OFG - Earnings call transcript Q3 2024

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Operator

Good morning. Thank you for joining the OFG Bancorp's conference call. My name is Connie and I will be your operator today.

Our speakers are José Rafael Fernández, Chief Executive Officer and Chairman of the Board of Directors; Maritza Arizmendi Diaz, Chief Financial Officer; and Cesar Ortiz, Chief Risk Officer. A presentation accompanies today's remarks. plans on Quarter of feature XXXX statements management's found under OFG certain be about Third the section. This goals, can the the page website forward-looking It expectations. and call may Factors subject are uncertainties the SEC risks These section statements OFG's to of outlined and in Risk filings. may differ those currently from results Actual anticipated. materially of obligation afterwards. [Operator Instructions]. occur to any in disclaim that information disclosed this developments call We update as a result over I would to call now the like Mr. to turn Fernández. Please go ahead.

José Fernández

us. morning, and thank Good joining for you

quarter XXXX year-over-year We It to year-over-year are our third per total X.X% pleased solid another were on in Earnings or results. performance. revenues. increase report was X.X% core a share X.X% up

We new growing. do to with Rico's operating core and economy high Puerto of well business activity levels upgraded continue products, self-service produce our steadily and adoption services consistent keep employment. results continues and to of and digital tools

today In marks anniversary XXth addition, in our business.

renew bring ready shareholders and that cause team time our for celebration, it all than to always communities customers, members and customers employees, clients a help tomorrow. is our our for to being our to and serve. Thanks to more While to commitment we the today is progress

comment go Southeast would I I also the like the Before hurricanes recent in United to on, States. on

turn ] [ have Page As to our and Milton. Please heart by X them, everybody affected of an go for results. summary second who island of to people many suffered and Helene out where a through our prayers quarter has been

were pre-provision totaled was $XX.X core the was Provision interest of Noninterest Net per million. diluted expenses $XXX.X margin at share of $X Looking statement, revenues $XX.X $XX.X on net total we income earnings and reported X.XX%. revenues million million. million.

Loans million was were and from ago from from ago year a for assets quarter. up year $XXX investment balance ago $X.X billion, million. and up billion, quarter. and $X.X up XX% from XX% up down Customer billion totaled $X.X deposits a $XXX last was the Cash up sheet. X% Investments from X% were loan $XX.X at to quarter. last production new Turning held billion, X% from year were a and Total XX% last

ratio Looking were First corporate during by interchange residential we portfolio. Please Durbin which XX.XX%. was took reduced the $X.X at in developments capital, card strategy. debit Page for acquired X update effect of quarter, Rico Digital third million, late loan fees billion CETX $X.X X on rights the servicing Puerto to August our and turn to mortgage note an a There

transactions transactions enrollment, growth. of sales of in quarter, by third and driven customer of X.X% and virtual retail routine payments, our of XX% XX% loan were being digital customer digital in in retail payments digital As the XX% deposit is channels. XX% This loan of teleutilization ] X% in growth through service XX% retail and all year-over-year [ made

grow business to reception bank, All Portal end all customer using expand. September, bankers Servicing were and the of from the addition, the with our Oriental it this XX% our to of of valued branch continues retail to up transact business In to to at frees customers. end June. By XX% advice up provide the clients

with on mentioned launch for our for I for the we exclusively checking benefits further unique offering account world that savings Puerto card of have account proposition market, the then, combined enhanced account we deposit in holders. Rico Since the in Elite launched first-of-its-kind their customers, rewards markets. our the retail value As account a debit Elite with last expanding lead call, and relationship a This the customers represents Oriental.

accounts. In checking all addition, digital offer retail we for savings account opening our fully with funding and

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

Maritza Arizmendi

from absence million, to of and yields, a review the total components the $X.X second the income with of This core was second businesses financial turn Please $XXX million quarter. X reflects and our loans interest securities the higher José. balances investment of revenues, of X% in Starting million to you, higher recovery $X Thank quarter. Page highlights. mainly or up loan

slightly late since due lower anticipated rate portfolio manage ] interest second investment have to been absence year, long-term the in valuation revenue mortgage revenues million, the This commissions. an month certain forward, higher mainly borrowings fees you $XX financial help interchange U.S. longer costs. Total This the to last of average [ duration $X.X deposits, higher lower loan million we cost the increase from If MSR reduced growing [ second the quarter's from one balances decrease rates. in servicing core deposit million $X.X and [ million reduced the well environment $X.X -- And [ from quarter. ] brokered service of was mentioned, and of adding fees recall, reflects expense balances securities. $X.X million guaranteed and higher Total the of annual new and deposits than José going less million ] cost from balances recognition that the reflects insurance than were a $XXX,XXX million, of $X ] mainly portfolio. as $XX higher in quarter. prepayment as banking average second reduced

X processing a in in Page gains turn reduced $XX.X real expenses from down estate expenses, lower reflects noninterest Mainly $X.X administrative If and contracts you exclude and -- line in banking to owned million quarter. million valuation, to million, at with the financial [indiscernible] the onetime expenses [ credit expectations. Please services total our for were $X.X $X.X and ] general totaled looking on MSR and second business in related million sales. they revenues debit original card

higher second seen and phasedowns and value almost to turn X.X% X performance X.XX%. assets XX.X% U.S. our the quarter yield Return and Loan share was also up Page review our $X.X held the the our trends value quarter. of End-of-period increased basis highlights. from million second of mortgages. Year-over-year, growth was common regular tangible securities reflects Rico or over held of and to Return commercial securitization X%. in XX.XX%, XX $XX.XX, than was increased and with that's portfolio. Please loans, mainly balances quarter. auto $XXX have last the on X.XX%, slightly X% third XX consumer increased in quarter. down quarter. the was balances on and second investment book up loan high. performance residential investments Rico loans due operational second Puerto This points from per Puerto from generally we quarter was Average points loans for were efficiency for This was line tangible equity quarters. Other billion, average ratio investment from basis quarter remained new to or second second The X the sensing

a loan amount reflects have a level Rico U.S. point And commercial have second Rico ] quarter loans strong said, levels. had commercial at loans. a commercial In overall Third [ new mainly ] pipeline. origination anticipated as lending Puerto overall we loans high and and from continue consumer of Puerto lower and some Puerto [ we Rico, to moderate of we will

from cost saving or X.X%. quarter. This were down in basis Now points, down from deposits million lending was and deposit has down rates point one come $XX mainly deposits. that XXX and are decreased second deposits Thanks. Core balances and time basis increases the pipeline reduced demand End-of-period quarter. reflects U.S. we Average interest down, inflation core falling U.S., strengthen. the billion, in expect to slightly $X.X the our second

compared compared basis borrowings was last million were $XXX End $XXX was The quarter. million Excluding public period basis X.XX%. [ quarter. X and to to the second $XXX quarter. higher second deposits margin the million points. rate basis ] balances points XX of compared funds, Net base brokered of was were X.X% million cost in $XXX deposits to down interest points XX in Average

X% Rico X.XX% same at level charge-offs last were point the Excluding loan the this X and the at than up in quality high the to recoveries to flat there charge-offs $XX lower and review loans. quarter. Please quarter. Puerto our recovery quality and in strength. Net in U.S. be to the high the was X.XX% net in now to typically previous be appear basically Page previously turn range. At $X higher million from charge-offs the but Sequentially, which totaled resuming Consumer quarter, commercial time, year. million, capital overall mentioned business, second Credit were mortgage both from traditional runs for stable. continues NIM second the credit continued net

million the X.XX% in million rate below sequentially, a was ] year As loan the million, net from increased [indiscernible], This renewal from basis XX ] reflects charge-off XX quarter. U.S. fourth $XX.X for but mainly result, related flows points of factors of due basis update of commercial macroeconomic an credit to million volume, up loan quarter. to Provision [ the points, for [ drivers, the a ago up up Rico $XX.X Puerto second consumer quarter. $X.X $X.X totaled losses [ the million the auto $X.X cash extension perspective. ] a annual And in loss and lease improved mainly loan

investment Looking the products continue of savings of deposit to as X.XX%. shift third servicing during balances value-added portfolio and qualities and Loan income in core services. rates at are option This buyback rate the to with from good and reflecting nonperforming was the and respectively. credit The beginning The customer loan sum in year rate to booking since delinquency environment were the Ginnie demand grew economic was total growth to held deposits portfolio the recent the steady continues the mostly and by second acquisition. To strong other pretty Mae and relationships a loans. The we related due maintained mortgage deepening programs metrics, have Rico. positive, driven were grow the with delinquency the trends from X.XX% credit time the be quarter. Puerto and quarter, up, total early interest increased X.XX%, net

and outlook X.X% cut. Fed between the fourth is of now Our first NIM rate the X.X% size quarter given

to XX continue X Reserve the seen expect forward million ratio have with by efficiency additional rate of ] several $XX cuts in an end year. [ quarters. expense [ the from range the basis going during last We should point the $XX line trends with we ] million to Federal Noninterest

on fourth margin and our credit net update XXXX. more outlook you will precision rate, We call about the quarter interest for interest

to allocation, and loan focusing share looking remain always opportunistic, and Puerto U.S. capital Rico we at buybacks. growth on Regarding continue and dividends

Now José. here's

José Fernández

Thank to X. turn Page you, Maritza. Please

the at Puerto both The for steadily in of positive. continued Puerto interest Rico both and economy continues growing, strong rate the OFG Rico the and to environment and be consumers. Altogether, Reserve Federal for supports optimistic. outlook start cycle lower are businesses financial levels island Our business wages the remains by a unemployment here high condition is

remain we and vigilant the ongoing conflicts. macro changes of unfortunate always, geopolitical As regarding inflation, in and impact uncertainties, interest rates big weather the events

OFG. to Turning

and current levels. at growth remain trends be of continue We should positioned our to loans, well customer deposits for Consumer credit base.

strategy to Our Digital continue First will evolve.

enhance further And Now established a continue through for fast, we that platform increased in with the means strong new convenient model time, serve. to personalization. to customer we of invest will strong the twin while innovations self-service, our to more a same and plan communities experience look differentiating easy-to-use deploy have customer we employees, goals than we possible progress we business for customers, to increasing and efficiencies. Altogether, forward further XXth our the our ready that year finish at shareholders to make

without hard members. team results been Our achieved our dedication not work the could and have of all

them to excited to thankful this, start come. With the please are Operator, end We formal we what's our for Q&A. presentation. and

Operator

we'll And our Kelly from Motta KBW. Instructions] take first from [Operator question

Kelly Motta

on you kick had. quarters, prepared kind And that in continued but would about past of U.S. the broad-based, you've been loan X thought in pipeline. side, very in it the the your strength the remarks I José, growth off auto. mentioned, I strong commercial with It's

the hoping how was And ahead on what sense expect I that the you're we should you're well, growth what as of you're look seeing we continuing there? about here. -- to loan as a be look it pipelines like sounds So thinking get like island to

José Fernández

Yes.

there you consumer. thank in of bit activity our commercial hasn't Rico changed. a in here terms that mean, auto Puerto Kelly, I your we that for supports of as So and economic our It quite feel growth question. strong as is well

that hasn't feel we the changed. So forecast

strong loan be the commercial the seen steady all, to production. the quarter pushed had have Puerto some are commercial of kind that on side. Rico delays have we into this we pretty quarter. going -- we are originations But in what on We originations, steady fourth is all a pipeline So in loan

U.S. growth going regards unemployment. It's we to the Puerto cautious economy on then U.S. do say, your compare we we last, going of felt been landing of And said, figuring and forward of have well, steady feel the question if what as because U.S., I to encouraged landing. here. Rico last not a the economy the what's going and more out we're with the let's we it down. quarters seen Rico business. what inflation soft we X low to a but kind years in and Rico to coming ] quite our economy. don't simply the I still don't And in think out going in with landing couple with X of good terms remaining to for have a crystal have hard U.S. seeing And look, Puerto on or a was it in economic where Frankly, does, have or ball. [ was anybody called no Puerto kind is now I'm here to trying similar in to that we're

of been next that we Rico we and Puerto couple in having pretty down funds We economy. steady higher think continue continue employment last I as a will as it have to Rico. that to a continue years growth years, the several Puerto the support low in It's given paradigm high different wages well living from the for to the have the wages, levels, reconstruction see flow

XXXX all, year this the really, momentum. more start U.S. to side. All in and looking year, about strong record constructive really So finish we're year Puerto the forward optimistic a excited Rico, on to with

Kelly Motta

of in Okay. among of It side, the your on deposits. you commercial, side was in slides, there more And then the helpful. the optimism but accounts. was retail sheet, like That's the fell. It migration some and highlight to about And your balance deposits we there deposit the looks demand migration? looks was expecting, ability other the a that it like government super on about with -- of as with deposits hoping this spend you're of gains in was growth I cut, rates well you Or on continued share growth market see continuation deposits. moment much is could grow leveling a talking as is that how island? do off the is versus that the

José Fernández

Yes.

variables you starting in flow model invested internally, competitive and some funding, of and I services see business see the deposits into in some and we're seeing that our move see off, that the of advantage our Rico there the model. and opening level into account evolve we interest rates we far we slight out So island growing seen right? is way have you the think way market. products how point a control, terms in something technology It's with that and and so are things down, deposit control ups a this downs business bringing flows, quarter, But trickle can to seen giving government have have And balances. is so in we deposits to on us and core in unique new and potentially Puerto that clearly feel demand rates we as we and in we XXXX. What XXXX, starting we as digital how interest liquidity can't how the into

from the big all, that the look books. because have transition to mostly checking a on and think core is to is towards start build deposits. savings shifting that time slightly seeing We retail from or a on the government still average deposit do we're from you of franchise we it continue going what as the balances into end that, we pretty period. XXXX, side. all our But at in If and it's

seeing getting market. small type side, accounts, levels in Rico is in momentum on On terms given of see small terms of of the very which the we commercial checking our And and good the in what Puerto liquidity we're midsized excited businesses. a accounts, we're the base

starting we we see as to where again, back stabilizing grow deposit and a year at steadily. XXXX look So

Kelly Motta

deposits, projecting That's through my updated you that remind And paying those? notes you think they government quarter on on -- least last us helpful. can super I the the September. were at about flows thoughts at Any be would

José Fernández

Yes.

and It it So we deposit to did supposed November. have large not, a in the September. sheet balance was that extended until exit

in now, this government that index government ] of bill which in treasury their on Reminding fund index what indexed a exit to the November at discount right is that tentative is this the is X-month everyone year. seeing to an a deposit [ deposits, So call we're rate.

is rates deposit as that books. in gone have us down, also as So funds the remains cost on of helping interest the the

the to we until going update accordingly. it's again, So stay will market and November,

Kelly Motta

That's last balance your Okay. quarter. turning helpful. It also margin, And bigger. MBS your guidance, then margin to time it is than sheet to it's expected this the seems X.X% purchased like X.X% we more lower securities. looks what like you But trending

in reason of versus for the appetite reduction -- much could sheet? an balance of rates purchases [ the discuss how of size potentially a kind you -- securities of the wondering if of Just function outlook to the perhaps kind the is and outlook that additional ] ones for the

José Fernández

give Yes, I'll the let answer. you Maritza

Maritza Arizmendi

the in rates. with -- last point you to XX quarter, the and the September XX And was one When actual basis Kelly, cuts. Yes. fed the on based estimate it's points. X basis was not expectation related we shared

the size okay? estimate the fourth given we cut, So quarter, for adjust of the that

Kelly Motta

Okay. securities of sheet? securities, modeling, it what the and And size any was then like looks the kind higher of than EOP balance here $X.X It managing I the was again, from was about repurchase around appetite just billion.

Maritza Arizmendi

have the assets what in Yes. the new for rate the mentioned sheet duration balance long that's the prepared about last I the the And part been, low year, of term. prepare in extending we Yes. also environment since remarks of

quarter this we So that's also. what did

José Fernández

in at ] U.S. extending X% now continue And kind to sensitive. sensitive. asset use sense the it used to government asset our of makes way the the handle duration [ We for to a of portfolio as be adding us. investment we look to that, securities asset as mortgage-backed sensitivity. reduce will again, X% We're from we X And the into

So about rate portfolio be we lower investment the are going to we forward environment, going as the as constructive mentioned. interest Maritza manage

Kelly Motta

tying return. that capital guess I Got it. is kind into of

-- going profitable even to Durbin accrete loan from with and that? the kicking here you're book buybacks capital. guys You range, low kind and of you're thoughts you're in make super managing in, even Any dividend, how growing -- you the updated on mid-single-digit

José Fernández

look the the the up, our did in and some session if Board. kind also off-site again if in I me, repurchases, not we'll and at view earnings it return. loan a look we the and we look about growth dividends, were and from It's little of growth, in [ loan put we'll been fault buybacks. accumulating a at we are us. of capital review that our with Board look buyback, we're with we January bit of ask kind ball that generating the the that little but the level is dividends could in But will have But more strategic capital coming a at -- -- the behind on we're we're management slow We little perspective bit at probably that quarter, a significant. Kelly, -- we a we And we seeing, third that to and the from ] buybacks you in the intentional prospects

Kelly Motta

insight Great. Maybe the is contributes to you income strategic And from servicing quarter. here? this for portfolio the how purchased that Hoping decision provide -- the servicing around that? the any some me on you last one to thoughts on the as can

José Fernández

Yes. Yes.

portfolio we with. -- that we subservicing first, So a had a it's agreement

rights building it its as Rico, whole it owning mass. customer a these requires has us book, us servicing the So critical part end, limitation. And relationship Puerto own perspective. in and And of a opportunities, you it's having servicing ability in has to know, the which, but here also our the servicing it's just from the

behind of kind logic the that's So it.

be balance complementary terms we it it [ own doing. the subservicing was already, felt -- today we think was to do. a that that $XXX,XXX what it. part of right now quarter except use thing to It of was approximately to in And and banking have model going I the just our ] it operating been fees. we mortgage versus we're generating

Operator

no back time, this over queue, at to Instructions] the the call [Operator And José. I'll in questions with turn

José Fernández

to stakeholders all you, Have team again Thank all Thanks and to listened. thanks our operator. members that have day. a our great

Operator

great us. today's And We you this joining conference. a appreciate Have day. concludes

OFG Bancorp (OFG) 16 Oct 242024 Q3 Earnings call transcript