OFG - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. Thank you for joining OFG Bancorp’s Conference Call. My name is Lorry, 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. on What’s Relations the New & Files found homepage on Webcast, 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 in risk outlined filings. factor and SEC the OFG's subject risks of These are uncertainties to section from differ Actual anticipated. results materially may currently those We obligation to call of result a occur disclaim update afterwards. this any developments as information disclosed that in noise. have been mute placed background lines All to on prevent a question-and-answer the remarks, speakers’ will be After session. there like now Mr. call to I'd turn over the Fernández.

José Fernández

morning. you page Good Thank Please for turn X. joining to us.

First, new half we for members Covid-XX the banks, flexibility. in have of I eased March and in but customers, activities. for U.S these at us, we the and continue would build reduce The spikes very like following them Virgin help rates Rico reduction their In during But people number a related shutdown But integrating to to Bank in financial in and recent futures. thank the Islands challenges all businesses and our commitment XXX results XXXX. to the better other acting cases were second points March, basis faced forced for were basis and May, January and during the team Federal Restrictions of challenging governments communities pandemic in our cut some the Rico Puerto occurred and Like followed to late Reserve Puerto Bank challenge. of times. we quarter. XX points personal Scotia with dedication of we OFG, second excellent the small in by also process no experienced in the produced quickly foresight, Certainly earthquakes acquisition. while

quarter as successfully say the and manage commitment operated these by done OFG. Hencho Rapido, challenges, our us - safely platform. at All easy, throughout fast, enhanced branches technology to Facil, our we enable Our preparation

in transactions facilitated PPP at We application Online half mobile and of branches. About mobile remote. COVID are team a appointment online deployed working and built-in members make client service for still scheduling possible routine full app digital ATMs and meetings ITMs process help loans. friendly contactless disbursement XXX% Our tools manner. customer our funds and safe

We new as channels. throughout and customers daily check-ins, and to we people for new Customer $XXX than more also site. testing results health our as safety on-site $XXX protocols benefits safe in themselves. implemented well extensive our total free knowledge as million. continue increase speak on incentives. for quarter people such The and offer COVID second online provided customer deposits million. for Loan high all of We safety levels production service, the And

margin customers. loan capital. And U.S businesses interest Page call to a grants in level and a support home funding, of the deferral local, Islands. to secured process reduce net and than small of to federal higher York and more build liquidity wholesale X. Puerto we relief Rico $XXX,XXX New turn in loan non-profit Please Virgin bank continued We Our and tool XX,XXX strong for online centers maintain retail cost and

mobile our second during users The from online customers deposit success of more with of numbers up of jumped customers tool. and have quarter area enrollment In March. pay see capture Online beginning scheduled to up COVID and the continued are June. us, end retail users the our the as we were of the utilization by both remote technology XX% and the XX% March. from as the than our for appointments another bill particular the first. business second since We of strong since quarter, XX,XXX in beginning of XX% of banking among Mobile of March trends year end through and the XX% safe

part of corporate core to this is strategy. with pleased very are our these We overall a technology see trends;

continue new X. our customers. and We to Turn it help ways innovative to to Page look to into ways use

the exceed in continue save SBA This our million we market enabled accounts than our at more small help to $XXX jobs. share attract program, also new more Puerto X,XXX us Rico. a PPP new to than in businesses Looking It enabled loans. to XX.XXX total We of important both in And quickly us the approval. generated communities example five and strategically this customer we distribute new to existing act our conditions a customers we of were electronically in great to to able funds changing days of application is ability base. within benefit to of these serve. and response This

of $XXX reported million, and a chiefly loans a a lower increase yields offset $X.XX results assets, significantly core due yield our of most basis. EPS about on cash X. earning talk on that Total in and Page large non-GAAP rate declining and Let's was on to $X.XX were This We revenues by lower variable rates cash. was partially interest commercial on loans. to due

balances. had we addition, In investment security lower

interest the margin net generated million interest the Scotia expenses wealth we primarily with Noninterest of to X.XX%. and addition acquisition. result, million. net a of $XX Banking revenues Bank $XX million totaled due management of $XXX a income were As

deposits in offset We from commercial due production primarily quarter-over-quarter. and XX% noninterest $X.X Scotia year-over-year and Bank Second with from recoveries and sequentially are quarter related we pandemic Page these generation Page X for tangible provision review equity cuts. core by of reduced retail results return Loan good strong; to and recent deposits Average up auto four turn XX% improve programs our and businesses. declined one X.XX% continue sale. for loans and in X pipelines four ago bargain X. hold shutdown. fourth ranging cost COVID momentum costs. credit to good Federal payment revenues the After core to quarter I'd million Please well results to Please note PPP for on category, The at building extra mortgages had return basis other the points caused the production emergent level turn to despite yield in $X and interest restructuring we're million Reserve The interest year-over-year. to Page turn Provision quarter. condition a $X to non-performing year year. and in by quarter-over-quarter asset losses and that and review effects included to declined loan $XX million our and included rates help offered We million value loan X% Average with paydowns effects charge-off was in X increased the we deferrals. and added loans from $X quality. increased an million the last and Loan of to year-over-year to expenses, continues like the was brokered to reflecting to several loan net of operating loan economic of purchase highlights. charges within related items. year-over-year Page to quarter-over-quarter. operational increase for was XX to loan gain. deferral The excluding Please margin the transferred and provision the for disruptions X.XX%. turn our X% deferrals. decline Please balances several economic COVID-XX, partially ended months. Net credit

digital unique As consumers effort first-to-market basis. quickly an individual tools developing forbearance by on help I've we've this for mentioned to enhanced apply and

process pace we of about centers significantly Our relief retail online total, and billion request slowing. have call $X.X XX% retail customers. deferral. retail is deferral or tool our loans In than for The loan XX,XXX of more on

research increased $XXX loans about almost December deferral. allowance loan our have XXst, million from we addition, Page XX. turn Please increase on of and losses or to for million $X XX% the and of level allowance commercial March $XX million XXst, doubled have the of Compared lease to year-over-year The $XXX XXXX, XXXX. million. In we

Excluding XX. was loans, loans; the turn PPP X.XX% SBA second points XXXX Page quarter than guaranteed allowance higher eight to Please quarter. first of basis

capital in position. a strong are We

capital see up on Please Page points XX.XX% at XX. as to since ratio CET last you Our slide turn that basis year. XXX is

are results programs. our our Maria uncertainty regarding respond to financial we still from unspent, a to COVID and Rico this to during still and strong While stimulus stimulus help demonstrate history significantly COVID we to in earthquake Once we benefit and we Puerto times. much related OFG, stands environments. through face these ability economic and believe At undistributed customers the ready changing our adapt our and trying position, get economy, and quickly

quarter, view, we of continue and build From develop to good in positioned loans. momentum sheet core well of balance we businesses pipeline our financially the point new and are a and second a During both liquidity, capital strategically.

the plan finish by this the Our operations continue of agenda going integrating we of year. end time, is must acquisition of to same the clear. the forward full achieve benefits Bank We At by Scotia XXXX. former the the end and

dedication significant a all I trying Virgin customers. plan in the to to our our people commitment simplify further our the we ability intend results continue play to in team also members continue for to Rico out to our thank U.S Again recovering enhance the for and brings and others. their throughout operations serve to invest months. excellent and in future the Crisis ultimately best Islands. And help these to We Puerto to role want and

single the Our we Operator, day. Thank formal with call that Q&A the please With people this session. demonstrate purpose presentation. our you for every listening. end open for

Operator

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

AlexTwerdahl

I'm morning. Thanks. well. Good Hey.

that a this to in the and start we $X reserve just to related quarter SX Moody's or you of of to Maybe kind to should about that? mostly how for break the you COVID. down provision Just Was aside us or the COVID off for help it put change downgrades the that was thinking related credits provision. related million could on scenario internal the be and

JoséFernández

high answer SX a the we detail. Maritza have you I'll give in I'll But scenario. Yes. actually more level; let Moody's you

to kept it's COVID-XX that Puerto and across no is we -- that have here in we and uncertain be exception. the that SX feel extremely scenario has Moody's Rico globe feel the proven We

So our as the scenario decided the we where keep Moody's provisioning. SX we to drive

picture So on of it; give details side big it. the the Maritza the let I'll big of the rest. you that's

MaritzaArizmendi

Hi, Alex.

also adjustment added the portfolio all that a the we a result did information them $X we mentioned, mostly as million based and that's Regarding retail We the $X million provision. evaluate in the COVID and most the qualitative adjustment as additional related scenario SX that keep the recent for quarter. and update we Moody's last we of during $Xmillion on Jose

AlexTwerdahl

Okay.

like seeing retail of really your curious that specific you just flowing oriented looking in at normally to a seems would retail mostly about you're that's balloon that at just today be peers. if stimulus It of of kind money they without was of and is in stimulus. the the down thinking factor some but amount there and island than deposits kind the shape retail might So the I'm better

-- portfolios retail So the kind expecting you're perform? of how to should we how think about

JoséFernández

Yes.

the hurricane that and stimulus assumptions and flowing the think from I out. the and correct. from earthquakes Maria play are certainly to There's you still going down COVID that's pose

think the economy and with is it's the just hard months. more good to think ended I the how a play that term, that have you scenarios. June should and we next portfolios a to the to do forward items on would portion doing agree how six short longer-term deferral term pinpoint behave the that on But comfortable going longer momentum stimulus retail scenario. us the the see it more the in that there's But XXth to program for the and we I all of be will out you economy mentioned a with economy, we feel agree see the on like

the side. with So and comfortable credit update the more on we we will data as see feel

AlexTwerdahl

Right this you and gone to something full this all the and through if commercial guys customers your have of have there's you done on that reserve saw course and would added at quarter. reviews point you the

JoséFernández

Yes.

tell the now most effects on that that can industries, we close the months. and on in a are the -- keeping market hospitality. additional So just on on on I hospitality industry for of commercial particularly that are the deferrals you Right of asks XXth middle pandemic. June ended have portfolios eye all COVID-XX most loans the three but and different terms That's the the large side we we the on commercial focused on of XX

positive feel large the those. good and our we commercial We're efforts our portfolio. portfolio the small feel So business monitoring about and middle on side about how commercial on also we're

side we the side, we retail look when how that to on quite the okay the clients commercial on back going at is pandemic to know again, that we're again, as of the they react recent the are effects But happy see we're to spikes. And coming are. still uncertain. provisioning, the we and felt government So don't

AlexTwerdahl

expenses. Understood and and little then switch just gears to a looking bit at

and use to get as for to the run adjustment of Scotia right you expense If COVID where's the into million the as as I end starting you third and the to you you then point kind the some rate Is or merger of like rate near out where run of kind of of $XX.X the end well the guess start expenses do XXXX? going quarter kind integration back year expenses. that of kind an expect

JoséFernández

So second on remember lower the the side; has quarter expense activity.

showing of lower the transactionality seeing So the lower we're of we from the we're customer. transactionality cost that

a Scotia picks because on to saves come terms the expect you cautious see those end the normal. on of as the hand, because operating to up. expenses the more quarter different So this in than some COVID, very, economy up, environment benefits the are we on we we environment third cost XX% we're acquisition savings and efforts started in of other those But a feel efforts XXXX we the simply acquisition from the the back and extracting giving extracting of very by the again, us from from comfortable but comfort we're going in

in So shape that's the at efficiencies of executing we there expenses. a are best as pace I we think the given on are Alex, good than albeit on slower give COVID-XX. I our the anticipated you, can really that we kind

Operator

Your the comes Manna of question KBW. of line next Glen from

GlenManna

the for And discuss Hi. the excluding portion interest would and could Good quarter-over-quarter talk maybe liquidity? what in could wanted the it helpful. portion rate from just excess And came we from the discuss about came recovery a context to you morning. decline NIM that PPP? I rates if be what of minute,

JoséFernández

recovery, rate said interest the Glen. Including you

GlenManna

Right. The excluding. no final right, -- excluding,

JoséFernández

Okay.

All -- right. that I understand. one. answer Now I'll Maritza let That's

MaritzaArizmendi

Hey, Glen.

reduction question, excluding your point to recovery. So the in the basis general, XX

regarding basis we cash about several the points. the it's XX assumptions much is assessment to the balances general keep points during We about that -- added But we how in balances it going have basis program, will depends loan PPP the that cash done forward. what on our XX one-third And in hold relates quarter. about we

GlenManna

liquidity So that on two-thirds would rate from was the -- and excess drop one-third be of on just was rates.

MaritzaArizmendi

is of are indexed fed different cash effect impacted of around the of portfolio as because because our but of rates cuts. were know, you that deposit the and already have rate we commercial also is that viable, portfolio balances XX% cuts this cost Yes have variable of commercial we expecting the full that portfolio the quarter the

effect the expecting more a mature as type They program will So the we the third us]. [with NIM during yields, PPP quarter. we stable third going in experience are cost continue forward borrowing during we of but see of quarter. of loan will also The loan the to full lower

GlenManna

but balances the the basis an at still like you've -- on average looking was I repo off Right. repos? got they there spot off, in all it you've and were basis a you've paid on taken looked

MaritzaArizmendi

Yes.

JoséFernández

will to use cancel them. will into we have Glen, several And, the coming excess still the and certainly maturities but quarters next some XXXX in liquidity

GlenManna

in you forward? those Okay loans quarter? on the PPP for what yield loans average your And and the forgiveness going expectation used what's the was on

JoséFernández

tell you to and I'll forgiveness talk I'll let Marisa expectations the I'll the about you, about talk and view.

Maritza opinion I'll pinpoint be to be are for expecting And there's forgiveness, us loans larger than those but federal that is forgiven. large give of rate, will when but the be we're occur guidelines follow. to a loans On let proportion, will It's of that government on hard a the that more of our more on forgiven. that more we more still we the the that and feel to XX% forgiveness, there will the PPP percentage going

MaritzaArizmendi

expecting able also around of loans, fee. X% repaid to are - all-inclusive be amortization deal be The the as the recognize Jose life of including if the that we before fees, of maturity that the but X.XX% remember considering we are Yes. portion unamortized the mentioning to they will

GlenManna

Okay method? and the using you're level yield

MaritzaArizmendi

Yes.

GlenManna

got roll on rates? the beginning off to redeferral have an and what you them of Okay or redeferral request idea rates with of some are deferrals

JoséFernández

so more we're -- what early We're much far that mentioned hospitality seeing large activity are too to tell. focusing middle on industries. and as commercial It's the not the on I the

three the in and It's too side, been On the quarter. into it's weeks retail early. third quarter the

later So indications how on depends positive for how an the sure, end the the you are able it have in or the additional or of process quarter's day at of the at the update back many the third call. when come full many first be ask to next quarter the we'll end program the for out But it to plays of but effect take. How deferrals. end of deferral

Operator

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

JoeGladue

morning. Good

Just one you us economy of and if up lately sort since some the started could seeing in markets, quick question, trends the more little wondering the opening auto and just bit us lending of you a quarter whatever. if just walk through you're wondering give in the could different mortgage

JoséFernández

the good lending Yes. mortgage We're seeing business. momentum on

We pipelines good Same have is We're We're on also Obviously There's XX% home. XX% side. a XX% the it's one in reflection pipeline on that's there. auto, a terms buying seeing there. of we're refi. mortgage with side. that doing around a doing the purchased good

residential the We're as actually some us. more and servicing had that's well So residential important extracting benefits significant that's Scotia of acquisition portfolio encouraging as more for they which seeing the mortgage activity operation.

seeing we're coming and that that with happy we're So pipeline through.

translating car rest for the for side, volume other the we seeing us more -- we're market. sure sales. also On that's And the are I'm higher into new as of

people but pipeline not two on side building meaning side, are installment And commercial we the the the on seeing we're still are on below the lending We're having-- it's lending consumer different be across uncertainty industries. a some side. our the on and those main ones. in side There's that So much seeing yet we've commercial there's and in that still had And pandemic. felt still the consciousness site. the still we're the business before lending from trends commercial can

Operator

question now Sandler. Twerdahl a from Piper of You follow-up Alex have

AlexTwerdahl

just -- talks segments. slide to was at PPP and attracting on and I looking small just strategically new clients the where wanted business I about it X specifically the here bullet important

the maybe kind can of put that's a you but be? to on How expand is a If meaningful bullet little that could If enough that bit it what stuff? as kind here that? of it's big obviously opportunity

JoséFernández

Yes.

had or on last a always and and that's quickly four more doing us segment. deploy act been And for our PPP there for incrementally customers us middle and side. fast that from the no the the of other And like which state be the a gave been focus be three to technology years processes lockdown any and we of process dispersed great opportunity agile got to great small we we funds For to we've the in business business in United operating our to the way were deploy customers. that our States the our the agile throughout in a that. the -- jurisdiction other situation in reviews PPP particularly or that

what the of life why with the the channel and to in by given living credibility I'm put getting effort. highlight from and we're a our segment. their have I that in perspective going of close at that's they close -- being they slowly quite it's but surely. And wanted to heart communities excellent the that on from move results have customers. at the It's that the benefiting be the of results just retail Oriental tell needle not proud momentum purpose out demonstrated you us your reputationally I for end terms good But that And also and So to we're program but means. that from important to and really team our to day, us

Operator

Glen Manna KBW. of You have from follow-up a

GlenManna

a Hi. the wanted question I on to ACL. just ask

your that to I ACL report guys think last we've and loans look at when versus some you quarter. we competitor seen yesterday in stability

bit mainland you quarters. forward a could level? you too. on you of not So talked or could reserve little about talk comfort of just whether they the discuss And what's that in have the if about building giving that kind And expect continued some banks maybe with

JoséFernández

to at again, trying We're adaptation. is you figure predict. not requires what really of operation can quarter and hard to out trying is it I year. but lot looking requires to very a life next this what's It's challenges, are So going different uncertainties from three and perspective. and those from next the next lot of how tell happen tackle be predict and in We're those a times it's of flexibility longer-term that half living It the a to in we going ready to Glen, going difficult. we're to months, or our

do be more the Moody's in terms of is gives this that that opportunity we we have say why comfortable opportunity to longer provisioning, to your a want -- we we a different we bank, are when thing that's fortress the I the maintaining kind the market. us great to long scenarios a question of it's term at thing So we a have to that SX balance resilient in really determine X-bank review we a look here that because term. and good sheet and right we the for market with the feel build cautious the And

trying the this We're pinpointing longer that here term or road. interested am the we're quarter. following long quarter to make are win So or sure we in figure to do we and the out how next I to close to not

for of any long-winded my I specific can't a you answer the get. So give inclining that numbers sorry but on to you're

GlenManna

I No. what wanted did you to little follow on And just I a give. appreciate question Alex's up bit.

feeling been wall? that Rico is online, digital. there they for resistance before? that push go are and of back challenger on you that COVID kind digital. have high Puerto it's that the been numbers kind once customers depositing has using of of may your that Puerto There's have considered adoption into of platforms. a to past guys of start customers lagged of that some and mainland the more to look opportunity no really Is bank the You digital don't down I that secret this Rico some at check pushing When moving a mean an island the a

JoséFernández

in XX You're the always strategy And speed. hitting more -- into the is think have that on technology forcing I we higher nail. speed and the now in plays that than pandemic technology, actually if our and -- the adoption the We've deployed at been completely technology, that's last years several said for of last We've into the a that. years.

So because those a are the in charts you do the what but is showing yes, which Having again, to Puerto though, we opportunity do particularly we of you is, in Rico. to said adoption that pandemic here mentioned what accelerating terms have have also great we end we need of do a in the with to our do. and what to finding invest great resources we continuing we to in fast, we to to agile proactively because the more island technology, here have competitors things great day for the and continuing customers at ways need do need of do

we're And operating in. work exciting of the home ahead teammates spite I the bank in three of and throughout on it's four achieve during culture bank tremendous the or I that but stay bank. putting a also looking but agile can have simple, times strong and or to a what short-term to that our us can't of that -- And And the it's last at pull we how remotely pandemic sheet, customers. proactive, So focused benefits And resilient us the for to repeat for months. to morning or exciting teams three and things again, journey come out continues dedication are this the are that's for pandemic. all again, how of amount having And the up particularly underestimate four to with gets balance last us. do work more gets the our every and up years, in simple is is

I'm to and optimistic cognizant again, and uncertainties So of of a short that continuing forward the term looking path. the the future of

Operator

no are remarks? further are Fernandez, there questions. There Mr. closing any

José Fernández

Thank have all operator. Thank also you our in. to stakeholders you, listened who

who this concern goes out Our pandemic. suffered to have those from

stays that soon that as have Our safe And healthy. and you and everybody as weekend. a hope ends a it day Thank possible. again. nice And great is

Operator

OFG you. Thank XXXX That Bancorp the conclude quarter conference does call. earnings second

disconnect You a wonderful your And have day. may now lines.

OFG Bancorp (OFG) 24 Jul 202020 Q2 Earnings call transcript