OFG Bancorp (OFG) 20 Oct 222022 Q3 Earnings call transcript

[Call starts abruplty] Higher yield. This accounted for 43% of the increase in net interest income. Two, the increase in higher-yielding investment securities. This accounted for another 43%. And three, higher yield on lower volume of cash. XX%. for accounted This this cost offset of all increase the in the interest-bearing was turn, by slightly small In liabilities. Please review turn our to credit quality to and capital Page X strength.

payments third they X loans. from loans In a and due factor. remaining we as the was million net balance that in commercial totaled to from part, volumes. quarter. at half of that Fiona charge-off, in Looking Also, of higher consumer the were second quarter. provisioned came About came auto late $XX.X result loan The from a

provision Looking $X and added $X.X non-PCD consumer factors credit portfolio. at Two the This balances. million. for was losses. Total affected auto loan million. provision One higher was main

to The a potential $X.X $X.X of account This added The improved portfolio and This PCD losses. led for to recapture qualitative was other increase allowance in Fiona-related million. an from mortgage loans. performance the an of reduced benefited residential balances the component million. of

ex That's Third PPP quarter was basis allowance down points the quarter. X.XX%. coverage second from X

comprehensive compared dipped total a end loans. ratio due The Fiona. steady at offset strong. ago. second partially earnings. equity $X second held second down to the the little That's basis at fairly basis X at a nonperforming the in reduced income, the quarter. glitch remained stockholders' stable Capital The X.XX%. was quarter increase was Total below other CETX effects from This NPL XX.XX%. ratio That's in and up was X.XX% by quarter. XX.X% with TCE from credit rate retained billion. the a reflects points Overall, XX points of year the little the quarter of Looking to The

José. here’s Now,

Maritza. you, Thank

We're capabilities. digital-first for to good provide an with Let's our year our to self-service plan customers finishing to with turn easy-to-use solutions continue to expand X the Page We XX/X momentum. outlook.

efficiency people, investments well to on and plan technology We and growing continue as our assets commercial exceeding relationships and average focused tangible average our Ultimately, return infrastructure. on also as we're and metrics, equity. on customer in common on loans ratio, specifically focus return network our retail performance

Rico accounts. deposits As to of continue for levels their excess in liquidity overall and the businesses with have picture, consumer Puerto high

However, we our to worldwide the This reconstruction please relative ready of Rico a environment higher formal inflation repercussions operate resilient session. the for than and coming on Puerto and said Thanks continue economically again any U.S. that economic in. question-and-answer being team more vigilant flow to island. customers given the perform help remain from rebuilding to will than the to rate trends Having their the better our that, we we presentation. believe achieve financial basis, for always start funds Operator, goals. our members ends the

with Alex question Instructions] Twerdahl our will from [Operator take first Sandler. We Piper

First could a Hurricane some off, I on expand Fiona. you little made the about of bit hoping was comments you

slightly at you think little hoping that a higher on impact early-stage of of you mentioned level credit hurricane. you I expand the maybe stability the bit. exception can of that the what attributed I that was from some a is end delinquencies quarter? sort And And of the saw to with

Sure.

the So we end the we part Unfortunately, the of see stable. Southern credit Rico. the Fiona at relatively Puerto continue had Hurricane to quarter of strike trends West

can loans. delinquent terms of at clouds in end little auto after the what little share least a picture. it happened with of bit the kind delinquency has kind the bit you -- the of I levels So a of But or quarter

themselves that far, already color a the have So just to little share put back of the delinquencies so XX% the that additional here, we at end bit current. had of quarter,

have part of requested, of kind Alex, disruption Also, them, the customers of quarter kind due XXX total talking to consumer $XX just deferrals the to million of of of Fiona. $XX the an around a indication to that's on million. side, as we're So that of XXX end the

not effect. really we're seeing So that significant

So we feel that things should normalize end-of-the-quarter event. after that

You effect and any Fiona. see there didn't no can whatsoever that the effects from on was we commercial also side, say

side. So credit that's from the

credit So terms encouraged point, continue the this by the on the seeing economy. at we in to we're ground stable see and -- in what of

kind everything That's imagine and, of Did weeks and down color. then hurricane would see there loans that you And on disruption the of Great. seasonality that pushed of same comment maybe growth going is was also Or anytime get you're to just remaining have the then that a with just the the October? closed third point seeing pipelines overall. of just then piece loan probably alluded helpful quarter what book, September the I X you maybe on the And the some obviously, hitting that C&I and on maybe on of question, at end reverse soon? to into there. sort part the from

Yes.

of End the digits. $XX too biggest on mid-single the we quarter customers -- postponed year have actually have this growth were in accounts of don't excess make that liquidity for I vicinity some of loan the growth in that loan to lines impact in seeing want of million. account the were credits that out to fully a the million still commercial were of deal paid might I and that are for that. we of $XX closings had that a but much think quarter, So couple the in because of our

this of and within again, about, little bit We happening have pipeline. mid-single utilizations the coming book. for the trends. just pipeline of at look origination when of you growth, what's are seeing When giving continue we're I'm So, strong a year optimistic line the our of and positive certainly, detail we feel good digits you very of we do loan our year. to seeing down. the commercial a into end end look We're positive here pay-downs target the -- But

of that also have we'll that year, higher, the higher I they've rates more -- a faster So that interest dent And putting next are in originations XXX line bit in years. are that's loan also a little out because fast And effect. having knows utilization. this higher. frankly, gone what's than point everybody significantly on kind rates as to call, of Hopeful last need

having for longer an our clients on it's projects term. effect financing the So about commercial thinking

that So we're but slowing I'm down not certainly have it's saying going to effect. an

over The Got question it. just sitting And the of billion. thinking the next on sheet going would balance size out sheet by a Durbin now for the me, year, considering the to I'm then with obviously sort you defer were is balance deposit balance about of guys just of into pushing especially savings. Durbin year management just Last some able a curious substantial that $XX how end overall you're of be another sheet year. year, And the outflows.

Yes.

So positioned year last we this achieve better lot are to it. than year a

I after to So are the clients pay what let's fourth see end quarter Deposit out. how and given stabilized the stuff. earlier the the of excess commercial -- trends quarter down some about lines mentioned plays cash their using

level, on say time, terms were below certainly, we'll $XX billion of closed by $XX of update total I what in can we're though the than last year. the closer this is the about point bank we year we But at billion. outcome we're in So at mark -- the assets. that end the

so So -- of of the it requires because above CFPB X $XX gets postponed consecutive compliance, billion. quarters

of it that pushing we X for quarters. are end, more kind in So

the that how That's much great. does And component? roughly save, CFPB

sorry? I'm

savings component that to? can Does CFPB result that you in any point

Not the near the already are above some we future. at planning really being in because point on billion $XX time in

us just to preparing fully are ourselves gives It we be more compliant. So time.

So it doesn't on have that. effect an

could you just is differences Great. are down one how case. the the final wondering And me. bank some tax remind U.S. us remind purchases if report to could a understanding I that’s My U.S. us in there Rico. are of what hoping then just I’m that might those taxes just purchases. if question on treatment was Puerto the for for treasuries you

I'll let Maritza that Yes, one. answer

Yes, we from invest. benefits income on do have we treasuries the that the

So from that would that we investment. benefit there tax a is effectiveness

even on Does up that on material of those -- might rate U.S. don't a tax-affected wind see those a having bank. your So, higher couple basis, next the than a quarters? you in so over might tax be impact

Yes, that's correct.

We Kelly next question will KBW. with Motta from take our

I there Last your range the you Great mid-XXs you’re quarter, efficiency to lowered thought given might efficiency. the currently strong quarter start had. on I NII and outlook here. you’ve growth

update move to you’re kind going keep your for on you pressures kind us you’re efficiency managing outlook the wondering have or expense you allow invest stronger of Just how will could there. efficiency mid-XXs that, to NII should continue maybe whether if lower than to of that and if expenses and maybe to

be Just on helpful. any that would color very

your question. for Kelly, you, Thank

the requires market, infrastructure, as maintain we our the leverage, ourselves said mid-XXs. our will Having our continue we surpassing efficiency in that to perspective. to Maritza basis operating set in to It's basis. will targets this quarterly and mentioned that on we differentiation and from of self-service we're in on we So we goals path And continue and and our network. digital-first kind work towards the are yearly invest us XX/X a a that, towards benefiting

because the need So view we sticking efficiency have and technology. this kind But ratio that our some we're of investments mid-XXs strategy the to want a our we to to from -- in might of make perspective. accelerate business that's flexibility of terms to of also

terms I can best that's of the So in give color. you

the to impacts. Hurricane back circling And helpful. super Fiona That’s

fee waivers slightly reduction the and of fees you made this One were in the quarter. lower called out that last items activity

be normalized have going into Just expect QX we should ended more something a wondering if quarter fee if a those consideration. to and that’s continue that’s waivers or

Yes.

kind hits an until for then the So waived the we And to terms be It's Fiona of in our our we when event our both. -- we we of customers, us, -- standard our waived the and as we fees and offered people know, customers. did And fees do you procedure. we lookout XX. September for like first operating on got

on fourth not have should quarter waiving the an fees. the of impact the So

kind that's event. So a of one-quarter

the last And authorization. question believe look shares for remain million like Got I the It on any repurchased doesn't on the quarter. $XX in it. me you buyback.

about Just buybacks wondering and about for your thoughts yes. appetite completion,

are Look, you. extremely fourth our -- we XXXX. we the on remain and got Kelly, outlook for quarter optimistic Yes,

clouds are in. probably and all We vigilant for the talk that rates reality and going we that the of up and interest also will inflation getting closer in operating be closer are and recessionary terms

sheet, And balance long-term our to look So that us been the CEO. that key operating with at with years I've a has storms in strong capital to the has balance last had strong sheet when very and to with weather XX success almost we've the all operating been we allowed dealt that our levels.

might buybacks. the more on at go out there today, are aggressive So be be able to we when we looking yes, buybacks and

situation economic in opportunistic in remain world have repercussions the to will might we that want Rico. and is but the We the sheet it Puerto also balance in strong event an that the there have

point So not of that's view opportunity good we a market clouds subside, operate the to than we this if with making sure we're do time, position. kind the feel we'll But shape to going how be lot to normal is for balance and in at better when so. and us we sheet in a a That mean that doesn't have stronger this. there be in

view -- how And So market ain't in recipe for future. instances, that's this going we and been near this. change that's to some our and, in success the survival kind in that's of

Hovde will next Rabatin with Brett from question We take our Group.

Rico seeing so Wanted the in you to that. it saw mind? progress Can the the for activity Can and – in about be. of talk talk the warned talk mentioned the been fast you GAO and rebuild Fiona the talked besides what your maybe that terms about reconstruction, Puerto hurricane? just to, about just recently maybe reconstruction hurricane as as advancing José, House we Representatives just of last you’re speak, subcommittee made should big here of what I has that wasn’t about the since first,

Sure. question, for you Thank your Brett.

efforts there's have Rico makes if a in last it's fact -- they silver to rebuilding patently and higher that to the clear the Puerto leaders years. it and that So exhibited the hitting and what than island, on reconstruction Fiona awareness urgency have lining Hurricane need for realize several the Washington the them and the

electric So low-cost, local opportunity and a Fiona to think the the that and there Rico for I is again it's grid, of to the also the me, collaborate only we more actually after but diversified, have kind focus on at day, public need focus resilient, lot Puerto not Because more going. of and electric things and Hurricane an fragility a officials the get federal end reliable, to infrastructure, of and services. grid well-governed

funds federal officials but to of it the to the facilitate see a lot the that's process quantify involved island. in can't me, trying at lining. reconstruction being flow I to and I So silver higher-level into certainly ways look this

hear. proof the out proof pudding, though. hopefully, the you deliver. is they That's jury what is see. the right? is The still That's And the pudding. there So But you what in in

Yes.

the Let’s uses opportunity hope resiliency LUMA the an as improve maybe cost this grid and its to that as and well.

And I basis, it Rico's states. change enhances the Brett, than Brett, the also doesn't of if it perform thesis. economy relative add, of the better that should thesis. in the in, it Puerto the solidify and accelerate coming to a the the on thesis will, think may I amount that Actually, hopefully Because size funds coming relative certainly simply, economy

it. of kind how that's So we see

possibly has might impact prices finally about think decline, about, Okay. both people values credit lower, And were a some concerned just how new as on as Index that the and degree, your maybe portfolio? that had, impacting one I and talk Can of your about car Manheim an turned auto to potential for the decline other used, I you think quality. that, auto just second have in you questions the

Yes.

So regarding auto Puerto out the the in point Rico. I same want to I just read reports. market

an to system a is on. rely transportation island mass Rico Puerto First, without

don't automobile have are positively, So you simply skewed sales to go car, can't if you because work. a

first of that's the kind differential. So

vehicles. there allowed of after many the into there has the I pent-up pandemic all their kind The think change coming demand the and or think second during is, for cash -- to was years. pandemic consumers one in them I been And

the I at new am sales surprised are. auto the they level of still at So

sales. in the I was terms think inventory the sense, think I because some of And of in not that Puerto exacerbated have in will here and brands Rico, so inventories the it was a a normalization did we little levels of that see bit affected.

they're going In terms to of think the I also prices, normalize.

component an day, XX XX better or And or but of lending all about credit credit an that end years what the when collateral all profile the mean it's I the we've something think for is of focused you're auto with client, as it's last throughout at look important done the profile the couple on increase you to auto a at have I consumer. now. the consumer originations of been really profile, credit we years. the

are -- are what And X.X%. asset book So for at is us. they were the end the north seeing, a it's It's in charges of significantly than prior yielding in on yielding the high-yielding day, of our the lower as you cycles island.

share So competitors. we're actually really encouraged and actually our gaining against market

stabilizing. going credit of So it's and origination an profile I area we the consumers. keep deterioration or it where don't and/or but the significant any think the in not the -- seeing we're in to we deterioration prices are see same normalizing of levels cars

here? move would gets last, basis rates the that little maybe increases quarter mentioned, well. it higher, do to a to like given think Okay. really do rates. I mainland the the at fourth to margin I you higher outlook And originate it past But as It bit for quarter? maybe maybe just you on about cost you nice had will higher. then loans appreciate seemed believe this tougher margin What betas U.S. as as talk then continue which continue versus you Can X the the from the the is move only color maybe of deposit was lag that and margin, points

Yes.

decades pointed excess U.S. in as banking system that's deposits. where ability us out, is cycle this lower -- operating you than the So with first significantly to core the is the the are And given peers. our betas many

X XX we only that island the we one. versus number that's or or have Number banks had. XX in So X two,

different, banks components mind, those in going definitely the U.S. differently, make betas. to, us deposit terms my positively perform are versus the So mainland in of

of will going impact see of still number not that. we and the one. We're Number the the We're and magnitude rate seeing certainly two, of by us that's So And continue margin. to to I is going the it increases are interest not terms increase. same the to rate in -- our speed me, benefiting see our on margin, of little positively we vigilant that in of Fed affect as up interest magnitude same year funds creep bit. we in in increase general, the need biggest kind the to on a we've higher this because cost to rates thing is of expect loan's seen the But potentially clients. commercial margin commercial be to variable how going

that. and anything eye So close pretty we're put have we not far, on seeing a

that's see a So we our how how clients. rates on of And are we seeing the betas. higher margin. little how commercial we of That's kind effect interest bit see that's

take We'll Instructions] our next with Securities. Braziler Timur Fargo [Operator from Wells question

couple first. a follow-ups just of Maybe

to positioned said you positioned Is you’re fourth Alex’s billion that question back better size, $XX year better balance this to to on billion go quarter sheet you’re kind $XX Are Going year the this of the José, the… delay meaning and it. achieve you below Durbin? in

That's yes. correct,

hands Okay. less And as year, just you Durbin. been are of somewhat as 'XX, this longer the fall overall growing outflow absorb just you into the emphasis of that balance go your factors the strategy. balance to know guys that had was in given just And the an talk quarter? sheet about, saw the maybe into kind how positioned through in term and size third sheet I we deposits that and Does better of

Yes.

balance interest seeing we're what is what -- interest going sheet I'm is So growth rates. given be challenging now to we're sorry, probably rates seeing right somewhat with

year, next to for just don't today. want we're deposits. an the I'm that in mark precipitate excess to fall spot still a billion have opportunity I year better we outcome but Into here. saying it's us this $XX So below the

the commercial to on see side consumer on deploy primarily but So on as if the to opportunity the loans the primarily as grow and those into the side. deposits well we we we commercial have will side opportunity

And up when in a is to So the to or Rico probably We're loan scenario the our mark interest be also their of going growth customers digits. We're vicinity behave Puerto it. be some rates. and there, you still where into commercial XXXX. the is into to on how single XXXX, seeing the going higher reacts in $XX how be terms look on depending competition to going billion low of that already we're in of down liquidity

those are it day, seem But moves. are above $XX end we us of to the to we're So how so that explode this navigating of terms doesn't the sheet at the the at size we're balance that variables in soon, going the to billion looking anytime level. going be

would in you're a of turn Okay. production commercial that type expecting looking know row loan side. be quarters now. just you're way I'm of of about originations the for loan 'XX to continued just for that commercial a and lower auto. then declined offset for Is that takes, at couple the 'XX, strength of kind and think growth the have out puts on consumer I'm and the right assuming assumption And expecting I growth? assuming to

originations a in the rebuilding it's different on case We're do have an that, a island economy that said be is therefore, and we to -- talked board. using the Having we're loan the dynamic going about macro the here and, scenario earlier, recession reconstruction yes. to some across there's Yes, into come at we Rico base Puerto global for funds. level an and in impact basically next going given it the to going is impact year have

going don't but single-digit that they And mortgage to to we year. won't down. them move we driven And will increased we're auto this up expect loan commercial. the I mostly level have don't seeing -- increase and same at are -- by still consumer balances it going see So growth

and it, funding in liquidity the with Okay. called excess Maritza that of outperform some guess, sense excess context of how let to guess, you said And pay kind I used the to to down through-the-cycle kind be of money after and on what give beta level commentary, going in that Can that was putting the down I kind then for the to expecting you through that Fed loan used incremental of is fourth incremental the that seemed balance line the that beta a what's pay this as transitions just deposits, base you're then of stops the cycles. capacity? of quarter 'XX quarter. they're here it prior balances, with us sheet? what's And hiking? willingness Or still of some like lines

Yes.

question that your what's is use the rates is lines them of interest So right credit liquidity their them higher answer, the first now. on part motivating clients their cash, to But excess bring our of down. to certainly, have to hard

in first When can of a you give an part beta XXXX-XXXX bit went But terms different I you question. up, the interest to answer can't the our of data the a cycle cycle. I in were with the So little XX%. we where share of beta in here rates around was

certainly, of in in landscape And the the but XXXX-XXXX, the that's different. magnitude So is that and different kind we rate than was -- the it where speed was scenario of increases also competitive what somewhat today. had

So a now, than other. we of beta one Right negate little X%, might the around less X%. have

that be still period But where very in in if simply significantly seeing beta. XX% my conservative, -- mind, gone you be to beta cycle had there as lower a and similarly, will of or, in jury want the out mentioned, because, feel So we will this time. around to rates that have the today, we very up we cycle, is it short what Maritza we're last have a

see the growth and let's whole from inflation. So Fed manages to in how reduction transition stabilization the

couple more you in details the give we'll quarters. next of So

you kind your the mean of the capital Is kind and where in quarter buyback. implying going Kelly's capital Okay, versus improved in we're quarter on that here the for of ratios third response. that's I that the through great. to then just excess And the last me, were question second back buyback guys position? active

or... trying to increased your is and wondering, that opportunistic then end just just be I'm on So caution

Exactly.

really a position. the view. we have We macros. the We sure of strong in make to the shifting want happen. careful. just capital hands global a is truth. And this long-term seeing going it. interest get a know bubble, landscape this and housing call amount typically, Typically, change junk We're bonds. go could So to to up speed, be be we around terms what's when It moment you we rates want in of good our at be doesn't it that could there It

But So we delivering need longer benefits need term. be if vigilant. of stewards to increases. execute doesn't we not of guard. on And so. be a seeing. more doing. at dividend time. We it the And make we've we're to capital. we typically, what good just caught we environment off And to we're of macro any just need year. -- be my been some we're lookout. that want in change that buybacks. the will I comes to But And that's of And from We it do ends that bad understand opportunity, the comment spot sure I to on benefits globally the And this want understand in point And the we'll

sense. that it. Got No, makes

I question was can more that on last I if the sorry, ask just the And know I one allowance. said but

quarters, trended And looks in last the credit. couple So lower. some we've allowances seen dynamic, normalization of still level over like of of it that

we given the Or maybe more off X.X%, there when at on? broad going to is some improvement allowance more originally the here at here just forward? should put that reserves here ratio expect still that room less take fairly stable? some you Is the or flat off looking that be to level of table Just

Maritza will that take one.

we stable. this is that [ph], feel delinquency how marine X.XX% with Yes. at see Timur, we it and point, the the given scenario

we of on at how in releases point. the in. during any coverage an eye reserves. quarter think will glitch we far, that but due Fiona We so We have this some we come see don’t keep to payments But stable the see to continue will general, that, potential

it’s this think at level we’re that’s and I scenario point. managing the adequate this at

I to to Fernández, the additional no would turn questions. Mr. Instructions] time, [Operator like call are there over further remarks. this back now for At you, any

for all time. Thank also our their next you, who thanks stakeholders to Thanks Until listened Have and great have to and operator a work dedication. members our again all team in. day. hard

We webcast. should program. would listening for like participation. had available anyone This first you A after be to webcast the problems for today's call replay ends. of the the who part to Thank does apologize shortly your conclude

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