OFG - Earnings call transcript Q1 2021

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Operator

Good morning. Thank you for joining OFG Bancorp's Conference Call. My name is Maria, and I will be your conference operator today.

Our speakers are Jose Rafael Fernandez, Chief Executive Officer and Vice Chair of the Board of Directors; and Maritza Arizmendi, Chief Financial Officer. A presentation accompanies today's remarks can be found on our Investor Relations website on the homepage in the What's New box or on the quarterly results page. certain about feature and goals, may expectations. call forward-looking management's statements plans, This subject uncertainties risks Risk statements to These are and of SEC Factors OFG's outlined filings. section the in differ those materially Actual results currently may anticipated. from a to obligation afterwards. disclosed call that any disclaim result update developments We of in information this as occur any All lines prevent have on placed noise. been to mute background the remarks, there speakers' will session. After be a question-and-answer be will time. given that at Instructions like Mr. now would to call to I turn over the Fernandez.

Jose Rafael Fernandez

morning and for you Good joining us. thank

today, Island I into my our the core been that almost presentation as this Puerto After with trends of Before XX and translates OFG. to we you have CEO, want on Rico our is perspective are get share progressing and into how most on the at I OFG. years in businesses the how optimistic

[ph] then previous not than place better of outlook is than out a yet, much year. our the decades. today in is but And the certainly better are almost -- We two Island far we last were woods this

the strategic the come. grow macro all great potential in of market and Looking liquidity OFG, and the excellent stimulus position this the the the are getting delay the gaining vaccination level flow finally people to funds, resolved. more understanding to in resolution. distractions solid and our investors bankruptcy overall small reconstruction we in, at momentum economy. consistent of as point our increased optimistic about that we we to are hope business resulted Rico's microeconomic my individuals share as inflection result medium size well in I federal and are their and an businesses, of the years our are All and the improvement Island's for At are past environment, Puerto perspective helps being

strategies while communities the increasing strong three we on page our quarter our results, purpose beyond. to agility on success the with pandemic continued customers, to presentation. also our of first turn service, through generated our and with start very and Combined help focused our and our our let's So, and dedication people,

For another employed. once credit $XXX portal PPP our doors staff and facilitated businesses in to small to customers, our access keep open proprietary by their digital million again,

Scotiabank take our Our online offerings. onboard our advantage ATM to customers of on and mobile more former teams robust helped ITM

people, our so staff, For inoculated. XX% more been enabled vaccination we for and our have far than

create make office work infrastructure COVID-related protect hybrid and staff our our or customers. continued the up We stepped for our to And seamlessly spending it from a home. to teams secure to to investment as our we easier more plan

communities, help program by to For find a established pandemic. outreach We our we new to them want situation. affected COVID manage to to through the ways advice small better provide the businesses

also sponsored challenges. bring grow. help community turn to and strategy adoption digital Confirming simplify to page to them next-generation four. seminars multiyear solve a college help leaders provided the seminars better to them series during entrepreneurial we their for and We our Please continued customers virtual Month, and Women's digital of how overall History business lives, solutions virtual understand of innovation can our our to

or are how branch schedule our customers example great are importantly, sticking levels You digital our can have digital especially see the reopens. how slide online you even These COVID, the can strategy, solution. it is to use subside -- mobile during A continuing levels digital we advanced economy to how adoption across to platforms this online as customers restrictions but this much in solutions, and confirm see adoption our appointments. more different

we quarter During such approximately X,XXX the first scheduled appointments.

what results. provide Please technology first quarter in We to for was customers our first $X.XX the in to per relationships, routine to build five year income which be interest core the million and to in fees the quarter opportunities. in and business reported the seasonal is to trends. people virtually and release breakeven goal That's service, digital picked quarter. quarter, million. benefited to compared million. loan remained our earnings from of equal convince quarter offset fourth provisioning when customers to it Net Allowance up did reserves, roughly cost pandemic. value-added COVID. convenient the items. PPP ago increase allowing $X.XX of process were is and to development $XXX that from interest by our included $X.X partially and page to due improve totaled loan more use impacted before deposits. workout fourth the million stronger quarter a Banking the COVID-related share easier Wealth economic review of in Our and the Provision was Net fourth more the revenues transactions, $XX X.XX% margin Total for in turn some online to by eliminate we $XX credit revenues lower loan primarily same. commercial Management This you

as total excluding reflected activities have higher This quarter fourth and the was fee both level in in banking merger servicing million. origination Scotiabank the expenses $XX flat we first a Non-interest quarter. revenue quarter acquisition. generated relatively mortgage expenses First of of strong non-core fees, and items this consistently benefits after

was announced rate spending effective the in expenses The plans compared quarter were in tax XX% with First this also for line XX% to quarter. previously fourth our year.

balances. levels, credit. to Compared cash activity higher balance liquidity $XXX paying higher assets the a million. to refinancing businesses with at to degree production December total of reflecting lesser lines sheet. declined due Loans mortgage unimpressive XXst, and Loan increased down Looking higher

have We going forward momentum pipelines good business and all in lines.

via the XX%. regular In outstanding preferred redemption of dividend of series payments. loans In preferred January, and the starting that to dividends to capital some nicely, common of return and due to growth we're stack shareholders in PPP deposit increases three via and dividends build optimization -- the we increase of strong of saw relief cash COVID we to common all also announced redemption March, stock. cash Capital continues We shares. new quarterly

back like liquidity income available this I addition to first that first deploy all up, improving also capital to to the earned good activity In common sum we value the point demonstrated of solid out in payment another services strong excess and would of and increase $X.X climb economic net by ahead quarter loan financial shareholders to the Stockholders' share dilution basis. more annualized schedule. supported anticipated structure, trends on the To our quarter an acquisition, Scotiabank per to recovery, banking the $X.XX effectively generation, million fees. than book tangible improving and enables us as billion. equity Island's significantly and credit performance, by

to over more Maritza in here's detail. financials go the Now,

Maritza Arizmendi Diaz

our Thank you, Jose. Please turn for highlights. to page six financial

million. compares to million in $XXX.X were revenues quarter. the $XXX.X fourth core This quarter First

revenues million First loans forgiven. from income PPP quarter in that included were $X.X interest of $XX million

When commissions, annual held from acquired First quarter items; revenues that back $X.X income million banking from from or and revenues $X.X of by that in in non-interest consideration, interest prepayments into activities. in $X.X the core lower This in million take quarter. X.X%. higher included three cost sales and driven was were third $X increased loan income all deposits insurance mortgage million mortgage $X.X million million

in non-interest to expense $XX million the total quarter. First fourth $X.X This million. compares quarter

primarily of These quarter first in cost reflected improved savings. foreclosed are The valuations on gains $X.X and million included all sales properties. previously-announced

restructuring in expenses. The and first included quarter merger $XX.X million

improved the quarter. ago efficiency XX.XX% a year in ratio XX.XX% As the quarter fourth the from and in to result, XX.XX%

is XX% range. mid to to return objective Our the

on XX metrics, points kneeled quarter. X.XX% the return performance at quarter the and average in basis year assets in fourth Looking increased ago from to virtually our

the X.X% return Our to in continued on X%. XX.XX% objective above the be to quarter. rose on common equity on compared virtually assets in and Return fourth to average kneeled average ago tangible year quarter

average on above return performance of achieving improved. XX%. to be all see tangible significantly to our continued key that common were objective pleased We Our equity of metrics

own highlights. of year-over-year quarter. value That's The to and X.X% $X.X an This fourth high billion, in federal in most a book mortgage to from Puerto production. which per stimulus is loan specifically of quarter. well the Average our the meaningful in the as were continued $X.X our decline Rico, page X% balances be from ratio XX.XX%. increase of Average Puerto seven X% tangible economy activity reflects Please considering of of expected, selling liquidity our This capital, of as level CETX XX.X% an from core PPP Most first and were that is our increase fourth fourth Rico in billion, from loan. $XX.XX at refinancing the our deposits of Looking to new portfolio. for the turn high increase was share. was strategy the quarter. operational quarter

excluding million As loan PPP originations. totaled generation Jose million $XXX or mentioned $XXX

an Auto X.XX%, generation of and the largely and lending. commercial commercial In reflected was and PPP mortgage, new in PPP lending the sales our points and loan size strong home used yield basis cars. strong was to of loan Most reflected auto new production, businesses. addition fourth medium Loan increases the driven was year-over-year a to Mortgage small with sales refinancing. from six quarter, due forgiveness. of increase by

in reduction funds. anticipated, of decline call, the basis our deposit from cost balances of As help the fourth last of drive points, Cost a CD in XX in quarter. was five decline basis a core points

continue this lower. balances of priced to cost expect We be as to core deposits improve to year CD more

for means that acquired basis we points increased $XXX backed mortgage NIM the fourth of first The the our to During quarter. maturity securities million on quarter, result portfolio. two held

across this all trended Please NIM year. positive turn to eight. stable expect page We Overall, credit portfolios.

the quarter, to has basis. improving trends steadily X.X% Net to the acquire quarter $XX.X X.XX% we in decline were ago seen deception fell X.XX% Our to were the Total reserved. from or a quarter I'd $XX.X quarter that of million rate. of quarter. This or $X.X rate charge-off line the XXXX. been Scotiabank charge-off With overall X.XX% in quarter fourth credit like in year to consistent of the charge-offs loans compared XX% fourth This and charge-off the also first to million in XXXX, the total general substantially have from metrics net improving million first fairly previously the the in with included a highlight is fourth of loans. of which on and charge-off

and X.XX% particular, $XX.X quarter. X.XX% in from the delinquency the Provision fourth ago quarter in the also fourth and X.XX% non-performing fell the declined Our our quarter early quarter. million rate year from total early quarter. the well from the rate in first in to loan rate and fourth delinquency as In

of included the the [technical loan amount You cover should Scotia that be $X.X difficulty]. to quarter that unreserved noted million fourth the

our reflects simulation results included provision scenarios. using quarter and This to weight reserve SX changes baseline of Moody's $X.X probability release in First our the of million.

provision loan of quarter a first to prior the for included a commercial The $X.X also million workout pandemic. in

year from [technical the the also provision fourth in been Excluding of the XXXX. quarter has ago, difficulty] declining large steadily

Now, Jose. here is

Jose Rafael Fernandez

nine to hecho approach adaptable. our successful rápido, and fácil, Please for Maritza. continuing to Thank conclusion. and you, are our both turn page team history, Culture, prove

businesses. As I our said earlier, in building good momentum we're all

us provide significant to continue deposits core cost, with dry low excess, Our powder.

capital recent actions and of most Our shareholders. capital deploying to returning solidify record

Our the same. agenda remains

We business planned will for continue invest our as model. to transforming future in the

ability efficiency Our to operations, to our goal is improve and further customers. serve to simplify enhance

our business unemployment than focus Thank the Puerto year. to At high effectively income. funds liquidity, face and a the federal up again. this help role deploy their of last of migration is With loan government's in out We to the for brighter. this, recovery Rico grow year, of cost to but utilize COVID an in Our vaccination agreement OFG, is and Q&A. and fulfill with signs excess individuals deployed, and of The generation challenges possible to increased all our restructure relief extensively and levels, U.S. signs ability listening. we more looking stimulus is early with recovery principle presentation. Operator, to consensual Rico's future Puerto projects fee end electricity, our way and being from experiencing from debt COVID, Virgin you high want still benefit getting and lives and Island from under a formal end we're play please and major benefiting We migration to the reconstruction start stimulus, reconstruction ready rise islands. and customers our in businesses

Operator

comes question of Twerdahl [Operator Piper you. first from Sandler. Instructions] Our Thank Alex

Alexander Twerdahl

morning. good Hey,

Jose Rafael Fernandez

Good morning, Alex.

Alexander Twerdahl

in the valuations real I can guess, give comments creation First to little I population actual you that migration inflows in see to if And most your kind you to bit optimistic potential us estate share alluded you're to optimistic on job appreciate are, XX few the of else as such you wondering able us? in the years. for off, how with a I are more was able anything details. a on But you or concrete or numbers Island. data Jose, things

Jose Rafael Fernandez

Yeah.

we activity So, that net activity economy there saw a Alex, perspective, but last from economic was signs, macro terms show string migration. we Rico's right, seeing, Puerto year to particularly a the were of -- in zero the though

XXXX was very XX-plus that had was XXXX, where people So, we positive it end. when migration, XX-plus, and -- to XXXX from net thousand you that compare year a

see and opportunity industries, that we we needed agriculture, even the workers left workers come education. And expect, of need line to we're economy level as services, also for to for entry lower those the see So, we're And and particularly starting back. low in some see that workers. construction, are -- the several starting And need. opens, to medical

for recent you history, got Rico's two economy into You back. of migration -- we've The there's is past most when migration that lasted gets of almost economic to had some decades. to Puerto in the that challenges challenge coming the see downturns, the and recover, then economy U.S., economic have past when starts and the it

So, won't is right? that of show back starts starting that and So, this of early end higher returning, immediately, back, will into -- but we're that. year to because And were Puerto see we a that of occur the come economy we're some expect to to and Rico some migration expectation We year, next people left and starting the signs in to droves -- opportunities economic our we activity the as that come it those of will haven't that we beginning arise. of seen evenings. in see the

at were everyone a that in So, I'm looking see I well, and direction And way right and I've solidify ground well, it's to with you years you I'm -- I the time of past. resurgence. that we're couple where it's to picture the spoke same is about, picture, too. when the speed in take that's from did to more actually of right things with and else but trying that, When not what be going beginnings the candid and the been relay this trying the a moving seeing to it's the the moving

So, we're the side. on construction seeing we're We're seeing from consumer right the it customers. that seeing our seeing activity now on moving side. and We're

of those Some customers very are active.

is our economy here. for to expectation grow So, the from

Alexander Twerdahl

helpful No, that's color.

from numbers the of see that the starting that same said, end year. timeframe we of kind it next I the you more mean, is, be think that maybe the this Just step at is than I tail expecting should well said, as point reserve loan levels, we balances, still think as inflection as think that a PPP, wouldn't an you see appropriate. excluding as the -- of make X.X% -- to reserve doesn't maybe you certainly about is everything

issues, So, we those be how tackling those should two thinking about …?

Jose Rafael Fernandez

do first me sure have try residents continue accounts the growth, to answer threw don't levels miss that they we them all. I Rico And quarter that, you I ago. if that systems to will loan And stimulus Yeah. them me the please question, I'll think in But and realize know, and of numbers I couple questions of liquidity but it. the let $X,XXX but regarding, and that starting are one them any, high, can so in the a answer very checks Puerto send in for actually a increase, they to you reflect if of not to because deposit their weeks just know I couple financial are because any in

$XXX seeing $X,XXX. deposit the what primarily in stimulus a So, growth reflection the of checks, not you're is

the in system. have that liquidity I more will So, suspect we

credit levels lines we cards, of -- credit loans, from they business. some So, consumers a with and for the liquidity those of credit regarding down have balances see and auto of businesses will loan growth, paying also that higher and

small and come growth that starts is, expectation and they'll meaning end individuals invest my So, flow long that's loan year, year, through medium XXXX, we'll back using loan start next come not expectation the subside that year, expect as -- growth. expectation I liquidity start next and our and to -- as and would our us is when sized but businesses the companies that by those from of into see deposits, to growth calendar

So, if you I'm allowance, not mentioned our regarding, mistaken. something

innings the this. we're like -- now way the COVID with pandemic. the past Puerto in the a still I've this but Rico And of COVID looking a maybe down, the here little where and dealt the bit the So, you're said is with -- hammer hammer reopened, but of restrictions. Look, were later not on government about always a dance. you right a say and is the in scientists Well, in little have at of bit Rico least, increasing the has seeing we having not would fully. I in COVID that resurgence talking the the see said in -- we Puerto are middle pandemic

that, said just Rico way. rolling as It's vaccinations world. having is So, efforts the on the available, Puerto are pretty that latter of even we well the like faster. I And with end think not its it's but vaccination we get on

So, pandemic. more I and some and the improve continues the suspect have will open. economy credit as that our we coverage to evaluate levels by And reserves, loan you will look the the summer, at when the news we regarding as to continues COVID

premature want your don't the what seeing I we of to Did So, questions, given miss too we're here any be Alex? Island. in

Alexander Twerdahl

be. of that by your for governing and be target can sort ratio what sort to of what -- me. that is actions respect priorities just a just No, obviously telling And your for to be? as for get some of quarter one the capital, getting the what with preferred. the the see into But queue, And I'll will you sort that and with that's color. final might the in target for And then start capital us and you dividend will back the timeframe we what then saw great maybe first this nice

Jose Rafael Fernandez

Yeah.

the -- question. So, thanks let for

a allow where a back or was you XXXX, how prefers if XXXX. one -- they -- I Indulge two issued we in -- think, BBVA issued that The for look let's me. XXXX The here became when redeeming, in I first acquired them second were second here. look they when think we we of for were CEO.

the and to allow when so, we, team, And those never fully, I because history bank look who's bank proud we're only dividends. stopped are paying as extremely only paid me a you our And that. said at who's the them of indulge we're

who so in preferred from believe managed XXX%. a supported years close environment and beat and never difficult We challenging or XX have shareholders lost delivered us to We a economic us. very our us,

to just look way. with wanted the need have of we done get in we'll I dividend, of that it first the increased So, redemption though, to quarter. that you finishing we at what we out a deal And and when then be with that Short-term this think second January. in off execution common

Board year. twice of at Directors look dividend decided has Our the a to

the will year. looking we the middle the and So, at the the start year of of at dividend beginning also

So, And how opportunities sure us to want common of been Rico also to get organic deploy that we on liquidity. supporters also excess our have we and who economy long-term, it make the Puerto reopens, longstanding want that we grows to what see also how capital shareholders and have that. excess

first for we'll We're out next consistent to growing the a try again, and we economic that about I'm very XX% the our expecting. the and to here to everyone see have else challenges. that's your in economy able to have guys forward CETX to closer And not ratio looking that our to equity shareholders, capital models, expectation. for -- as and And to obviously have XX%. So, but capital constructive And again, do good tier with good of We'll does. were common you'll opportunity to plays years. XXXX, when our earnings many reopening it, you manage assuming And in several today look own basis potential, confident but see the at you'll time returns. years issues generate be ourselves one you return only ratio also starts be a have the we're as we and our tackle

Alexander Twerdahl

you is just it's then, to your in that share later should it around target of XX%, a the another -- target with are follow-up might now when reassessing of respect And also Okay. around out this think dividend, payout guys that, you -- what year, we ratio? is there I to which and I then half it that ratio? And common out expect how a same mean, as like seems that dividend the you of authorization? think authorizing payout bank repurchase size, meeting consider discussed about is the you maybe the

Jose Rafael Fernandez

Yeah.

that's sure to which look twice into ratio that the the make want payout normal we targets. Board the we XX% is because the year, more dividend -- we for to a get So, at to ratio, decided closer our the dividend, -- more payout why

build to we So, want towards that.

Regarding point. talk think, to share too repurchase, this that it's I early about at

I of as think, earlier, I through we redemption. want the get said kind to

look for to Let's individuals economy see the clients to want individual deploy and the and grows dividend and commercial how and to capital lend also. us the commercial to opportunities let's have what our at We reopens organic really. available capital and

-- those that ability. that there and that So, we to want have we see opportunities

So, several And at -- the on redemption of more more news in time, more but point preferreds we'll dividend. quarters, the give shortly think we're news in we'll this at the the and several you dividend. on the looking I next focusing have

Alexander Twerdahl

my you Thank questions. taking right. for All

Jose Rafael Fernandez

Thank Alex. you Yeah. for your questions,

Operator

from [Operator comes Woods. question Bruyette, Instructions] Manna & Keefe, Glen next Our of

Glen Manna

morning. Yes. Hi, good

Jose Rafael Fernandez

Glen. are morning, Good you? How

Glen Manna

your from hearing you how kind projects up customers in little a it with depletion are events, have week two I'm down a a the seems the last Island. rate and over than maybe been well. with last conditions of they're on follow-up inventory double could coming faster approved faster years. just significant There's the and and on those for to I an Island Thank gearing little indicate approved whammy to inventory. restocking COVID, bit that on pretty What causes wanted yet was your few announcement there on projects been you. be seen a you in mean, they've Island pipeline the I or?

Jose Rafael Fernandez

Yeah.

Glen. So, question, you your thank for

been since start the has more the year, and me beginning with saying the of branch Washington executive constructive Congress that by Puerto Let Rico. much just

current me Let is positively governor say in the from executive Puerto that and trust regaining far the confidence also Rico the of very Congress and also the worked so too.

So own, helps. right? their each So, to that

also get those least administration current the of principle. board, reaching think, very positive it at to some working a like behind way next sometime fiscal in on this or power they're agreements, with we're I year. the constructively on I question us The later way remaining electric is that still working in also authority. that And and What maybe on has the bankruptcy looks is helped big year, our know for fact that.

thing. one that's So,

mostly The roads somewhat other services. in our saying infrastructure. commercial and the thing is last year the asked are about have do bridges with I and clients us, are you engaged -- they already and me engaged, They are been on when to they what and customers rebuilding construction

work. I think projects put seeing new that's to starting coming to accelerate and now, them in and we're we're being seeing --

the very seeing -- a if level to last that opportunity. starting CDBG I services construction think, earlier excess firms part transitory, activity. or mentioned their And to for again, liquidity I and during being those I some services companies with that going seeing are in but need are the remarks, to it's in this shortly system, the that's are too. that increase funds going that to forever. they're ready question we're of I do workers not home those there is -- of construction think construction it think, from start has are my I So, late think of also Alex's released. And year to somewhat

on results -- of how economy think, I land to So, people an opportunity the -- here particularly side as the as construction construction. economic with on starts reconstruction add there's the workforce, to the revival also more

right We're the the to good sales. in I'd that early just like you challenges on inventory. we're seeing From the and side, So, it Island. with seeing There's some good consumer innings we're retail sales and can good the places. mention in all consumption that, now of see auto

the are I demand products. the clients either or and and and auto that's particular their to particularly they inventories recognizing to are facilities But towards for our -- retail to side. think some on them as growing, and is the parts So seeing look inventory the not starting amounts that of larger and other particularly build missing starting because at requesting to of that on chips of hold the are larger world they're

Glen Manna

you. Thank

mentioned right kind and stuck what that after digital not future on that of What digital, to numbers you the fits for someone of COVID of of that theory they with Island, branching go that the they've and kind back. once tend the a footprint think means size You your goes do the franchise is?

Jose Rafael Fernandez

to the The side five I very been equation pandemic different last day, end the here past, in in States. the that it. accelerated of for branches years that is stay in on the future and calls future United we'd the -- said Island and in we'd it's how in has as grow. of At the no to pushing here the of branches And And the COVID been other the brunches and Island, it's than the of the digital adoption nicely.

is the understand you're provide our continue lives benefits it. -- to solutions it, And that provide that. help what we're simpler. what And of continue them infrastructure, digital to those and seeing to job that that's precisely make at Our their is kind to of customers

a think of more finances. best way what or to not our starting their for help the certainly and are, place get to expert And the branches been the of it's is to sit employ that add financial and and the check their can they feeling using now. loan. more our are more I that to too. digital, for recognize or achieve save us down to as we're of a we're people more States them see aspirations and the be deposit in goals differentiates to And in a cash for and excited time our future add that's bankers decide value pay in to check, with the conversation recognize detail, Rico. that's United what about It's Puerto value Puerto customers and to benefits able And customers, to a in starting and to have comfortable and benefits You're direction. think that the a more really manage while moving And I is here their banking the bring good Rico a conversation what What success that.

Now it on how retail your the on excellent we've question but and an work at our branches, retail channel, the have being who as to side, and disciplined the on done methodical done size the on what's job. of look of very we're right and really to very teams knows, proud

next several to envelope and our push digital years, to solutions how see the the in do customers. with add you'll we So, continue value

Glen Manna

for Okay. last then me. the And one

With that And of alluded that your Is and mind of residential point home to part your that heard you've mortgage what and I maybe lot said, I've there on you comments change -- portfolio construction loan your production. -- heard Maritza a and in renovation. production? include of your kind any of the a past start to construction mortgage you some that what could your practices to home the that said understanding Maritza significant It is is that some sell originations. in

Jose Rafael Fernandez

that the of XX-year a Yeah. originations higher the our it a speed point this the that us for and from see in it to comfortable. some need not most the interest at point, fixed rather perspective feel point end right? rate duration we as think, past, utilization point to we are start liquidity talked going to manage of yield, go rates kind day, for up excess feel And the So, of more There's of we've we kind be where makes at mortgages. of terms funds that at cost us of bit to this I at in but sense and

fees You banking saw to to on was that something picked said, we to at okay, interest that levels generating. bought when how we're held in of liquidity the mortgage backed quarter. But for Nice of look we some securities a kind we we got where we health activities how maturity. rates level do put kind mortgage and up that's That us. --

the to higher the So, of the at interest end to I for us rates it decide need day, take keep to think portfolio. on

Glen Manna

something? there's Is Because Okay. with And or then, that? mortgage down more deposits and of was you this one be something, on the share. The securities about beginning $XXX you've Island, has -- am stimulus noted of into the of it getting there. because that -- kind balance ask in million more do the going more you to sheet. led to been you'd your going there to put you coming full sit Maritza with expect execution go I backed where I you

So.

Jose Rafael Fernandez

anything Yeah. No. of is not This Glen. in particular, the beginning

interest that this I We to think, asset this is grow just States likely we us do move rates. in increases year next to significantly rates some managing liability economy sure the United the that most think making is higher. going and and on are our opportunistic and going in and the interest

level. this the in So, portfolio we're investment ourselves no in situation on hurry get at long to a any

kind is this liability, a just So, of or a less more decision. than

Glen Manna

taking you Thank for questions. Okay. my

Jose Rafael Fernandez

You're you for questions. welcome, Glen. your Thank

Operator

Instructions] [Operator comes Martin next Slater. Steven question from of Our

Steven Martin

over and position a lot. had shareholder been months. six recent Thanks my last a the building I'm

you the Biden's So, think. infrastructure and -- the hurricane it talk you I recovering potential have Rico And Puerto of to benefits? well in you can ago. plan may infrastructure be prospect answered, Puerto about -- you Can can COVID a about -- and -- and year Rico? was talk industry benefit the but the a questions hospitality about and how what of you half statehood talk in can Can from you the been asked my its timed, address most see

Jose Rafael Fernandez

Yeah.

welcome you being our call for thank So, shareholder. and a to

well and XX% The below that They're in some and XX% pandemic. were but general, which say right? the levels, more percentage on all. last hospitality. they in occupancy still some before deferrals gave holidays, And out the XX% with in Louisa, are don't of as that information also. Beach have Pandemic Rico let's fully imagine that ones them level much Dorado the start the are keep it deferrals. we're Puerto them would seeing they the left. end, increasing or clients. you here higher of what really the as and seeing of well we bookings in it's deferral in now, We've Bahia the happened of me of the hotel booked. one, Beach, XX%, higher terms in Most are hotels, Bahia end. the of those and of and from are commercial our as We in we're -- Right Dorado, Ritz-Carlton the like, hospitality, reserve hospitality, depends weekends specific levels We care above, the in the Let in taken have most

Island think less future, as and and Into of Caribbean that the are COVID even will I The what's from having occupancy. with have we benefit per they're more happened expensive, of other here. Puerto the given lower se, benefit ones given will COVID, still aftermath that an nicely weather probably think, casual, Island, the I more levels hospitality, recover will and Rico a

our hospitality. of So, take that's the kind on

said it -- Puerto include will infrastructure infrastructure from going terms right benefit, the Things any include which than much of it's Rico to Washington, we know what's that very How that they coming some Puerto plan question the as funds to approving terms you more -- do, the on -- tell as from I asked In I do hard But expect can you there. -- fluid of really to is beneficiaries. But we as the going you over is, we be whatever plan, a it's now. tell. Rico going that specific Biden is fluid have one imagine, over can -- much there I that the on will granularity have very second infrastructure of you I details. are don't And there. in tell don't

is first for And we the of XX,XXX about So, that end is question that. has And then asked the years. the the been let's expect your at really XX say question divided state. are terms middle as we of that to in is is answer in becoming or Puerto question a -- relatively Rico still the through remaining Congress. that the day, -- last

to think, also need again, with a and and and politics Congress issue. Puerto I So, take, per too, at in play soon. from it’s Rico to of that to effort come se, a a Republicans come But -- lot anytime Democrats take as to statehood for terms going and look

work sending Washington Rico more a term, Congress Rico, but with the So, I Rico some of to and visualize I give to say in short and but would understanding that messages want wish conflicting for what's on specific for I we're to hard still the Puerto very Rico of political answer that term state, -- Puerto statehood, becoming question would the to can -- I five say the a and of community short in very me in the in it's and next Puerto hands you come general. years, Congress is also and say to need I don't level Puerto path to

Steven Martin

Thank you very much.

Jose Rafael Fernandez

your You are questions. you Thank welcome. for

Operator

[Operator Instructions] comes of Twerdahl Sandler. Piper Our question from next Alex

Alexander Twerdahl

Hey.

technical Just had questions, a follow-up if could. I couple

funds, parts forgiveness, what I assumptions moving off, the PPP through kind are this of like deposits, in XXXX Maritza, cost cost that terms of cash, that you XXXX -- get First that stable of rather. just -- for or be walk NIM that NIM, stability think like the what things you NIM you that? you expected said you of to to the of Could year timing gets the

Maritza Arizmendi

Yes.

quarter. see mentioned additional you in. we're the cash also really coming in items I that at looking key next most in the Alex, stimulus recent still are think, in that identified was We regards couple of approved. I

balance. see that more And for then level in the lower put our earning. so cash pressure cost So of cash, pressure on that the will funds will would of we compensate

our have NIM a So, the that to -- of scenario year. are stable what we for is rest the

Alexander Twerdahl

Got it.

just you bit -- cash. I've in of amount the things the a that drill wanted about to on just asked and of is One in the past,

hoping of now an increased average and $X.X the And the to on one I billion just should XX at -- during actually which touch end there of way? quarter, bit just on, of earning kind at cost aggressive a you just jumped balance thing a look is deposits lower really of more out savings here go opportunity of huge points. a I had and on the deposit continue kind accounts little quarter, basis up up me or to side, was is cost can that caused not the quarter deposits then went maybe based in the that in the of And You commentary, the then on that? what first at accounts your XX

Jose Rafael Fernandez

Yeah.

your for thanks Alex. So, question,

had finished finished year. We called are quarter some this integration. the mature. maturing we starting So, last They're said with coming the it conversion borrowed Scotiabank. the we to We We CDs acquisition. we and in

Some of savings those the bounds has to checking. kind and moved of

conversion, we move we not additional what care take -- to decided then. our and of those we et clients. Scotiabank stress our cetera, first, deposit from COVID above customers back So, to thinker And and with didn't was want beyond integration, costs

And alluded our kind actively towards, to, And the maturing are -- time, some are powder we moving we're mostly as and see we have them CDs savings. to we have, dry this of a of same the cost Now, the deposits. higher starting that's slight moving getting are working off CDs to pick strategy. those up in is that and of getting and balances. you the at the

that's where the expect kind of of -- accounts we repriced kind And of that the we generate to it's the in to that. year started them. Now, at by of advantage probably look the and of benefit take some end those

by from of particularly was of We And creates, about have the customers. just opportunity value there, at it. that are driven and It's noise on sure that, our how this. extracted want kind we kind year think challenging do right. looking we Scotia an the acquisition, very it. But you're that's how do all definitely we which acquisition. that's And a is we make all given the So, see conversion XXXX we and a -- to to really a been integration

Alexander Twerdahl

quarter? you able reprice to us with in third over you there the that us? the to you amount can a dollar migrate to are And that expect CDs and give share Is or of potentially second, in fourth savings terms

Jose Rafael Fernandez

have I you, have later that to -- don't Alex. it I we but can don't at specific you with time, information. a if I provide right me that now.

Alexander Twerdahl

ratio prepared wondering comment targeting you're is And was of an sort range. timeframe mid during achieving you in in you're to rate get of what and a that, environment, that, if remarks have from the come Okay. efficiency ratio can current then, XX% really another just that efficiency if you the balance higher the and I if seeing that need the lower? rates sheet sort or

Jose Rafael Fernandez

Yeah.

XXXX I our we think, that a But regardless and we're interest the income can bit break probably We also of interest of net little optimistic level so generation, and so comfortably rates. need probably interest about higher on right. achieve rates, a the fee goal. of

for do mid start of them update our And say, going year want structure the that take I cost cost the And of, is -- would into. continue for one so comfortable a So, we'll couple look and to us again, how to XX% more continue But the on several it's with on think, to feeling a parts. next range -- end or you efficiency. to we are do us I we side, quarters there because many we to that moving throughout platforms. invest on on

happen need some invest of doesn't to air. We issues. and and timing our infrastructure the digital all thin mentioned about that. adoption out there's think and technology I in Glen It

And long we're that's haul. doing sure to So, about believers we kind on successful we the on we're doing. doing, and what time how our how buy to to forward. we're need here it of we're make for be are vision And we going truly the that We're invest what strategy our and it. going

what focus that's our So, is.

year, of ratio So, for a little next and room the on breathing give us a a the half. bit efficiency year

Alexander Twerdahl

it higher is the then, this you're a And potentially consideration. to $XX even quarter. above some popped at forward? than -- this is that remixing That's Durbin Is billion something still being that again Or just billion? and committed there $XX it. point still delaying you guys threshold Got

Jose Rafael Fernandez

way there's any Yeah. back. think I don’t

rules to $XX we make so crossed of and the investments reality. think, I to we're and -- We with need going we have the the billion. it the kind rules, to deal are do

have, of prevent year. have from So, it. that's billion hard that I effective see the end were here We said the from very above us today we preventing mark. we see at being But that $XX consistently kind the I happening how last and to of of it what expectations with

Alexander Twerdahl

properties, then the line. the the value out of the to seen gain that, quarter that quarters. couple question just -- foreclosed and it's first write-up being but final I expense just of for it And what's the of that really thing what last another that on Is you sort not seen from those sort is biggest that commercial gains? you've we've driven from of leading jumped is properties in the that properties mortgage and Understood. know -- saw me, the

Jose Rafael Fernandez

see We're Yeah. It's we're residential seeing -- not the go to And and board buy we're in see it's to across -- prices. they're sizes, stabilizing, no what starting mortgage. ground. starting trying on starting longer no home only high the their homes. to again, to different young We're from the up renting seeing buying properties and professionals longer to professional end moving in increasing with values,

are place. homes we've picking But And shown mirror. but in saying are also today. data the small as some So, we're home in again, in We're income call seeing and lot $XXX,XXX statistics, like of confirm lot States, rear also seeing not saying any of not today, in been They those up, those bought. lower the I'm in of that type the view sit kind what here $XXX,XXX a through are $XX,XXX are look to looking. are that -- skyrocketing, to being a they're green I areas shoots because prices $XXX,XXX the homes backward the statistics and seeing the we're points of remodelings

Alexander Twerdahl

taking it. Thank you questions. Got for my

Jose Rafael Fernandez

Yeah.

welcome. You're for your Thank questions, Alex. you

Operator

[Operator from comes of John [indiscernible] Instructions] Our Cartman next question

Unidentified Analyst

workers economic much Moody's getting thinking model about as about economic And that cash, forecast Moody's in you you're forecast how difficulty]. can us does what your Jose, informal appropriately to paid et And talk an then seeing the on input economy, cetera. [technical capture that does time? real

Jose Rafael Fernandez

understand I was question. So, to I able your think,

very call to or the hard for -- underground consideration middle. variables a some to model up we you in it's And the to and some the it think it's into You that are the take accurate model assigned however, it. probabilities were reflects Moody's economy, economy to, Moody's think breaking But regarding I not. the those just and I unofficial variables are and want of are Model of made model. the

evolve it's don't evolve, insight there. I continue you economy going the play So, Puerto beyond. provide think it's economy. to is things above continue included Rico. going in in out model to And The the to about in right, formal pointed to as don't again, have much The to question, to right? and I

you full -- another I to had this regarding question. to question because issue, understand was hard the I feel So, repeat please

Unidentified Analyst

fine. That's

activity out what Just the second of increasing companies, D.C., latest activity or of of Island? additional And is pharmaceutical levels, the out Island? out any hearing to that pharmaceutical question. companies are activity mainland Puerto on aid staffing attracting and the What the efforts increased you hearing on Rico and pharmaceutical their the you're on coming legislature there

Jose Rafael Fernandez

going There's I that I announced smaller Last Rico. think, Puerto to this is earlier we've during two -- maybe or was, Rico their Puerto last year late happen information got that's establishing sometime production pharmaceuticals year, the to in production Yeah. some are year. of moving

XX% the is to XX% Advil to medical still of Tylenol, all either devices Rico suspects production I global but of and pharmaceuticals and/or medications. the don't It's from think pharmaceutical. medical realize, GDP we -- devices have in of of usual I know all XX% and people medications if the Puerto kinds of

that is in it's and Rico. the going regarding is that any Rico, to be now for players the to it to it's for involved come out, to seeing So, changes politics play that of yet. for And infrastructure what COVID in so I those and at more opportunity innings -- us in the opportunity optimized and Island is Puerto continue more look competitive make there, to issue. there further. even with Washington because an seen to efficient to to Puerto And here think we're infrastructure couple more play. that And we still a for Have take not

competing States. in of be the some the with we'll So, States United

from energy efficiency advantage the those on been in that provide built to to infrastructure and increasing We that stuff. to better already I we with companies, something here need early to be island still the too has their as have do production and that's it but job a an to, It's works. services in honest, in all call But Puerto it's pharmaceuticals Rico. an think

Unidentified Analyst

you. Thank

Jose Rafael Fernandez

questions. your for you Thank

Operator

And we questions? Does of hour. now the reached have have top the any final anyone

Jose Rafael Fernandez

through other the there are thank operator have who And I our questions, thanks to listening for pandemic. team -- an stakeholders call. like for no And the if our So, helped thank today. will all outstanding coordinating also customers this They job. to done all have members I our

call. forward day. to next great our a Looking Have

Operator

This today's call. you. Thank concludes

may disconnect. You now

OFG Bancorp (OFG) 21 Apr 212021 Q1 Earnings call transcript