OFG - Earnings call transcript Q4 2021

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Operator

Your program is about to begin. Should you need audio assistance during today's program, [Operator Instructions]. Good morning. Thank you for joining OFG Bancorp's Conference Call. My name is Britney, I will be your operator today.

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

Jose Fernandez

and extremely on helping our well-being. they've achievements, excellent morning want work focus you thanking proud I particularly through our for us. to call we XXXX, and of the Good done start progress financial our are for our thank our joining today team achieve customers members

were million by Fourth-quarter Fourth the start and let's decision already due $X.XX turning partially year-ago in in our third X per of had to $X.XX required These earnings to was million the earnings provision. So of diluted $X.XX period. our past quarter by call sell loans. compared What page presentation. quarter to conference reserved. been in loans impacted additional $XX $XX strategic share

of XXXX increase we As an XXXX. for totaled our core quarter-over-quarter, momentum million to and year-over-year. now that's end entered demonstrate business, as we continue and revenues $XXX strong X% Core X%

increased primarily to resulting Pre people $XX provision to $X reserve which -provision in million total release, revenues than year. continued million and third to to worth net due totaled improve, expenses Non-interest last net reduced quarter Asset XX% a in the investments technology. million greater $X quality similar increased million. our $X

of to million This partially deposits. $X.X customer XX to reflects Balance billion. declined XXXX $XXX withdrawals increased at the later postponing of billion offset assets, government-related An loans, December with to growth in and the Even deposits the Compared in was areas. loan September in clients. very X% sold by decided loans in increase priority all ended we XXth, loans. we an commercial the held $X.X an investments year-end, Dublin by sheet, auto $XXX applicability for million with in at Looking of quarter. summer. That institutional retail of consumer new X sell. increase of remained our And increase commercial loans, X% for and ex-PPP, loans, of origination strong at X% in the loan We

capital buybacks Please our successfully Page strategies, also capital executed to X. levels million completed our allocation $XX we share robust. on We and our turn remain

$XX at per Earnings the We progress And lower higher by $XX all XXX%. million. share revenues year million we This are million up was the as also pre driven of million revenues, -provision made core million $XXX pleased to and provisioning, a expenses. $XX was non-interest increased $X.XX XX% for whole. lower net

million. deposits Looking at declined $XX loans total $XX they sheet, million grew a excluding customer $XXX forgiveness, assets million, the balance increased $XXX increased PPP million,

years. XX was strong $XXX the $X.X very compared XX% or also we at us million If capital up origination both record XXXX, a billion was ratio PPP -- points, a loan position. million from New $X.X billion. CETX to $XXX record in leaving increased It exclude a basis

Consistently share the $XX driven growing income we quarter our preferred the for stock. and and net increasing Although our our from $X.XX completing million the dividend our capital recurring the actions common in per We both redemption year, of remaining of all $X.XX, to drivers stock reflect X and continued saw to XXXX of digital main including; that optimism the to Rico both U.S. scale, loan Puerto service future focus our businesses to on on Rico our Puerto includes and increasing differentiation, beginning to a continues our regarding our this growth by economic All Puerto larger cycle. and and OFG. build loan validate and growth, continuing Rico enter customer business utilization

simplification focus transform and a building to with service. on and culture continue customer We excellence of OFG a

talent developing are on deliver transformation in to and continue to We attracting top this invest and technology.

X some technology and drive investments digital, As investments of in our stakes are upgrade and XXXX sales these you cyber continuously table deployment data quick required know, our the unique strategy, require of security customer Both focus technology migration, our residential us service namely experience growing digital Rico cloud stage OFG will on model. our position, longer of systems. origination outlook, Orders to faster, and analytics, the our were that to OFG to first examples capabilities. and economic market. with banking for Puerto business investments the data-driven Rico's efficiency we and the improve growth. accelerate for set our long-term strategic term, process mortgage improve With commercial these and our our Puerto

together grow the We clients our to proud and and are we serve. with extremely forward look to communities of our continuing accomplishments

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

Maritza Arizmendi

a our banking total total you, to million and the interest increase up revenue. investments, decline in the to technology, That review in also income about an and compensation, That levels of $XXX of in expenses net total and from quarter. increased The driven on higher insurance This X% was cost There management included from also million last quarter. $X.X reflected rate. is year. higher This allocation The several million of annual an million reflected non million third lower business increase average $X quarter. in cover from revenues totaled Please also more investment $X.X reflects to of XX.X% income operational quarter million the core to a for and in increase of less [indiscernible] pay securities real fourth interest by Non-interest compared recurrent of funds. and shows reflected mainly to Growth million. expenses XX.X% commerce. to $X.X NII costs the compared Thank million $X growth The year reserve and owned wealth reflected X lower increase third are is financial revenue expense or increases this on of $X.X Total quarter losses internet $XX in mortgage $X commission. about lower Non-interest highlights. saw gains the million Jose. activities. to compared $X.X you were million. in loans services from to net taking estate core related activities. quarter. a cash, The prior banking sales fourth quarter start in or $X.X ratio our million banking legal increased included prior

to in equity technology in in XX% strategies. ratio our As We further in in on target to rates [indiscernible] low may XX.X%. and common on assets Return the mentioned, expect our we now will was continue deploy Return branch. average our our invest recency XXXX people was tangible remain be continue X.X%, range. to to return

in new non-PCD for per of BXB and increase auto X largely to held book is an This Loan of of The increasing has the $X.X PCD, loan Scotiabank consumer steady loans. increase residential it The former reflected at loans. PCD PCD yield year. and portfolio. of $XX.X $XX acquire commercial in loans. as reflect X.XX% sales largely decreasing The million mortgage turn value of operational was is increase million tangible $XX review to continue loans in highlights. capital, There We third from XX.X% build an year-over-year. of Average from to quarter $XX X.X% Please share million quarter. a There an billion. the of loan million consisted $XX.XX. Scotiabank totaled reflected our most decline page third repayments and the reflected mainly the mortgage balances,

It the transferred were at year-over-year. large during the lot quarter. And former the loans Slowdown was $X several April have is also one loans off third million. Our million Scotiabank the non-PCD the a that where in mainly increases to small same by from million Omensa $XXX up million It $XX% above commercial is was $XXX of completed [indiscernible]. quarter.

decline occur million of Core year. [indiscernible] fourth to core Early September see X period $XX continue third XX quarter. X.XX% X an cost core reflected high general This basis has government-related increased of million raise [indiscernible] a is the of of on of Most maturing from loan credit the of the the Fourth lending withdrawal the at paid portfolio, in deposits There and the and continue order, quarter. $X.X were points Quarter, billion. fall. and We in Average higher increased ex-PPP consumer sheet. The quarters. now results End commercial commercial, deposit consecutive to record XXth. prices. That continue and declined million end from for $X.X basis mortgage the older third balance we $XXX down points from totaled commercial of deposits law. demand quarter. levels the

The increased X.XX% and from respectively. increase an million rate page in that loans point of quality are PCD as Our field. to totaled million Fourth X% interest have X.XX% increase that by the credit was to point any included the mostly mentioned. million. compared lowest past-due strength. X.XX% turn Net and asset we in is was portfolio level quarter driven average listed This $XXX of positively. the metrics in offs lead increase one charge NCO balances The the for held reflects early X.XX% quarter. rate third quarter quality basis the portfolio of previously These seen in non-PCD cost increase delinquency basis total to five to non-performing $XXX by X%. the sales X year-ago XXX%. our and billion, quarter. [indiscernible] continued was of rates an basis rate mainly The driven loan sale quarters. last This $XX the decrease third These in a the The margin interest $XX or by third X the and decline by to loan and trend rates the Please MCOs from net quarter. was X.XX%, and to our related to points review on transferred some the Well investment million. capital XXX%. $X.X X were totaled

$X.X chief had we retail net interests. of result, a As

the sale allowance forwarded and work increased fee added reported was And a duration basis XX.XX%. the X.XX% related probably on million. loss. to probably as With The from X.XX% purely loan that our on PCD $X.X to

our design. far from situation continues The back hosted. optimism, cycle. Puerto also These reflects an fibre, equity, by Puerto Rico. sector to remained both page the is us risks you, macro So quarter. of million tooth to turn the increase equity continued consumer business incremental common Maritza. by at the seeing and growth Roku's The in We're improve increasingly economic Rico X Thank $XX Please strong for will the to $X.X outlook. beginning X.XX% partially hormone of demand by be dual offset third this was an banned now billion,

way long Puerto addition, towards In a Rico the believe exiting of bankruptcy, will verge this on is we go

Jose Fernandez

perception technology, mainland deploying us, ready, for Puerto listening. advantage thanks the to continue people than of in Within dedication this speeding that With business Operator, let's economic transformation the and taking been momentum, OFG have start in formal the at to the our commitment. its mainly Q&A. and excess continue we their changing members the standing and We well community. strategies of more end presentation, environment, for and working for Rico our thank continued enhancing customer growth, our this, liquidity team loan investing will improve are all for digital the we experience. resilient you so

Operator

our first And open. Alexander Sandler, is with will Twerdahl from take now Piper Instructions]. we line your [Operator question

Alexander Twerdahl

Hey, good morning.

Jose Fernandez

Alex. morning, Good

Alexander Twerdahl

start extra is comment seeing, can know, loan commercial maybe us growth, some the this give starting of But, Looks think to expectations you I give on sort couple -- be want with should off, the that the us some activity this saw quarters, a for commentary. obviously what -- on and you a growth was nice our about excluding loan for the guys next growth? some quarter originations, can of help PPP. pipelines, the like this hoping of saw commercial you pay-down either loan [indiscernible] comment are the I questions have We commercial First us loan Jose with quarter. I strong growth quarter. bunch you here.

Jose Fernandez

seeing a not on on portfolio. three fourth last confirmation in side balances in particularly we seeing what the well, the So is again, the consumer have the been auto this of quarter side we're prior, and inching as originations, what quarters on lately commercial the up inching lending or up loan

XX years of So year what was optimistic. mentioned the beginning I most that at the the feeling is very year. last CEO, I'm now I Last My right of optimistic.

saw XXXX, Puerto a I think is throughout confirmation turning for that into Rico optimism we the economy. growth

pretty it's cycle I feel the data now, So of much year. Puerto the [indiscernible] is maybe confirmation Rico in economic us behind we're pretty last early growth much in from

economy growth of years stay the I the continues grow. loan So couple to next as that feel is to here for

growth We origination, going higher relatively the similar we likely see loan in we're most in feel here and at So similar production, look that we is a see loan record what origination, to consumer we're auto the for which and to it itself it's loan call origination. a We're is look when I commercial origination, XXXX, seeing at it loan going let's year XXXX. production. way loan had

deploying we when that excited the So excited. I'm look on here. And liquidity look at we our side, very as into a scenario are production team to

about components Regarding talked we other to of the we need balances, about the but also talk loan origination, paydowns.

mortgage up, the we'll the portfolio. think repayments, good mortgage have and interest On for now I repayments inch starting us. That's slower rates the portfolio, to on to probably will with continue we have

to sell, non-confirming. we will non-conforming a little mortgages, but continue we portfolio see retaining bit be the lower. more and but might on be mortgage We bit of trending also will focus on little and originate helpful, a That residential

XXXX, to strong commercial pipelines we're and we On be to mid-sized line business commercial utilization yet, the build those opportunities continue there's positively starting clients. for pipelines. opportunities pipelines a but is good going We're that for to expectation that, haven't that build to to is there. trend the then we on us And see I us side opportunity to on commercial, small also our And particularly the positively. for trending that one good year, think next on start and the seeing are seen feel we

So of Alex. loan growth. and that's take kind my loan on

Alexander Twerdahl

you terms $XX That's of the really know remaining you quarter piece this do you gone saw -- that of helpful. and in that of what's have last expect quarter And is PPP, fees PPP PPP And mid-year? then just the the fees? let can in million, front it, the by Maritza, last do you just we us remaining

Jose Fernandez

forgiveness, PPP the end the the just on they of half of by So our be forgiven is the first should expectation year.

have but I don't So Maritza there. fees answer information the that's the PPP. the have the data, on on does

Maritza Arizmendi

yet quarter fee quarter. $X million this about $X.X recognized. in million. We be for to at still $X.X the fourth last have least This amortized Yeah, million an

Alexander Twerdahl

million $X.X What I'm sorry, repeat last can a bit? quarter more million broke little it you time you was you up one just quarter? that think $X said I left. this

Maritza Arizmendi

million. $X.X quarter This

Alexander Twerdahl

in million $X.X XQ.

And Okay. in wanted of bankruptcy. from then Thank the the as could certainly signifying think addressed you are increase it I'm announcement is But it any bankruptcy? that around you to yesterday prepared very the implications bankruptcy much your ask for direct for bit little of Does that. end kind plan? I the judge, like impact comments, as what big implications improve the things the just in of the your out. kind out, Certainly, or capital longer and say there a you And you be sentiments no guys? you island

Jose Fernandez

it's that on here second a back question, important. step because me let So I think

economy X% we went XX at a Let's The rate XX the we XX% for so last had issues so XXXX. bankruptcy, knows. as to that Rico's Puerto of to average everybody had years contracted this. think all contraction. XX% prior We about the years,

the is building funds the earthquake's and we when of I Puerto that Rico all and growth look at Maria in the So great the we're from of beyond, right now any and XXXX position now here now. and -- that cycle in in. it's because particularly coming and a the mentioned and coming the

depressionary cycle of now stages moved growth Rico trans the it into -- from has has XX-year cycle. a basically deflationary So a Puerto -- early

the funds the on. is all, of first stimulus the for they bunch into rid to invest for supposed the and But had in of in get certainly years. of Well, put a Puerto pay we privatization to of government the those were very that invest the exiting federal does we education, the Power federal all strengthening over because and going this? the build Authority place in bankruptcy we Rico, to ten guardrails in that positively importantly, how other that in last debts in play So the and are infrastructure more the to -- use last invest reconstruction in infrastructure pay

things Rico are bankruptcy out is in do going right of And things right, So to eventually, me at early those getting markets, to we allow -- all that growth the stage. the access able to Puerto be to beginning now. expand that and is cycle

Alexander Twerdahl

actions, or dividend for your end questions of I you sometimes Last more update two just to know then the at capital to respect when plans, over with you the of January. the returned it of retirement And dividend XXXX? Great. a the with One, and Is there announce kind buyback the capital an year the return you should expect equity earnings XX.X% not capital common of tier-X, another why in preferred add large up increases. pretty reason buyback, we XXX% two any me.

Jose Fernandez

There's there's you no it. for think things. no mean, not those reason about to reason I for

are priorities tell think capital. our are But correct. what you me regarding let you I

First and growth, and foremost, that to we customers we and loans, to deploy the and deploy want our able capital good good to help -- serve. in the loan in be to communities

share looking making in us So priorities that's to the authorization, and more growing dividend repurchase. expect to X active dividend come and sure with be number continue that to then X. the also is prior Number a have the we We so us. with at finished the

Alexander Twerdahl

potentially next correct January, end times, then timing, July Great. sort we And of two so on the end get update could week. the of my is of an

Jose Fernandez

on timing. the you're Yes, right

Alexander Twerdahl

year? pushed effectively question. just noticed guys $XX the the then at full below right year. And billion final of Durbin my out you that drop Great. I a Does end

Jose Fernandez

billion on Xst. would So it whereby December by Durbin, have my I July XXst, to remarks. in Durbin $XX mention above tried triggered

fee in of had half would half-year So We impact income. a a in impact have you XXXX. have year terms only would

Now, year that closed because $XX will impact half-a-year we below not the materialize, billion.

Alexander Twerdahl

Fantastic.

$XX so you pushes assuming to that fees a year, out impact million grow. So that XXXX would interchange and that XXXX continue early have of takes half guys of lost effectively effectively the and you or the back in

Jose Fernandez

I actually pushed it out.

For XXXX, full $X.X been half been million. million for year, a would it would million it would year have it because $XX $X.X and have a been or have

pushed July we all to it the way So of actually XXXX.

Alexander Twerdahl

for Thanks questions. my taking

Jose Fernandez

you your questions. for thank Yeah,

Operator

Hovde our Brett take will we - Rabatin And question Q - from Q Group. next with

open. is line Your

Brett Rabatin

everyone. morning, good Hey,

Jose Fernandez

Welcome Brett. our Hi, call. to

Maritza Arizmendi

Good morning.

Brett Rabatin

-- first the of One

Jose Fernandez

say, should I welcome back.

Brett Rabatin

Thanks. loans Yeah. little if to I loan us bit for those you those sold, of for a loans, that were some XX-and-a-half the the like related the on question, sell then loans guess, give into quarter, over past be How that to quarter much the that. or two of of of decision It's it the sold? million sales the color good first to the sounds XX-and-a-half charge-offs wanted go those million I and to back. the the you you loans of more the you loans made, could went proprietary

Jose Fernandez

I I part understood So, part. second the question, clearly your of understand couldn't but Brett, first the

me the question first if you. again, okay that's Let you can then and ask the with answer me part,

-- So

Brett Rabatin

Sure.

Jose Fernandez

had part they Why non money Scotiabank came of legacy about as are are mostly. years them one the of loans bracket. of residential mortgage -- of what commercial sales. most loan mentioned. the -- several doing PCD Scotiabank of were These the the And frankly, the loans on acquisition loan were I performance. And as residential These

try too get to becoming loans cumbersome was the add books. resources, those us it out to -- for of to So manage

We're the is, that way So day. work logic on not thought more the and the and them of end we what's same get out performing some important. can we it can that it's, been and the the books loan of put the can focus we trying to felt on the for right participation, business and of move also not there. so it the The commercial we of we that's outside the a it's to dynamic. decision that also how efficient bringing process again, the loan our side the at are so And was resources of necessarily we it get had it we year. on decided sell part end out be of front on behind a to strategic also while that so It's the sold,

of ask question? kind thought the part it. that's So your Can the second behind of you process

Brett Rabatin

the release net Yes, second just Jose, was sure. the related terms of the to in of was a How question loan the I $XX.X net the of noted significant you sales. much million sales to of loan in part think portion charge-offs? charge-offs specifically press were the going

Maritza Arizmendi

million. $XX

Jose Fernandez

So $XX million out -- of the

Maritza Arizmendi

were of sale. to $XX Out the related million the $XX million,

Brett Rabatin

actually modest. And That's driving that to little the then, a excluding was that, that as anything notice were charge-offs up delinquencies net that it there Okay, relates bit, were early I pretty that, linked-quarter? linked-quarter did was

Jose Fernandez

had you'll We We're we have bit a to should little around That's that And it got -- auto the pretty see where should the early looking be. it. our and we've delinquency higher portfolio there. that seems feel that again credit. into about we hands it you're back asking me well trending

starting compared to levels the consumer some see prior near to the economy going pandemic, of too. years, how time all [indiscernible] normal charges it. can in. with to the of then. to XX prior the that we're better will -- process managed future feel that imagine, that continue benign background don't deal the as so we'll as getting we very forward, that going the than back book, a We seeing in we in was back the come have a as we to have see state we those part Certainly, credit what to stimulus we levels see the But of put see the normal That's we on you to have

Brett Rabatin

I'm question I is will a maybe or this for say better Maritza. Okay. And curious, then roughly,

X and margin XXX Fed And going last or basis be it is seemed was at with a see that on of the from with over the Fed But of X% your Just margin. year this the year? you out throughout margin talk I how being you X you point reported maybe hike's times XX% to about balance could Fed quarter sheet. about know the throughout it benefit can NIAF cash action. the increase, think still how margin conservative like does year, the thinking little the playing the would side about end seem like the raising for Maritza, impact possibly

Jose Fernandez

pointed we things -- cash as Brett, you've -- all favor. out, are our will We we immediately, So, asset-sensitive. the impacted play in those so be

of We also commercial lending have a portfolio. quite rate bit variable the on

some the will So color let early income later interest February. be rates in when give XXX will me impact will be But just specifics high points in on it on net think affected you publish we single-digits. but positively it's shock, I come on of the it XXK interest we in the basis a

So we're right that's seeing now. how it

As we'll the these specifics give like. continue all XX-K, and to but scenarios, that's the look how modeling we it at looks you on all

Brett Rabatin

then, what lenders, the made? the expenses. bucket, I that come any that, And with maybe And hires. as quarter? wanted hires a year? guess, that from Okay. is level to we does the throughout add just in first the or other XQ talk Did then go back ask continues about There you were I'll about that hires this obviously thinking about the start some you is

Jose Fernandez

seeing talking about. turnover. more is that on great address our So the is where on -- from we're that we're side the everybody angle we just me hourly really seeing employees and resignation different let What the a with

make to service. order keep replace in the So go that in of recruit out and house the there and those we we've customer sure to terms had some of

We particularly continue good the consumer side. the side, to talent, retail on attract on

so the Remember, the acquired on that Scotia bunch also of attracting, team developing talent We side we want on the right the and make they on consumer the good excellent have. well. our people have at develop acquired past, our commercial side, we've we so, the that's But we sure done retail and there. have so And a been We for think strategy. great right how continue a when as retaining, hires bankers, Bank, potential talent we and commercial to and with building. talent, we're I we've looking to do that future side in the and we're

or where So that's employees prior the the than We kind it's than usual. lowered from we're employees, but coming of really where lower quarter, have having pretty from. much coming higher this turnover hourly we're quarter

Brett Rabatin

quarter, going Okay. expenses item, expenses, on line rate core that that forward? a fourth back could for XX with number come the is And and I technology maybe run the things, assume little of then G&A the some that good bit. number the other the other a

Jose Fernandez

for able more better to migration position technology our our data of cloud proactive, market we coming looking be why advantage here customers. care service not actually be everything In looking to in on increase feel a Maritza We're to us strategy that faster. XXs. the on future. for in at we into doing all market the From the can technology, and in invest us analytics you operate we thing benefits as sales at those low is the of efficiency need we that to general customer and how to And in we're the how ratio on and as think is unique deploy customer, the and doing. we're the take do the feel continue in so be that to So how are in, we're we add and that of the that's to able speed taking technology closer solution execute actually providing and differentiation with we and unique the service guys here top a but is We perspective an that with vision and a markets we and we in position confident guided means today, that's market the we what a this our will incrementally they continue people, in and are we're and incremental get in job in of operate, on Puerto to really we need we order that those to our to we're be and very affect to because decisive change value bring investments Rico, customer that differentiation. investments, right being that

Brett Rabatin

color. that's Okay, and appreciate congrats quarter. that, great on I the

Jose Fernandez

Thank much very you

Operator

Instructions]. [Operator

We from take Timur our Wells Braziler with question next will Fargo.

Your line is now open.

Timur Braziler

Good thanks the morning and for questions.

Jose Fernandez

Hi. to Welcome Good call. the morning.

Timur Braziler

that with which deposit Maybe I some of And then thinking are you you. deposits, you know as us near-term? thank here far XXXX? deposits and had I bankruptcy and give you activity. back the resolution government-related just in government What -- the what's in as all just come you of guess about balance institutional much online outlook. your exit a kind client to starting then Does can are mentioned the expected

Jose Fernandez

So deposits, those have overall deposits that half to in year. the we of to we're most feel -- probably come of and first come those the going going back back in

that's of it the don't that on we see So the top where because head. you give up have I'll side, at let the Maritza government kind numbers of my I

Maritza Arizmendi

make how at sure get [indiscernible] were In this question general, have coming I the moment? how back withdrawn just it's or deposit we to right, much much dormant

Jose Fernandez

much we have? How

Maritza Arizmendi

How at much this have we moment.

moment. have about have but we shall there. had we at deposits We this history, And much haven't $XXX million in some our

Jose Fernandez

-- consider don't Historically, we

Maritza Arizmendi

much. Very

Jose Fernandez

Yeah. part deposits The are government business. of a core our not

Timur Braziler

in to in see there and first and transitioning a mix on margin margin cash maybe meaningfully shift decline of year-end reflect going sheet much little really looks the it levels at not then pretty balances. the up that Should And the we something over and that deposits Okay. margin decline subsequent in and mix in is kick keep might else or Balance lower? the with reflected happened balances, quarter to average the here like

Maritza Arizmendi

see started training changes during up we of a there day, peak quarter, than think maybe there. this are seeing sort to I margin

with that We'll us. will of loan case best will to it to continue -- mix. in the positively balance We spend the scenario and continue of our is continue deposit invest changing

during we saw next third so to is the quarter, So year. the increase gradually getting the of bottom quarter expectation our it in the in during the -- continue to

Timur Braziler

from do them? does reserve trend? was to the helpful. an for wondering, guess ratio from to current translate see at provisioning That's pretty should Okay. here, And allowance. still then The Thank loan reserve fully switching how high levels. how I additional sales level these Maybe I'm that allowance absorb than the through you. to there XXXs we is ability that charge-offs releases the rather

Jose Fernandez

I'll need methodology the follow the we to charges, couldn't we the let qualitatives of is that [indiscernible]. at details. the and to need then need Maritza and and look we But into picture, CSO big balance means look scenarios, and at no, we loans, we because economics answer to what the go the at

answer the allowance part we but think of specifically your regarding particularly So see in trending we let done this [indiscernible], I future? transaction. into don't have do Xnd Maritza that or the how question At I'll could the

Maritza Arizmendi

quality again. forward Thank forward we you. in asset the going that And general, and CSO [indiscernible] move X.XX% maybe have the X see allowance coming think element better. model I continue normalizes into And continue to transfer allowance And the to day are coverage there Jose, coverage. going we and or down

and that trends want expectation the within so middle quarters. quality fourth seen are implementation, scenarios our far quarter. -- continue Economy because has have been so probably how asset be better Our as scenarios. that's we to that the it we forecast I the of CECL expectation go we move down they there it of on better won the need we conformation with couple mostly down to to as And next experience of of see this is will in

Timur Braziler

then going become projects efficiency Okay. just spend back fall and out That's the provided and prepared is some then remarks me, of around a talked stick million tech to just off bucket, some tech The and larger the accelerating quarter, helpful. circling of during quarter annual called in does that initiatives come the as spent this million in some $X get of expense mix spend to and technology rate shift point last or built ratio does within component overall on, it And to completion? run expenses, of you spend. at guidance the from the $X the these and your you the tech about

Jose Fernandez

how as it technology of we Tech investments. the going translate $X start as an hard we do is those And and tell to this out a number? you when have It's execute question want, larger is depends on million because how they going answer projects. on component. to specific some the to come ongoing To into capitalizing

strategy part give doing the our why of it heads So but our with on a that and But we a they in is will we're feel again, that return to executing start guys is trickling up, you having strategy. that's of that. objective that on investment,

Timur Braziler

very thank much. Great, you

Jose Fernandez

for questions your and you Thank comments.

Operator

Alex with Piper from We do Sandler. a have question Twerdahl follow-up

now Your line open. is

Alexander Twerdahl

Thanks.

on there? XXs, interest One guide whole assumption the couple rates the of follow-up I questions. the a on to low the question. what's guess that's efficiency And Just

Jose Fernandez

answer the or will Fed on We be and rates that assumption is, to they what go we'll Balance will will our that's so how The have and there. spoken, question from here they affect speak us looking how have sheet. our be that looking, guidance my given Fed Alex, then -- let will

update analysis. in XX-K We with shock you will the the

Alexander Twerdahl

X forward in single-digit NII guess high kind ratio do get efficiency I feasible f we point what mid-XXs and curve if asking of that up. Okay, different way get or to the whatever still is a just at helping do this or X expecting stand? revenues is you

Jose Fernandez

I'm about Mid-fifties, ratio we still mentioned, XXXX, are of targets I again, targets and meaning bank. efficiency you at advantage think our We're than to I we're mid-XXs as our I'm positioned investments. XXXX where mean apply. question. longer-term. of this is these be ratio Yeah, so No, talking of take I now, and accelerate trying some efficiency glad But asked it to remain still right further

that's how with that guidance you. again, we're efficiency low and view sharing So about we're we the this how thinking XXs

Alexander Twerdahl

then sheet question. the And optimization Understood. balance on Okay.

XX a back there in to at third sorts basis securities? continue coming in to child points of securities Is those on also. think the expectation some like things cited some credit strategy laddering Seems you of are from I'm did boost laddering rates you're with. there guys and -- amount tax still a a sure the from the You do into the for all deposits you'll with quarter quarter of now sitting the liquidity nice some first huge get I of that cash in

Jose Fernandez

Yes.

Alexander Twerdahl

given you'd quarter? for any be purchase Any to sense how much in willing

Jose Fernandez

have be in but again, we incrementally number, have need don't on decide. to terms to -- But decided how and the I increasing. quantity. yet to We it's think of going around

Alexander Twerdahl

for reserve on this that history the loan does loss the sale. XX Great. book like And you the quarter, charge-offs back X% more CECL When then basis loss the obviously just the charge-offs remains? related question, the get about the the circling -- loan model, bulk that think to be that CECL in incorporated would history that or model and points your of

Maritza Arizmendi

No. excluded, it the We million is exclude -- the $XX to sale. the charge-off related

Alexander Twerdahl

Awesome.

a more charge-off basis looking or rate? XX net you're like point loss So

Maritza Arizmendi

Yes.

Alexander Twerdahl

next still will that's quarters, little to lot lower bit the but relative couple out and it a was where than Maybe shake it where low over a --

Maritza Arizmendi

Yeah.

Alexander Twerdahl

mainland more bank is reserve Much Got still your comparable to it. while a double.

Jose Fernandez

environment. That's why benign we the mentioned credit

Alexander Twerdahl

thanks Great, my for taking follow-ups.

Jose Fernandez

you. thank question. your Thank Yes, you for

Maritza Arizmendi

you. Thank

Operator

And we Rabatin do follow-up Group. Brett with have from Humvee

line now open. is Your

Brett Rabatin

Yeah.

that related One, follow-up you what give to? legal X can maybe quarter, this the guys Just -- quick follow-ups. that on you was did color reserve any

Jose Fernandez

actually arbitration from the bankruptcy cases on or from cleaning up the legacy Finishing up broker-dealer Rico debt issues. the Puerto municipal the

research about. it And in took to up that. we for reserves is So what had That's for quarter the all some we've some that. build legal

Brett Rabatin

their like contributor on what And might that then, this think looks update any a your pipeline OFG year? how growth be USA, to and you

Jose Fernandez

for we continue We've right, to So loan. X years will now. added been execute the U.S.

been Hurricane started good Maria. And in building we recall, a portfolio. you after we As XXXX nice, frankly, have

And We too. in great team built our partners a States the It's relationship more becoming around real. incrementally with it. have some we of

So happy that we're very with portfolio.

XXXX, be We did as the build same. And on have it. and to XXXX, been will doing continue we'll we we

our of feel it's risk are what equally again, that's so our geographically, of also we strong seeing that. we Puerto that see as So deploying pipelines Rico. in advantage capital how diversifying some And the again, we're of part and taking

Brett Rabatin

there maybe like Okay. And like would one levels think buybacks, so, would besides base? to the about U.S. Rico it that less regulators improve the is on one, be is talk to maybe you're a finally capital about, last be Puerto just it relative further and just the seem capital relative the on profitability the you Can of that corner, amenable then thinking to if you else Rico buffer and in more your seems case maybe turning a trying if thinking for anything relative and of terms Puerto the about might if

Jose Fernandez

have -- would aggressive would I much regulators us been. don't be really to very allow think that the we more what be than

as recent close in recently in has they all -- past we are the Puerto here happened Rico. are think what I very to

years that's will risk sharing to would about a U.S. here perspective, opinion. I Rico, So a say am my for opinion. I couple And more I own think the from it think Puerto to my them jurisdictions. take similar

view So having operate of with within are having perspective. earnings momentum. we rolling operate good are growth, capital we We a good we

we the the have XXXX to the shareholders. opportunities to same don't in we then to markets to come And capital. We return need then we excess we see capital capital more capital on numbers that strategies. throughout do If and operate, deploy that management

Brett Rabatin

Okay, color. great for showing the

Jose Fernandez

welcome. You're

Operator

for questions. Mr. no remarks. to the program Fernandez there turn further At are over I will back closing this time,

Jose Fernandez

XXXX. members to great all forward -- the Thank year. work a all team hard goodbye. all our We you, Operator. listened to throughout in to past Thank Thanks and stakeholders for have you who again their our dedication today's, look

Operator

conclude does Thank This your today's you program. for participation.

any a You time wonderful day. may and at have disconnect

OFG Bancorp (OFG) 19 Jan 222021 Q4 Earnings call transcript