OFG Bancorp(OFG) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total assets decreased by 2% quarter-over-quarter to $11.2 billion but increased by 11$1.05, with total core revenues rising by close to 6% to $174.2 million [15] - Net interest margin was reported at 5.4$15.1 million [15][22] - Return on average assets was 1.77%, and return on average tangible common equity was 17.92% [20] Business Line Data and Key Metrics Changes - Total banking and financial service revenues were $30 million, down from$32 million in the previous quarter [8] - Mortgage banking revenues increased by $400,000 due to higher MSR valuation [8] - Average loan balances remained stable at$7.5 billion, with growth in auto and consumer loans offset by declines in commercial and residential mortgages [9] Market Data and Key Metrics Changes - Customer deposits totaled $9.5 billion, reflecting a significant increase due to$1.2 billion in public funds deposited [4][30] - Core deposit costs increased to 147 basis points from 107 basis points in the previous quarter [10] - The non-performing loan rate was reported at 1.10%, the lowest in the last five quarters [24] Company Strategy and Development Direction - The company continues to focus on its Digital First strategy, with 94% of routine retail transactions conducted through digital channels [5][31] - The strategy aims to enhance customer experience and operational efficiency while increasing staff dedicated to business development [6] - The company is optimistic about Puerto Rico's economic growth and plans to continue investing in technology and customer-friendly services [35][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic recovery of Puerto Rico, highlighting the influx of federal funds and private capital [46][51] - The company anticipates continued growth in loan production and expects net charge-offs to remain below pre-pandemic levels [49][64] - The effective tax rate is expected to decrease to 29% for the full year, reflecting a favorable business mix [95] Other Important Information - The CET1 ratio increased to 14.45% from 14.12% in the previous quarter [29] - The company announced a 14% increase in the quarterly cash dividend to $0.25 per share and a new$50 million stock repurchase authorization [29][62] - Non-interest expenses were reported at $91 million, down from the previous quarter, with an efficiency ratio of 52.49% [27] Q&A Session Summary Question: Impact of interest-bearing funds cost increase - Management acknowledged the impact of rising funding costs but clarified that the margin guidance is now 5.45% to 5.55% [39][42] Question: Credit quality and net charge-offs - Management noted that while net charge-offs are expected to increase, the auto portfolio has shown strong performance due to strategic improvements made in 2022 [43][44] Question: Economic developments in Puerto Rico - Management highlighted the positive flow of federal funds and private investments in Puerto Rico, contributing to economic growth [46][51] Question: Long-term growth strategy and capital deployment - Management confirmed ongoing investment in Puerto Rico while also exploring opportunities in the US market [63][130] Question: Consumer credit outlook - Management indicated that consumer credit trends are expected to remain stable, with no significant deterioration anticipated [78][79]