Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OFG Bancorp (OFG, Financial) reported a 16% year-over-year increase in diluted earnings per share to $1.08.
- Total core revenues increased by more than 5% to $179.4 million.
- The company successfully deployed $24.3 million of its $50 million share buyback program.
- Digital-first strategy showed significant growth, with 94% of routine retail transactions conducted digitally.
- Customer deposits grew to $9.6 billion, driven by strong commercial deposit growth.
Negative Points
- Non-interest expenses increased to $93 million, up $1.6 million from the first quarter.
- Provision for credit losses rose to $15.6 million, up $500,000 from the first quarter.
- Early and total delinquency rates increased to 2.81% and 3.71%, respectively.
- Cash reserves decreased slightly to $740 million from the previous quarter.
- Retail deposits declined by $53 million, partially offsetting the growth in commercial deposits.
Q & A Highlights
Q: What is the outlook for asset repricing opportunities for the remainder of the year?
A: Jose Fernandez, CEO: We do not have any immediate second-half specific maturities in our investment portfolio. We have repayments of our mortgage-backed securities book of around $20 million to $22 million a month. For loans, there are no large fixed-rate loan maturities coming up. The focus will be on loan origination and maintaining our investment book as part of our asset and liability management approach.
Q: What is the status of the large public fund deposit that came in the fourth quarter?
A: Jose Fernandez, CEO: The deposit will remain at least until September. This is already included in our net interest margin and cost of funds guidance. The deposit is collateralized and indexed, so its cost will decrease if the Federal Reserve cuts rates as expected.
Q: Can you provide an update on the credit front, particularly regarding Puerto Rico consumer trends?
A: Jose Fernandez, CEO: The Puerto Rico consumer is benefiting from higher wages and lower unemployment levels. Cesar Ortiz, Chief Risk Officer: Auto and consumer loan portfolios are stabilizing, with non-performing loan rates and charge-off levels improving. The auto portfolio has shifted from subprime to 84% prime and superprime, enhancing credit quality.
Q: What is the loan growth outlook for the back half of the year, particularly for commercial activity in Puerto Rico?
A: Jose Fernandez, CEO: We expect 3% to 4% loan growth for the full year, driven by a strong commercial pipeline. Small business origination levels have been record-setting for three consecutive quarters. We anticipate commercial loans to drive growth in the second half, with auto loan production tapering down.
Q: What are your thoughts on capital deployment, particularly regarding share buybacks?
A: Jose Fernandez, CEO: Capital deployment priorities are loans, dividends, and share buybacks. We executed 50% of our buyback program last quarter at an accretive cost. We recognize our excess capital and aim to return it to shareholders consistently.
Q: Can you confirm the expense guidance for the back half of the year and provide insights into future technology investments?
A: Maritza Arizmendi, CFO: We expect non-interest expenses to range between $90 million to $92 million per quarter. Investments in technology and process improvements will continue. Jose Fernandez, CEO: Technology investments are crucial for our digital-first strategy, enabling us to open retail and commercial accounts digitally, which differentiates us in the market.
Q: Are there any opportunities to utilize excess capital for acquisitions or portfolio purchases?
A: Jose Fernandez, CEO: Currently, we are not looking at inorganic growth opportunities. We are focused on growing our customer base organically and deepening existing relationships. However, we have dry powder and will be opportunistic if opportunities arise.
Q: What excites you most about OFG's future prospects?
A: Jose Fernandez, CEO: The outlook for the next three to five years is exciting due to our successful strategy execution. We are steadily growing our customer base and deepening relationships. Our differentiated strategy and consistent execution keep us motivated and optimistic about the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
