OFG Bancorp OFG Q2 2025 Earnings Call Transcript
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The research indicates that What caught my attention is Image source: The Motley Fool (something worth watching). DATEThursday, July 17, 2025 at 10 a, given the current landscape. ETCALL PARTICIPANTSChief...
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15 min read
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real estate
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July 17, 2025
10:51 AM
The Motley Fool
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The re indicates that What caught my attention is Image source: The Motley Fool (something worth watching)
DATEThursday, July 17, 2025 at 10 a, given the current landscape
ETCALL PARTICIPANTSChief Executive Officer — Jose Rafael FernandezChief Financial Officer — Maritza ArizmendiChief Credit Risk Officer — Cesar OrtizOperator Need a quote from one of our analysts
However, Meanwhile, [ tected]TAKEAWAYSRecord Assets and Loans: Total assets reached $12. 2 billion and End-of-period loans held for investment were $8 (something worth watching) (something worth watching), considering recent developments
Diluted Earnings Per : EPS (diluted, GAAP) was $1
Furthermore, Net Interest Income and Margin: Excluding the new FHLB advance, net interest margin would have been at the higher end of the 5
On the other hand, 40% guidance range (quite telling)
Loan Origination: New loan origination was $784 million, with growth across all lending channels in Puerto Rico and the U
Deposit Trends: Average core deposits increased to $9 (quite telling)
Additionally, 7 billion, up 1, amid market uncertainty
However, 4% quarter over quarter and core deposit cost remained steady at 1
Efficiency and Cost Management: The efficiency ratio was 52%
Noninterest expenses were $94 (something worth watching)
Nevertheless, 8 million, aligning with the $95 million-$96 million quarterly noninterest expense outlook for 2025, in today's market environment
At the same time, Credit Quality: Net charge-offs totaled $13 million, with a net charge-off rate of 0. 64%; Early and total delinquency rates were 2
Additionally, 59%, respectively; nonperforming loan rate was 1
However, Capital and holder Actions: Common equity tier 1 (CET1) ratio was 13 (this bears monitoring)
Moreover, 99%; a new $100 million buyback was authorized, and 186,000 s were repurchased
Furthermore, In contrast, Strategic Investments and Digital Initiatives: 70% of retail loan payments and nearly all routine teller retail transactions occurred via digital or self-service channels; Digital enrollment and new net customer growth of 4% were highlighted
New ducts Launched: The company introduced Oriental Marketplace and a U, in today's financial world
Government money market fund within its DGI family of funds
Tax Rate Guidance: The expected full-year tax rate is 24
On the other hand, 90%, excluding discrete items
On the other hand, SUMMARYOFG Bancorp(OFG 3, in light of current trends
Furthermore, 45%) management expects retail deposit growth to continue in the second half and into 2026, driven by digital account acquisition and deepening client relationships
Conversely, Fernandez noted competitive pressure in commercial lending, particularly surrounding loan pricing, but described deposit competition as "pretty rational
Furthermore, " Cash increased by 20% to $852 million as part of a strategy to pre-fund expected loan growth, enabled by opportunistic use of federal loan bank advances and brokered deposits
Management reinforced a commitment to balance investment with capital return, supported by a strong capital base and a CET1 ratio of 13
However, At the same time, Chief Credit Risk Officer Cesar Ortiz explained that imved delinquency and charge-off rates reflect better-performing vintages from 2022 and seasonality in Q1
Nevertheless, Fernandez stated, "overall retail customer deposits will continue to grow in the second half, in today's financial world. " emphasizing the shift to digital channels and expanded duct offerings
Arizmendi confirmed, "The expectation that we with you is 24, amid market uncertainty. 9% for the year, and it doesn't have any discrete items included. " clarifying the tax rate guidance methodology for modeling purposes (noteworthy indeed), in today's market environment
Furthermore, Nevertheless, Despite "noise" in Puerto Rico's energy sector discussed by Fernandez, management does not view the issues as currently impeding the bank's operational or credit outlook, considering recent developments
INDUSTRY GLOSSARYFHLB (Federal Loan Bank) Advance: A loan or funding vided to member financial institutions by the Federal Loan Bank, typically used to enhance liquidity or fund asset growth (remarkable data)
Net Interest Margin (NIM): The difference between interest income generated and interest paid out, expressed as a percentage of average earning assets
Nonperforming Loan Rate: The percentage of loans that are in default or close to being in default (typically 90+ days past due) relative to total loans
CET1 (Common Equity Tier 1) Ratio: A standardized regulatory capital ratio that measures a bank's core capital relative to its risk-weighted assets
DGI Family of Funds: OFG Bancorp's prietary suite of investment funds, including options such as money market and other mutual funds
Moreover, Full Conference Call TranscriptJose Rafael Fernandez: Good morning, and thank you for joining us
We're pleased to report our second quarter results
Conversely, To start, let's go to Page three of the presentation, amid market uncertainty
It was another strong quarter ending with record assets of more than $12 billion and record loans of more than $8 billion, in today's market environment
We had excellent financial results, generating earnings per diluted of $1
Furthermore, 15 for a 6. 5% increase year over year on a 1. 5% increase in total core revenue with a high return on average assets and equity, in this volatile climate
Operating execution was highlighted by loan origination and core deposit flows
Credit reflected a stable economy in Puerto Rico, and high levels of liquidity held by individuals and es
In contrast, We announced a new $100 million stock buyback authorization and bought back more s supported by our strong capital generation and balance sheet
Please turn to page four
We continue to see strong momentum with our omnichannel digital platform
Our strategic investments in nology and innovation through our digital-first strategy are paying off
We're growing accounts and building deeper customer relationships
During the second quarter, nearly all of our routine teller retail customer transactions and deposits, as well as 70% of retail loan payments, were made through our digital and self-service channels
This was driven by continued year-over-year growth in digital enrollment, digital loan payments, virtual teller utilization, and 4% new net customer growth
Additionally, In the second quarter, we introduced two new ducts and services (quite telling)
Nevertheless, On the other hand, We launched Oriental Marketplace, an online feature that gives our customers exclusive discounts on travel, restaurants, and retail ducts
However, We also introduced a US government money market fund, a new addition to our DGI family of funds, to vide customers with another convenient investment option, in this volatile climate
Now here's Maritza to go over the financials in more detail
Nevertheless, Maritza Arizmendi: Thank you, Jose
Please turn to page five to review our financial highlights, in today's financial world
All comparisons are to the first quarter unless otherwise noted
Core revenues totaled $102 million
Looking at the key components, total interest income was $1. 194 billion, an increase of $5 million
This mainly reflects higher average balances of loans and cash and $1. 5 million from one additional day
Interest expense was $42 million, an increase of $2 million (noteworthy indeed)
In contrast, This mainly reflects higher average balances of core deposits and higher average balances of borrowings and brokered deposits, and $400,000 from one additional day (something worth watching)
Noninterest expenses totaled $94. 8 million, up $1 (something worth watching)
The data indicates that is in line with our continued outlook of $95 million to $96 million in quarterly noninterest expenses in 2025
Additionally, However, Compared to the first quarter, the second quarter reflected $1 (remarkable data)
Moreover, 4 million less in seasonal payroll taxes and foreclosed real estate costs
Keep in mind, the first quarter included a $3, in today's market environment. 1 million incentive payment from a partner, considering recent developments
Income tax expense was $14. 1 million with a tax rate of 21
That reflects an anticipated rate of 24, in light of current trends
Furthermore, Meanwhile, 90% for the year and the benefit in the second quarter of $1, in light of current trends
Additionally, 7 million in discrete items
Looking at some other metrics, tangible book value was $27 (an important development), amid market uncertainty
Additionally, During the quarter, we bought back 186,000 s
The efficiency ratio was 52%
Return on average assets was 1 (quite telling)
On the other hand, 73%, and return on average tangible common equity was 17%, considering recent developments
Now please turn to page six to review our operational highlights
Total assets were $12. 2 billion, up 9. 99% from a year ago and 4% from the first quarter, amid market uncertainty
Additionally, Average loan balances were $8 billion, up close to 2% from the first quarter
End of period loans held for investment totaled $8 (an important development). 2 billion, up 7% from a year ago and up $328 million from the last quarter
The sequential increase mainly reflects our strategy to grow lending in the U
Furthermore, Loan yield was 7, in today's financial world. 91%, down eight basis points
New loan origination of $784 million was up 38% from the first quarter and 33% from a year ago
In contrast, Second quarter originations reflect increases in all lending channels in both Puerto Rico and the U, in today's market environment
Meanwhile, The commercial pipeline continues to look strong
At the same time, Average core deposits were $9. 7 billion, up close to 1%
End of period balances of $9. 9 billion increased $139 million or 1, given the current landscape. 4% quarter over quarter and $291 million or 3% year over year
The sequential growth reflects increased commercial and government deposits and reduced retail balances, amid market uncertainty
In addition, it reflects increased time and saving deposits and reduced demand deposits
Additionally, Core deposit cost was even with the first quarter at 1
Excluding public funds, the cost of deposit was 0, in this volatile climate
However, Additionally, 99% compared to 1% last quarter
Average borrowings and brokered deposits were $672 million compared to $570 million (something worth watching), in this volatile climate
Furthermore, The aggregate rate paid was 4, given the current landscape
Moreover, Meanwhile, 11%, down 21 basis points
End of period balances were $732 million compared to $421 million, amid market uncertainty
Nevertheless, The second quarter reflected $200 million in a new two-year federal loan bank advance at 4, in this volatile climate
On the other hand, 13% and $82. 5 million in additional brokered deposits (an important development)
Nevertheless, We use these funds to increase liquidity in addition to higher deposits as part of our strategy to grow commercial loans
Furthermore, Conversely, Cash at $852 million was up 20%, reflecting some of the new wholesale funding pending continued loan growth, considering recent developments
Nevertheless, Investments totaled $2
On the other hand, 8 billion, remaining relatively unchanged
This reflects that the repayments were mostly offset by purchases of $50 million of mortgage-backed securities yielding 5. 55% and Ginnie Mae securitization of our own mortgage lending
On the other hand, Net interest margin was 5 (remarkable data). 31%, compared to 5
Excluding the new federal loan bank advance, NIM would have been around the higher end of our 5
All this being equal, as long growth continues, we should see NIM expand from the second quarter level
Please turn to page seven to review our credit quality and capital strengths
Credit quality continues to be stable, in light of current trends
Net charge-offs totaled $13 million, down $7, in today's financial world. 6 million from the first quarter, given the current landscape
Conversely, Net charge-off rate was 0 (this bears monitoring), in today's market environment. 64%, down 41 basis points sequentially
Moreover, Year over year, the net charge-off rate was down 15 basis points (fascinating analysis)
Moreover, Vision for credit losses was $21, in today's market environment. 7 million, down $4 million
This analysis suggests that second quarter included $70. 2 million for increased volume, $3 (this bears monitoring). 7 million for specific reserves for commercial loans, and $700,000 due to the alignment of model adoption and risk-weighted factors mainly in Puerto Rico
Conversely, Looking at other credit metrics, the early and total delinquency rate were 2. 59%, respectively
Moreover, The nonperforming loan rate was 1
Looking at other capital metrics, our CET1 ratio was 13, in today's market environment
Stockholders' equity totaled $1, considering recent developments. 3 billion, up $39 million (fascinating analysis)
The tangible common equity ratio decreased 10 basis points to 10
Additionally, To summarize the quarter, net interest income increased due to loan growth, in particular, our strategy to grow commercial loans
We saw continued deposit growth driven by commercial and government balances (fascinating analysis), considering recent developments
Net interest margin was towards the lower end of our expected range, reflecting our decision to put more liquidity in place to fund future strategic growth in commercial loans
On the other hand, Credit quality continued to reflect the solid economic environment in Puerto Rico for both consumers and es
Furthermore, Noninterest expenses were in line with our expected range and should continue to do so
With a strong CET1 ratio and earnings power, we put a new $100 million buyback in place to return capital to stockholders, and we continue to acquire s in the open market
Jose Rafael Fernandez: Thank you, Maritza
On the other hand, Please turn to page eight, in today's market environment
This analysis suggests that Puerto Rico economy continues to show stable growth despite concerns global macroeconomic and geopolitical events
The situation remains the same
Wages and employment are at historically high levels
At the same time, The environment is constructively positive
Nevertheless, This analysis suggests that economy continues to grow, and the outlook is positive
Turning to OFG Bancorp, our continuous imvement culture and our digital-first strategy are ving to be highly effective
Additionally, At the same time, New services are viding customers with better insights to better manage their finances (an important development), in today's financial world
New tools are giving us the ability to further line cesses and become more efficient
This tells us that end result is continued value creation and differentiation in the marketplace
Nevertheless, Loan growth and credit trends are solid
Our risk management capabilities are strong (something worth watching)
We continue to execute our plan strategically and thoughtfully, growing market by creating value and helping our customers achieve gress
All this is supported by a very strong capital position
As always, we could not have achieved these results without the hard work of all our team members, considering recent developments
We're very thankful to them and optimistic for the future
Conversely, With this, we end the formal presentation
In contrast, Operator, let's start the Q&A
However, Moreover, Operator: Thank you
Star one on your telephone keypad, given current economic conditions
Additionally, If you wish to remove yourself from the queue, press
We'll take our first question from Timur Braziler
Moreover, Timur Braziler: Hi, good morning
Furthermore, Good morning
Maybe starting off on the margin, that's good ary that you think margin starts to expand off of these levels
I'm just wondering, maybe from a deposit standpoint, those costs seem to tick higher a little bit in the second quarter
I guess as you look out into the back end of the year, is it just the better loan growth trajectory that drives margin higher
I guess, you just talk to the interplay between those expected loan growth and maybe what the deposit comp is doing on the island
Jose Rafael Fernandez: Yes
So thank you for your question, Timur
I'll take a stab at it first and then I'll let Maritza give you additional color
So on the point on deposit cost ticking higher, remember that the government deposits are tied to a variable rate treasury bill kind of formula, given current economic conditions
And during the quarter, you have those fluctuations kind of trend up and down (noteworthy indeed)
This quarter, we have a little bit of that noise there, considering recent developments
In contrast, That's why you're seeing a little bit of that uptick on the cost of deposits
But let me just also step back and give you a little bit of our thoughts on deposits and how we see customer deposits moving forward
Because what you have seen throughout the last year and a half is that our net new account growth in retail customers has continued to grow, particularly in checking during, as I said, the past year and a half, given the current landscape
So that's one of the key drivers for us
Also, you have to look at the changes that we have implemented within our value position and our differentiation for retail customers
Nevertheless, In contrast, We have added a couple of new targeted deposit ducts and services, considering recent developments
At the same time, We have expanded, as you know, the self-service capabilities and also the digital capabilities (noteworthy indeed)
We have vided additional insights for our customers to help them manage their finances, so we're adding additional tools for them to help them achieve financial health
And we're starting to see, we're in the early innings, but we're starting to see some of the loan-only clients starting to add relationships and deepening, in today's financial world.
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