OFG - Earnings call transcript Q2 2022

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Operator

Good morning. Thank you for joining the OFG Bancorp's Conference Call. My name is Katie 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. on What's Relations the New page. found homepage on quarterly be the in box can the website Investor the results It or on call management's statements This certain and plans expectations. about feature may goals, forward-looking are Factors of Risk statements in SEC section subject uncertainties the and These outlined risks the filings. OFG's to from currently may results Actual those differ materially anticipated. any as developments of afterwards. a obligation that update disclosed information to disclaim result We in call this occur been placed on mute any prevent noise. have to background lines All question-and-answer speakers’ session instructions remarks, given there that the a at be After be and will will time. I would turn the to over call now like to Mr. Fernandez. Please go ahead.

Jose Fernandez

thank joining Good you morning, and for us.

We on It is helping proud well-being. a focus progress this achieve our financial and of are quarter's customers of direct performance. result

dedication. As to always, members for thanks team and our commitment their work, excellent

X So conference to our us call turn Page of presentation. let

our interest was second totaled included million $XXX diluted $XX sale of $XX branch statement, revenues expenses net non-interest earnings a gain the million. million, income was that Core $X.XX. were and quarter revenues from margin per pre-provision legacy was X.X%, Net Looking provision share $X.X totaled million, a million $X.X at building.

increased $X Looking from accounts at When we deposits total assets and compared retail sheet. billion. approximately amounted to our and billion. Customer the total prior commercial $XX.X to balance quarter, both

X.X% balance in increases loan loans. yielding businesses, consumer commercial key loans enabled held continued investment in three deploy loans Our for increase improved and saw to liquid asset all increase higher sheet volume Total mix. loans, us X.X%. of in and into X.X% which auto cash continue to loans, our investment securities, in increased X.X% our increase We

Cash $X.X $X.X billion. declined million. New Investment loan $XXX to high origination securities balances increased to remained billion. at

bought reflects another our quarter additional capital. we We a scale our This on Overall, three, had consistently capital the differentiation. and shares. three income, our ended our we back Year-to-date, by $XXX have two, and total with in core our increasing recurring we million of of net high investment at actions, in primarily completed quarter $XX.X of of share businesses. buyback driven program. million and million larger Looking increasing drivers, an and main capital $XX.X levels focus digitalization Number great service customer our all our people key growth. loan

level, second opening. During has banking global of liquidity to trends experience. us. show to do the in customers momentum. expanded to and and Enhancements to with fast, by improve to the credit trend the business commercial the increases from continue their self-service good anticipated macro banking headwinds, digital stimulus we for Fed. convenient our This account easy flow make from and benefit We both ongoing the continue these benefit quarter, We clients the to is customer like environment economic consumer of introduced reconstruction Despite kiosks. and federal also number part it a continues Rico positioned further positively. commercial On and This Puerto OFG due well retail rate funds.

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

Maritza Arizmendi

Difficulty] [Technical you. Thank

Operator

speakers. our This is with while we moment the One reconnect operator.

Maritza Arizmendi

Please Page review to Jose. to turn financial you, highlights. Thank X our

they our year-over-year and quarter-over-quarter. total increased revenues, million at core, Looking $XX core $XX million

legacy revenues. mortgage branch million, benefited on quarter. $X service first banking This from and sale from million the yields increased higher As It Non-core also was than building. $XX income securities. million Interest from wealth was investment management of lower $XX.X income part on banking revenue higher the This higher the interest and Core $X.X Non-interest income non-interest million. at million. yields income loans first benefited million $XXX gain increased cash. of and of $X income non-interest that, reflected quarter. balances from benefited totaled improved on a

ago is year reflect $XX That's an it Expenses greater the at quarter. revenues that's expenses. ratio, million, at XX.XX% growing in was totaled Looking previous from a the and second $X quarters rate efficiency related increase digital both the higher our improvement than than activity. The higher technology ongoing reflected higher capabilities. in to business compliance quarter. also our professional investment expenses expenses greater first due It our million reflected primarily levels due of to

our year-over-year from quarter-over-quarter. common more quarter. basis up points be basis equity our XX.XX%, return X.XX%. previous at from average that tangible to Return average the is than range. up in-line also XXX They Looking continue metrics. with That the improve is They target was on Return on quarter. XX and first was asset points

the factors: X was book tangible increase two, of the quarter. other at the to highlights. share, is reduction in Please three points the This partially offset X our of annual. operational per from first reflects and in this returns value stock; in repurchase turn was comprehensive basis one, to that a turn, by review decrease Looking income; $XX.XX. Page That common

period $X.XX million. $XXX balances. at for that totaled loans is quarter. of Looking first increased the from They loan of investment billion, average $XXX increase held End million an

two at quarters had loans have almost now have a consecutive grown rate. annualized We XX% where

reflect decline The This and commercial and loans increase loans. PPP was in new loans. second mortgages quarter auto are offset U.S. partially Puerto Rico and that consumer new by a

loan first at was increase yield. That the X.XX%, that's Looking point quarter. basis X from

our for into rate their rate variable As work mentioned through takes we in way and past, while increases have the it portfolio new Fed loans. a to

million $X.XX of totaled is Looking increase the billion, grew from million. an and deposit They period of $XXX deposits. quarter at core first $XX average end that

was from a costs, point that reduction no deposit beta X To Looking have of at basis date, core basis point, virtually first is quarter. we seen the (ph). XX it deposit

$XXX levels a auto loan origination lending. high a consumer Auto Originations originations. loan and of at reached reflects million. million, historical high $XXX This level. new high continued at at at levels Looking continue

interest basis in also interest for XX accounted an net was margin, higher margins factors. from This investment that for XX% interest that key net at reflected is looking is at XX% accounted One, at net higher of last the of of securities This yield. of higher growth yields. increase increase increase a portfolio the in loan increase. year-over-year. Now the of points Two, an quarter. the The XX slightly point increase three It X.XX%, basis income.

we quarter, continue to second volume XX% our X our for on accounted increase a strength. three, And investment portfolio. of This turn higher yield increase. the of to quality and the opportunistically Page cash. credit lower review During Please to capital

Looking at net quarter $X.X quarter. the in billion second and charge-off. They in totaled first the $XXX,XXX

from quarter second during quarter commercial million during off The this previously included charge-offs -- reserved second sold -- quarter. charge net this $X.X a from in net loans a

lower a portfolio. mortgage The second significantly and net quarter charge-offs recovery also in the nice the loan portfolio reflected overall in

in PCD of acquired settlement the final net of and of loan First an XXXX. quarter sale recoveries $X.X the charge-off benefited the loans million in non-performing from quarter from fourth

million. for at provision Looking the losses was credit Total from provision $X.X credit losses.

down this to its the factors Two added break affected into million analysis. me volume main component in the non-PCD $X.X portfolio. in loan Let facilitate increase to the One volume the it was provision.

$X.X quality entries at main relatively end, flat second was added was other million. in and In qualitative reduced was quarter. factors One volume. affected two commercial recession adding adjustment $X to that they U.S., in U.S. was positively. allowance provision other the the to loan million The a X.XX%, model into continue the the reserve were portfolio. loss as reduction also million loan trend $X.X quarter NPLs, coverage in of credit $X two PCD adjustment million. reduction the and of There loan with by probability for This the higher loan first factors primarily accounts Economic portfolio. This

quarter the up at first basis That X.XX%. Looking and down a non-performing from points is loan Total points XX year loans. non-performing from rate XX basis was ago.

assets. three, that in was XX.XX%, first compares Two, offset the at risk-weighted partially turns, quarter. this factors. that earnings. repurchase One, to in Looking by common ratio, stock. the XX.XX% the reflects was it increase three This CETX in retained of increase And

Now, here’s Jose.

Jose Fernandez

Maritza. you. Thank

of We be the we for Let's of increase and rest Starting revenue, turn pre-pandemic. of metrics business higher first are our With continued better OFG. Credit to control with mid the year growth. now range to activity for targeting remain efficiency and the Page XXXX. 'XXs loan our under outlook. X ratio see than levels in significantly and levels our

We our experience. and on the to invest even greater will focus an in technology people, infrastructure continue improving with customer

core the by loan we rates. and expect past grow seen interest to primarily several growth quarters, driven As continue to during revenues

peers. will high remain to to continue metrics compared U.S. capital our Our

Looking of liquidity. environment, levels demonstrate Puerto consumer and said macro Having its Rico Puerto consumers. continue Rico at and we keeping good the to businesses a in economic are Rico, in on that, Puerto inflation particularly on repercussions eye watchful

a reconstruction members significant of I great presentation. They've than potential amount dedication OFG that mentioned stimulus help and want their our commitment. done and and in formal should team believe federal impact resilient of As mitigate ends Puerto earlier, our ready. all are more the for Operator. at headwinds. Rico spending We job. thank the Thanks to I we

Q&A. the start Let's

Operator

[Operator Instructions] come first from question Brett Our Rabatin will Hovde you. Thank Group. with

open. is Your line

Brett Rabatin

everyone. Hey. Good morning,

Jose Fernandez

Brett. Hi,

Brett Rabatin

color first credit Wanted the just Rico, ones? to non-accrual. macro that terms us maybe on did which have the credits talk to particular bit. of and give two you from little what like in get two in continue It then seems backdrop better perspective migration things any and qualitative those credits Puerto with Can seeing two migration about adjustment one about talk a overall, specifically you're those a about

Jose Fernandez

Sure.

businesses. high positively earlier, Rico I in liquidity see very So, trend remarks on so to continue do as of credit levels have Puerto and we to the said continue consumers and

not So, in we credit this any is situation feeling change Rico are at Puerto the how point. behaving

a these the (ph) really It's loans. to that telecommunication business terms a the in importing isolated bit companies and Puerto telecommunication things loan is supply in from Regarding in of $X they is credits, need business small get materials they’ve done. in chain commercial million our provide two suffering all the One and Rico. they of loan it's just are services the been two to a and business issues

So, it, the completely and not feel big credit working we're it's it's a regarding issue. so isolated we that with

in participation U.S. a packaging the a again it's is loan other and is business. -- this loan The

we a the with think Rico growth the through but is we're the electricity position Puerto for we the definitely well here of inflation business do a the in in often of we've Rico. cannot year travel But And and do economically. -- of global I good not up the in the in also keep and I chain as profile as activity that's quite Puerto we occurred part first So, There gasoline. employees. I same in that right had frankly, as visiting different level businesses change are do island at the in and pretty the say, probably our I got the the certainly in have some that and disruption cost it, has the manufacturing a island, effects and disruptions the island. have provisioning any credit on why some all the see But and supply island branches will of and particularly think I lot those now is and

Brett Rabatin

to they're able starting to be seems consumer Are Okay. Puerto the the in seeing a from Rafael. with island the usual is flowing when one there yeah, certainly a pressures to tell their inflation? like all And talk Puerto things pushbacks perspective is will impact that of that not population continue Jose from of while the be strong. continue But to you Rico that guess mentioned I I have like the anything the to would about inflationary on expenditures it or pressure Rico. inflation you disproportionate funds you

Jose Fernandez

So, we frankly not. have

strong. see lending. a consumer pretty saw to continue our the auto levels We We of

us. for record a really was quarter This

very big So, we too. the going buying out see very, still items is there consumer ticket much and

not so the and logically, of of living island as we but on far, rest of we in what's of the slowdown we are it the should the So, going cognizant expect seeing has of cost the world deterioration in any are terms that. affected

-- are and of we're interest to up modeling rates because not the activity are going We forward seeing remain going that level inflation.

Brett Rabatin

maybe And where last here? continues be do think in auto one Rico. or current Do trend to to from trend? it Any continues just one, year goes Puerto Okay. auto of you sense last then it its you here from similar Great. strong think

Jose Fernandez

to hard Puerto in in autos so, keep of of gut pace new in and tells Brett the sales My the it's that me terms general. Rico

strength going inventories some the to So, chip inventory I continue of able I given to feel and that there terms that by driven us not near, enough know the to the stuff. past disruptions and and that that, has forward. all all just be sustainable in be manufacturers -- in to dealers cars the been Surprisingly sustain have sell recent additional going the mentioned I wanted it's the in to Speakers] a new terms given mentioned Having what island. the you Puerto that sales Rico said little said funds you the at of stimulus funds high the level to there. a reconstruction the though, color businesses and are car bit you in of in also in Brett, earlier, give to [Multiple and going remain consumers just

now of seeing are of in more of Puerto any and I should that's be encouraging the receive on is credit and a island, part layer in Puerto equal Puerto credit, to I formula had reconstruction activity you it class beneficiary same significant are creating funds. need We seeing It several any has in that other for the tax think any government-driven, that to out something are of COVID, is new been your it funds stimulus still order credit a for Rico for has and additional class the impacts qualitative file years law Rico lot from that some tax to middle are union is child the And and get a middle as the impact. of tax a of sustainable stress the child that really really significantly low for momentum there of returns. way those Rico particularly an given in and projects that never lot there the significant to state and allows and a we're and in the going and terms with next magnitude want too to you those reconstruction coming also the but

many, higher many government that where Puerto in So, seeing return tax not filings has years is occurred. Rico

So, people economy underground of coming. the it's out the bringing to coming more and

I there of the number in a several to on in it's dollar So, Rico think Puerto outlook be island are going lots now, the What going from next forward good are apart underpinnings the years. right building. that for

Brett Rabatin

all assuming I U.S. on color quarter. certainly decouple in Jose that is Yeah. the recession point. appreciate That's the Rico Rafael. U.S. at and Puerto some congrats from a could helpful, think mainland I the

Jose Fernandez

you. Thank Sure.

Operator

you. Thank

Our Braziler next from Timur with Wells will question come Fargo.

Your line open. is now

Timur Braziler

Good Hi. morning.

Jose Fernandez

Hi.

Timur Braziler

or Jose of growth, pace one talk up good you the the was made the saw it's on following but Maybe, of keep can't first growth probably items you as believe that of to seeing you a loan which is year. consumer the is makes through expecting kind reference is something gut statement that you're of auto that activity there broadly mainly a more with half in follow-up your statements the still what pace in lending on sustainable that (ph)? line you -- feeling slowing loan not the Can

Jose Fernandez

question. during year Yes. the you loan still on growth your Thank half portfolio. the growth Yeah. We see of see second auto we for loan and

we've XX%. in it quarters We a annualized on the at as you've row commercial grown portfolio also consumer of seen, rate and book three the an see

growth still drivers the bit in on So, we slow opportunities but the year. loan good half, three still second might commercial our very half of the we a see little the down side second see main of being the in lines those next

Timur Braziler

you're then, in balance little growth, loan quarter to sheet that. fund slowed a the deposit some bit Okay. growth helpful. utilize And Thank here you looking second on as That's for liquidity. that

about to look the just some growth sheet fund into you year the on of the As 'XX, going funded liquidity maybe rest there the through be talk is expectation balance still loan using, the that strategy deposits, for plan that forward. on is will and funding

Jose Fernandez

Sure.

many, the We banking has for many the core funding. decades Rico, are excess sector in beneficiaries first-time in Puerto

at certainly going XX and in but even than I we the feel we rational have We deposit very ago and banking very you very this take funded States, very, that excess and in same you of that deposits all this is look the only it quarter, in dynamics have are deposits think further be that and loan players years we that of benefiting when and from the growth you also -- to our we was are So, three the is being and is end in have grew it's deposits Puerto so, day, market different way three today, we at as us opportunity that deposits I that think banking that advantage strategies. see players, we going excess all saw the at those market the a Rico core by to it's different OFG we quarter. main

So, I deposit as book, that through our be feel we it loan grow further done core will balances. our

Timur Braziler

Okay. that Thank color. you for

some the what just through additional bond securities reinvestment in or end here the yields you Next can yields year? this and is what today from those purchases during for you're purchases appetite the quarter talk me on the back the where there of seeing of quarter,

Jose Fernandez

say so securities market treasuries. for handle for much in slow. quite the There would can U.S. the, for not as availability as the is supply in buy the mortgage-backed both only rates the to securities the has or quite I in of securities well up have X% shifted three Yeah. that dramatically, handle, been mortgage-backed as the interest a

So, of we've but purchases around X%, anyway the north it's done, X%.

Timur Braziler

this has bottom this we're (ph) Okay. understanding stepped see kind again than much be of credit level the you how these nearing new or starting on quality me you we your about do normal comments credit quality a of do as that's the achieve up past, good trends And just then following but credits we're where from inflect on been that think is Puerto quarter up to Rico two and the just and better whatever how and going macro last one-off? to

Jose Fernandez

two-part have you question there. a So,

recoveries net in some in of hitting in credit last we've of We've the a loan part the quality as and book. this across a having of sustainable terms It's year So, bottom we're think the not year hit I island. bottom. had

up a Puerto last to in onto the auto we have was deteriorate book story years past. that now for see and consumers and delinquencies trending it's in different lot no. what a been better is mean a that The answer Rico consumer. consumer feel of going we the We to it will than on it's cost decades? two some the does So, profile the see We

And So, and not the we we in of see for continue whatsoever deterioration side are feel confident to any think loan terms book. in the will business Puerto the I Rico seeing with strength we commercial of side, the of commercial the that.

two, in credit bit deterioration consumer normalizing it commercial So, there forward. into of I on the trends businesses on on strength the a don't any Rico the foresee Puerto that kind the side, next we I feel going start quarters. split the because to a the little is is several quite and But in

Timur Braziler

Okay. Thank the you for color.

Jose Fernandez

you. Thank Yeah.

Operator

Thank you.

Our Twerdahl Piper come will question next with from Alex Sandler.

Your line open. now is

Alex Twerdahl

morning. Hey. Good

Jose Fernandez

Hi. Alex? How are you,

Alex Twerdahl

Thanks. wanted of I I'm you the can couple of update a in us sort maybe points well. sensitivity more on give expectation. One, just asset here. to an on drill

we've that quarter, the hikes NII NIM rate the the done the seen expectation into that third for and so with quarter? clearly importantly and what in kind more the just May far, be aren't would given fully Just for heading in of reflected we've June what

Jose Fernandez

Yeah.

as think by out of I increases in you interest terms reflect point quarter during So not what the this the Fed. quarter happened does yet rate

effect us two increases. of three-month there to is lag the So, interest a those or rate for full reflect

see second you of would is you and the forthcoming effect So, in -- saw you say rate the the the increases rate what third effect the partial on of second increases will that this half the the see that I in Fed. will by quarter, full quarter

of straightforward. it's So, can the math the do we end at all pretty, and pretty the day,

and we the zero far in betas relatively that core given balance income out net outlook and being We interest have good this or pretty on terms there looking at so quarter. the have our negative our sheet margin strength deposit of

and impact be what confident comfortable as for the will ratio, efficiency crystal technology we're now I had So, about our into feel the more and it rest investments our given to is XXXX. in feel quarters interest able the loan benefiting be rest the how why book and but our a ratio from digital is today that feeling saying as That feel and now in experience regarding be is. two very more the of confident it of the year I in making efficiency fill saying rates the should why mid customer year and we it into ball that positive is I wish the we're we improving ago 'XXs XXXX. we of to

Alex Twerdahl

in Just contribution NII? as you a quick from and housekeeping do have the PPP item, the quarter fee NIM second the

Jose Fernandez

I a Maritza don't know. has I'm number. sure

Maritza Arizmendi

Okay. I I saw can have with you can give be should we -- It we than don't quarter. But lower last it me. offline. to much it

Okay?

Alex Twerdahl

of Thank higher customers seeing there then you the Okay. you thus second hikes really on in so the looking far. we've much all pressure that you're Are in seen? the that. way quarter, far deposit that any Is seeing And are nothing rates? you with beta any mentioned deposit inclination for the

Jose Fernandez

management what some I'll the the are the consumers see So, do will to business. I answer split did to starting we earlier, wealth Consumers, move to of monies two. starting high in side I balance

of So, you the trust a in fees get broker seeing of of it. what an a there bit of don't is that's certainly but dealer on Certainly, some we the little all -- bit seeing. are we're business, we and it, increase little saw

some So, a accounts rate on were due being balances redeployed year. at that high the CDs the into of they consumer in the side, earlier are higher savings coming

management they're to seeing happening. deployed we're and Now being that wealth

-- On of the putting having little terms a commercial rate. commercial side, of balances we large the some also in are interest of pressure seeing bit

we are be in that So, to competing cognizant forces they off. need the island

pretty good player deposits the be a with deposits marketplace operate Puerto has for well well as balance as us in we given the OFG in are Rico, in the excess large commercial But So, shape Puerto competing again, and players. Rico on the several here as next there two which might feel and significant some quarters. we other in that we pressure

OFG going think I deposit for us optimistic -- are here we forward. at about So, betas

Alex Twerdahl

color you some as Rico, you maybe the application just market much slowdown? anywhere wasn't really near done us Puerto higher a rates as And a mortgage bit in But I give on I on in little of seen this color have reflected us of banking volume. mortgage sort what expected to Great. can have quarter. then mortgage give

Jose Fernandez

Yeah.

that zero refinancing basically color brought on. So can on the to residential interest two I on things the mortgage One have is you give increases certainly rate side.

from view estate type on that pretty So, point have of that is but other the Puerto zero, real much of hand Rico's market business improved.

seen buckets prices have We recall. terms of residential really, in in a all actually, from across and different can really increases we've as seen you coming that level depressed

quite we're the what interest is purchase bit of and in and So, still island bit some of here in reconstruction are that being taken quite an because seeing the a for of is the housing a is a that's the need things market have the care activity what still there and of we by rates that a in is of increase there spite island in that fund.

in seeing States pretty is market might you as gone high what good our as be gone the residential and there on relative as as have the basis market we're residential that here. some Puerto not the Rico see states given not a purchase States that not for mortgage still So, in is the have United opportunities as all in much affected prices

Alex Twerdahl

sheet? going point, rates then put it. higher, to your at balance some more mean make does sense with it the of that I Got on And

Jose Fernandez

early And that in started that up, summer do starting do July. point. have we as this in good to a we've the rates late to gone are June, that's So, early,

have So, that loan yield. loans actually a of retaining they some we're residential better because we originate the

So, yeah, that. are we doing

So, trending you selling. because slightly will not retaining down we're see and mortgage banking simply activities

Alex Twerdahl

my taking Thanks Perfect. it. Got questions. for

Operator

will with come Rabatin Group. you. [Operator next Hovde Brett Thank Our question Instructions] from

is line open. Your

Brett Rabatin

All right.

Just of follow-ups a couple here.

First, U.S. would the then given interested in the the about industries concerns what might economy balances and forward? Just the of the what U.S. for be kind going that you're have happen you appetite to U.S.? portfolio, and

Jose Fernandez

Yeah.

give So, XXXX. just to back started background, we some in you

XX. loan around as June of So we in million built balances, $XXX

it Most small size. (ph) market So, around is that's and kind of $XXX loans of commercial of loans. million is the middle there some

composition. the that's So,

Brett Rabatin

on your production appetite Jose new then thoughts And [indiscernible]? Rafael, any for

Jose Rafael Fernandez

Yeah.

Sorry.

far what forward. I seen quarters so several to the last seeing think be going what that's you've going in you're

is I'm building I here sense small too you XXXX for diversification our us our I we're since diversify been in in mean, the and because island not this the As diversified nationally what will said, team us geographically. team business businesses focused on continue again the I part so see -- from that mostly that's in doing sorry and strategy a pursuing the the is -- makes to diverse be we've States island of it to U.S. also, for building what think also geographic

So that's today. U.S. we business way, kind how see of the

Brett Rabatin

of share on you're Okay. from then plan. mostly on thoughts back repurchases purchase authorization how that And year? here through the half server current the the Any and you see might the in

Jose Fernandez

Yeah.

the last the we when pretty, repurchase. opportunistic two did, XXXX we been we've announced years pretty since first in done we've So

be So, going we're to forward. going continue opportunistic to

position We we at we in also recognize that -- capital. the look and have at the we will a strong dividend -- continue deal to of terms very

momentum the have We business. great in

update market the accordingly. will both will we we look at and So always

Brett Rabatin

Okay. the there benefited on the be the how thoughts just a the positive wise saw news just in economy what I seeing that's impact outlook of an Airbnb on and think do Rico, is the tourism you're lastly Puerto any in for publication might that and that? Puerto tourism And for you then market Rico estimate in and what

Jose Fernandez

loans. positively. our originated commercial that have are trending the in what Hospitality is business better Puerto on we the hospitality loans significantly it performing when very Rico general in we Yeah. we than All had projected

think travels island levels than doing activity on business the vacancy of but seeing We're very much seeing lot are a historically. lower abroad. better also of Rico the We Puerto and marketing is job a too, I

island we're there been certainly the the last So, of Airbnb as several a a out, and there think business quite lot as seeing in -- there growth across you but pointed performing -- business tourism metropolitan island. the has is island rooms a I rooms, years, hospitality also a continue in all is hotel those on the are entire in around hotels the the serve should only also the in and well buildup business not to area, the very in island in and but

Brett Rabatin

then on I their on Oversight any one Rico? Puerto one, saw Board Act impacted maybe update just XX what's the And Board any with and how actions, Oversight last that's and Okay. here or froze going recently, the the thoughts

Jose Fernandez

been but mandate Rico, I keeping the that world. in a balanced to discipline get mind, here and Oversight mandate discipline across restructure you So, the job, well discipline a the in good stuff. the to think as my all United they're island hard and it's and make it has They've the budgets the is doing it as doing that fiscal they to debt -- across it's Board governments see keep States, that sure and you -- Puerto in for States see in fiscal

three the them the restructure all to think their still balanced budgets I and going something I vehicle good a with the is PREPA vehicle debt to on So, fiscal works. to deficiencies, but keep its for is think but or mandate. take, fiscal They the perfect board it's a good right, it as is serving definitely not more is discipline it's that complete two to have which

be. dynamics the of should while, it's it what think a working are I as So, after kind

Brett Rabatin

Great. Okay. Thanks additional color. for

Jose Fernandez

Thank for Brett. you Yeah. your questions,

Operator

Thank you.

will come question KBW. Motta with next Our from Kelly

is Your open. line

Kelly Motta

How higher already a if I morning. your doing been a grow down to you if taken a got so think also experience the I Good was franchise NII bit with but outlook asked, for disconnected you're the is investments you. is while about do of mostly the the side on little range much customer what efficiency I versus this so function growth was you could maybe ago, it's guidance changing. into and outlook to improve about be would talk that little NII know whether Thank mid-XX% wondering if I Hi. apologize further quarter. the higher about excellent. and the expense the Thanks this expense help and question.

Jose Fernandez

Yeah.

Kelly the you, thank for So, questions.

range ratio On mid-'XXs net driven modeling the and XX’s efficiency we are -- interest ratio, by yeah, efficiency income. higher mid-range

and doing other, digital on quarters. all the that that stuff technology invest efforts will about the we're We previous we've continue and talked that in in to the

ratio. us that's mid-'XXs guiding of behind impetus kind on a So, the efficiency

also We of recurring. We increase activity, expense flow to due side, to expect those you that to saw that compliance on the we side expense saw do out. don't expenses on quarter this business some the primarily be an expect

keeping again, So, efficiency to be mid-XXs. as on focused going franchise very in our we're check ratio but in our the continue to expenses in invest we

loan book, Regarding was higher will interest question a rates and basically the income, your addressed have interest we I income and grow side are because net cash. benefit, interest grow we investment volume higher answer the side, of net as the We the certainly, earlier loan in as well we as the is the income think double and right. and the and balances on interest improved driving the net on

we quarters So, are we interest have the -- of several next terms is for what Fed very the positioned doing in the well in rates.

I you -- miss net experience, mentioned of did. that's kind any the on you about outlook Did think So, I of your our income. interest the customer

So…

Kelly Motta

Yes.

Jose Fernandez

launched are Also, to through help learn out our provide flagship able -- self-service done at for mobile for ability better we issues branches branches two care and more be more their to are branches as needs the this will what a to and the take fast the kiosks of time our issues. way can in on resolve self-service kiosks flagship customer strategy needs part take and of a digitally Yeah. be and that customers them older of our work in our and a at basis efficient financial employees way. to those transactions a which providing of either try these is We to that quarter really

banking be we So, continue in as to a position in that direction. network transition our better we will

invest we our So, place. in technology continue in our strategic to will to get executed differentiation

Kelly Motta

Got it. it. so the for I Thank appreciate help. you much

Jose Fernandez

Thank you questions Kelly. for your

Operator

you. Thank

Next, follow-up Braziler Timur Wells we have with with a Fargo.

open. now is line Your

Timur Braziler

Hi.

a quick U.S. you on dollar follow-ups that of Just loans have the if two on participation hand.

Jose Fernandez

question? you the could repeat sorry, I'm

Timur Braziler

The the dollar participation amount of Mainland. on loans

Jose Fernandez

plus million middle or $XXX in two, on loans commercial and in split minus small market difference million the $XXX businesses. said I So,

Timur Braziler

And participation the just that's or all participation channel. is

Jose Fernandez

partners key that with participations have. all are These we

Timur Braziler

Okay. for Thank that. you Understood.

Jose Fernandez

Yeah.

Timur Braziler

question just missed And the repurchased shares of quarter? the then and in this sorry but a modeling I'm this I number documents if

Jose Fernandez

with around million have we shares me that. but It's disclose. will disclose We can X.X don't I so. or them

Timur Braziler

Okay.

Jose Fernandez

there. I don't it's have around but specific number, the

Timur Braziler

you. Thank

Jose Fernandez

Yeah.

welcome. You're

Operator

you. Thank

Alex have Twerdahl with Next, we Piper Sandler.

open. is line Your now

Alex Twerdahl

Hey.

Just a couple of follow-up questions.

that because On during does that of way of the the of Mainland? quarter, negativity and take sort one are and release, the walk that maybe $X.X kind outputs million COVID for projecting into qualitative the was through or the just of economists reserve kind inputs that some account of

Jose Fernandez

that. for I'll get answer let Maritza an

Maritza Arizmendi

with of model. Qualitative the that disclosed disclose qualitative is -- excluded the not we adjustment that [indiscernible]. on million and include million from does you, that's we Yeah. part share $X.X that The these $X.X that. also reduction adjustment adjustment The economic is the way

positive in loan in more Actually, portfolio, see the million We trend were the see is how $X.X recoveries delinquencies PCV Page non-PCDs release PCD in $X that presentation, we $X.X these in you of is particularly of have and this of can charge-off. are portfolios, reserve had and and in that can in saying the trends about of XX million the portfolio. the the as you million better mortgage the of adjustment because the in

Alex Twerdahl

just kind there? and or Thanks then that just the utilizations? Are color the And of there some put in maybe higher sensitivity of about the Jose, of, given there operating rates that this later loan customers deals economy us or there. with then less you color like year. loan line yields down you from that higher the down Rico talk of the is Puerto on interest give prospects patterns. holding Okay. rates, has well been given you is you as already here for of things, one it some commentary when I'm rate characteristics one the banks hearing the seems And growth into sort Can are of seeing many have kind for

Jose Fernandez

has of couple months, reach pre-pandemic the Line it Alex to has utilization levels increased. yet the increased but in last

commercial and had some we been that some for get of there quarter In this here on they that interest and maybe has terms and certainly has might of booked impact delays have the loan booked. rates effect originations never postponements of some transactions

So that we we on But a achieve year. are the will of side. have still see and said this some origination good effects to the rate having for we to pipeline yes, our feel goals be pretty the we loan able commercial starting on that, interest

Alex Twerdahl

then maybe that the to And you and the just expenses, Okay. mentioned what final some of were? break are explain for compliance-related out they you follow-up, expenses able being non-recurring, us

Jose Fernandez

has last So, six the quarters. for five, as increased this -- business four I activity said, quarters, increased

do for and to and we things that are with we also to need we all compliance in preparation date CFPB. And need so make to up the to we the need to that catch sure that do up issues consumer

are above $XX billion. We

We remain $XX expect to billion. above

are running those, in of those things place. bank. So part a all It's

Alex Twerdahl

Okay.

say of recur little item kind you as is So up catch of planning [indiscernible]. bit of when that a won't one little a from there's they a bit

Jose Fernandez

say mean expect the is doesn't several to trying that It's in I off. recurring. just is yes, it up to is to it's that we What of is a the amount level quarters. level that into next not here be and expenses that I That level zero. there say deployed non-recurring when particularly catch The don't it's eliminated items, same

Alex Twerdahl

me. you That's Thank for for up me. you. that from Thank it clearing Okay.

Jose Fernandez

Yeah.

welcome. You're

Operator

Thank you.

to this like any have remarks. further Mr. now time, program or to additional over We questions for Fernandez, turn I would the no closing back at

Jose Fernandez

for stakeholders and in. dedication, to Thank and who thanks work to thanks all and all hard our their you, operator again our team listened have members

the to our forward quarter. the of call next at end Looking third

Operator

ladies event. and today's gentlemen. Thank concludes This you,

You disconnect. may now

OFG Bancorp (OFG) 21 Jul 222022 Q2 Earnings call transcript