so level at point, Right. we of depends figures. a see space on how that can MSR market. back So, we it we activity a how

in line see you that with will this. why that’s not necessarily levels So with work what you

Glen Manna

said That to was just includes $X million MSR, this? Right. a that confirm, And you right?

Maritza Arizmendi

The MSR valuation.

Glen Manna

right. Valuation,

Okay. And press you effective is tax that securities the good in release exempt to on and tax have the the noted you level given and use that income? of now cash XX% rate, forward that rate going a the

Maritza Arizmendi

Yes.

Glen Manna

All you great Okay. time. Have day. a Well, for your right. thank

José Rafael Fernández

Yes.

Glen. too, You

Operator

Piper Your of with next the line comes Alex question from Twerdahl Sandler.

Alex Twerdahl

Thanks morning. good my Hey, for taking follow-ups.

back you or kind that much decline for a Puerto to Rico are Just, in bad the is recession in I expected the go or Rico. about pullbacks because the I X.X% not put guess or to because of and assumptions as Puerto XX not just more just to on Puerto go specific expected economy go rates is context that what already is there’s of that’s to Is down years can Rico into to is to that be down into assume the us. said the reserve not first one – GDP I that of

José Rafael Fernández

impact Alex, X.X% next Puerto saying of on a you’re a is annualized, scenario, correctly, saying for contraction the the question we’re Rico a quarterly basis your understand of when the I that couple X.X%, on if So, Moody’s, quarters. but

to here a to plus – just like X.X% drop numbers X.X%. real So, it’s I’m using minus X.X% plus from from

X% immediately annualized a due it’s to drop COVID-XX. of the So,

Alex Twerdahl

just, the scenarios using that guess XX% some have I reporting mainlands are are we down I to Okay. or like banks XX%. was because in that like

just in of And so kind kind that portfolios I some characteristics of able are the at you you to that? of in us hospitality understand sure give as restaurants the things like the LTVs, properly. you disclosed like look and of on, And terms the presentation, then risk want higher context to make some

José Rafael Fernández

those? the LTVs on You want details on

Alex Twerdahl

coverage, those that with standings service us anything hotels high risk can the of a the and get bit categories. on debt And little restaurants, more the comfortable

José Rafael Fernández

is hospitality XX% say would I around the average, On LTV.

Alex Twerdahl

centers. shopping about what And Okay.

José Rafael Fernández

Shopping centers candle. but longer the they’ve because on the say are that lower but more books, average, same. or I around the some There’s been less in XX% LTVs, would

Alex Twerdahl

the hospitals And Okay. same?

José Rafael Fernández

again? that Say

Alex Twerdahl

the same? Hospitals

José Rafael Fernández

here. The that Maritza don’t later. to hospitals, right so you bring number can I have

Alex Twerdahl

Okay.

OFG changed sort Sounds this what that then quarter kind of the just are a in been USA, and us underwriting the it’s and can saw, world of last just a there quarters we’ve good. in seen obviously, of just everything loans that how those And kinds you few the participation’s lot has since the weeks. of works remind couple because growth and we the

José Rafael Fernández

Yes. Well, small. these are

the is are them of of small a loans, commercial of them have proportional Some origination SBA SBA some loans, guaranteed.

these loans and production participate high again, of the straight SBA the we to industries on risk COVID-XX, we that that given see are are Some there pandemic. feel them necessarily is you that not all and the prior

Alex Twerdahl

Right.

be percentage SBA would what So guaranteed? I mean,

José Rafael Fernández

the give off you we details it can the of top have my head, offline. I don’t but

Alex Twerdahl

it believe high be next if percentage comfortable payments the is you at enough But lot launches six little on SBA, in mistaken. Okay. I would I’m more months to a not a of making a those get

José Rafael Fernández

yes. Yes,

Alex Twerdahl

One, kind elevated quarter. us to are to margin, of until and the LIBOR coming and on And of of say all the time can what’s the with down about balances bit the parts, moving year. then, margin, two or give the borrowings question you just have think costs of, long during higher And about do. point So, just a little one, considering later kind on when and can borrowings to come for back for of starting think and second those right two, in then about, the some funding until the to parts, the the back going to due? prime the everything there’s going kind we happened you picks the of schedule talked you cash kind up the Okay. what’s come to quarter, into going first

José Rafael Fernández

to giving wholesale of Maritza the maturity but and guidance you not about on we’re that. the the margin, So, let I’ll talk funding all any Alex, of

Maritza Arizmendi

what our what this is about years. point, the seen have two And maturing think we it’s balance brokered and during remaining barrels, we have year something year-over-year. about reduce would at wholesale million by the XX% point I to to this of that $XXX in at quarters we’ve this deposits important matured three about including that Alex, next notice we be

the that’s So perspective – year the we we that’s have for the million. maturing that around $XXX

Alex Twerdahl

a And these – or two quarter they’re on so? yielding

Maritza Arizmendi

Yes. or a Two on something. quarter

Alex Twerdahl

as Okay. of that advances? the as FHLB includes And well deposits broker

Maritza Arizmendi

Yes. Yes.

Alex Twerdahl

presumption program, that to customers? existing the it Okay. is that only fair assume doing a And for you’re PPP

José Rafael Fernández

also their’s serving customers, are to and of We’re existing we from primarily expand a can it non- certainly hopefully, we’re doing relationships receiving we and requests them clients but too.

Alex Twerdahl

quarters some mentioned then just prepared the your quarter those should at about the sort you’ve for plan, expenses savings could how the of And plan coming in be think we on postpone remarks those you expenses? transaction. next One, about the Okay. And online? how cost was from out start when postponing of what the potentially, and first we savings shape couple Scotia impact cost that the then to as back cost thinking the of savings

José Rafael Fernández

Yes.

expenses guys, we out. This how expenses the to you focused plays tried because for an who we on pretty while, act the where around area the efficiency quickly. known to, really, this us from notice pretty to that So, want we further we’re pandemic, Scotia know COVID because on postpone have transaction efficiencies a until just of time know and is

we and lives First, because people don’t individuals, service want also. come but don’t affect first to need we of also to customers our – we well

that originally. execute So, as we’re now, right the going keeping we to not that it we not certainly, on does but handle mean on designed our hold plan it are

we with probably seen silos, we’re to that down been barriers, fact, of have break this done is break matter things a faster. bureaucracies experience, we As able get down what have break and down

actually I are efficient beyond and want to ahead I don’t things now, acquisition, we want that for – above haven’t the as anything don’t here, – to But us change do. on curve to get we processes in done many of I think many, occupancy. more there So, opportunities myself but getting of the I’m change processes, be

We haven’t on done payroll. anything

And contracts. redundancies even anything act haven’t on. still there have that on several not are we We done

COVID until the would the as you model I seeing we a relatively this as being, for similar level that. so find pandemic quarter know, out you’re But on time how And out. we’re plays just to expense very cognizant

Alex Twerdahl

Great.

over trying of the how to mean new saying have these how not kind normal new that you some couple are you operating if maybe of if under interpret things up about a what of going and kind acceleration branch – processes rethink can kind just a learned forward, of of, environment I of weeks what work backed guys an about and so you’re I to get you guys necessarily couple the maybe but months. the last something, So, correctly, towards

José Rafael Fernández

Correct.

better did. said I You it than

Alex Twerdahl

for thanks appreciate taking my Well, follow-ups. Great. really it. all I

José Rafael Fernández

great Alex. Yes, to talking you.

Operator

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

José Rafael Fernández

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

you, in. and stay soon goes again. hope out thank all that nice all we Have to we’d Thank for pandemic Our end listening safe. this a and day up you will

Operator

concludes call. This conference today’s

disconnect. now may You

OFG Bancorp (OFG) 29 Apr 202020 Q1 Earnings call transcript